Full text of Annual Report of the Federal Trade Commission : Annual Report of the Federal Trade Commission : For the Fiscal Year Ended September 30, 1979

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ANNUAL
REPORT
OF
FEDERAL
TRADE
COMMISSION
For the Fiscal Year Ended
September 30, 1979

For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402 (Paper cover)

Federal Trade Commission

MICHAEL PERTSCHUK, Chairman
PAUL RAND DIXON, Commissioner
DAVID A. CLANTON, Commissioner
ROBERT PITOFSKY, Commissioner
PATRICIA P. BAILEY, Commissioner
CAROL M. THOMAS, Secretary

EXECUTIVE OFFICES OF THE FEDERAL TRADE COMMISSION
Pennsylvania Avenue at Sixth Street, N.W.
Washington, D.C. 20580
Regional Offices
Atlanta, Georgia
Room 1000
1718 Peachtree Street, N.W.
Zip Code: 30309

Los Angeles, California
13209 Federal Building
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Boston, Massachusetts
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150 Causeway Street
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New York, N.Y.
Room 2243-EB
Federal Building
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Chicago, Illinois
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San Francisco, California
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Cleveland, Ohio
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Zip Code: 96850
iii

Letter of Transmittal

FEDERAL TRADE COMMISSION
Washington, D.C.
To the Congress of the United States:
It is a pleasure to transmit the sixty-fifth Annual Report of the Federal Trade Commission
covering its accomplishments during the fiscal year ended September 30, 1979.
By direction of the Commission.

MICHAEL PERTSCHUK,
Chairman.

THE PRESIDENT OF THE SENATE
THE SPEAKER OF THE HOUSE OF REPRESENTATIVES

iv

TABLE OF CONTENTS
Part
I.
II.
III.
IV.
V.

Page
The Goal: Ensuring a Vigorous and Honest Free Market . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Strategy: Fighting Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Simplifying, Speeding and Improving the Administrative Process . . . . . . . . . . . . . . . . . 13

Appendix
Part II (Investigative Stage) Consent Agreements Accepted and
Published for Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Part II (Investigative Stage) Consent Agreements Issued in
Final Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Complaints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Part III (Litigation Stage) Consent Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Initial Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Final Litigated Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Civil Penalty Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Appellate Court Decisions Reviewing Commission Orders . . . . . . . . . . . . . . . . . . . . . . 41
Supreme Court Decision Reviewing Final Commission Order . . . . . . . . . . . . . . . . . . . . 41
Other Important Court Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Policy Planning Papers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Staff Reports Published on Proposed Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Economic Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Economic Working Papers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

v

OVERVIEW
I. THE GOAL: ENSURING A VIGOROUS
AND HONEST FREE MARKET
In 1979 the Federal Trade Commission continued to police the market against dishonest and
anticompetitive trade practices. The Commission regards vigorous and truthful competition as the
touchstone of its mandate, the most efficient means of ensuring that consumers obtain what they
want at the lowest possible price. This mandate takes on particular importance in the present period
of economic stress, when more and more consumers must stretch their dollars ever further.
II. THE STRATEGY: FIGHTING INFLATION
The Commission's strategies have been integrated to focus on the sectors of the economy
most critical to consumers: health care, food, housing, transportation, energy, and clothing. The
activities described below are examples of recent FTC actions; they were all initiated or carried on
in Fiscal Year 1979 unless otherwise noted. (The Appendix provides a more detailed description of
each FTC action taken in 1979.)
A.

HEALTH CARE.
C

acceptance of a consent agreement requiring Eli Lilly (which sells most of the
insulin needed by diabetics in this country) to license its present and future
insulin technology to other firms (Lilly had been charged with illegal
monopolization of the insulin market).

C

issuance of an administrative law judge's initial decision, subsequently
affirmed in pertinent part by the full Commission, holding that the American
Medical Association has unlawfully limited consumer access to information
about the price and availability of medical services, and imposed unlawful
restrictions on the ability of hospitals, health maintenance organizations, and
other "lay" institutions seeking to contain health care costs to employ
physicians on a salaried basis.

C

issuance of a consent order which, for the present, prohibits the American
Dental Association from restricting truthful advertising, and which will
ultimately be conformed to the final order in the AMA case.

C

issuance of a consent order barring the publication of relative value

1

2

FEDERAL TRADE COMMISSION

scales (which can decrease competition and facilitate price fixing) by the California Medical Association.
These health care matters are still in progress:

B.

C

issuance of a complaint against another group, the Indiana Federation of Dentists, alleging
that it unlawfully conspired to obstruct cost containment programs developed by dental
insurers.

C

issuance of a complaint against the Michigan State Medical Society alleging that the society
engaged in a conspiracy to fix prices and to boycott cost-containment procedures instituted
by insurers.

C

publication of a staff report analyzing the extent, import, and legality of medical
participation in the control of Blue Shield and certain other health care plans.

C

a rulemaking involving prevention of alleged deceptive advertising of over-the counter
drugs; staff proposes conforming terms used in advertising to those required by the Food and
Drug Administration to be used on labels.

C

a rulemaking to consider proposals to require sellers of hearing aids to give dissatisfied
purchasers a refund of most of their purchase price up to 30 days after purchase.

C

issuance of an administrative law judge's initial decision in Bristol-Myers litigation,
involving advertisements for Bufferin, Excedrin and Excedrin P.M.

C

a rulemaking to determine whether and how FDA-mandated warnings for labeling of
antacids should be disclosed in advertising.

C

examination of the effect of restrictions on advertising and commercial practices on the
price and quality of professional services, focusing on the profession of optometry.

FOOD.
C

issuance of a consent order requiring ITT-Continental, which makes Fresh Horizons
bread, to disclose in advertising that its fiber content is derived from wood.

C

issuance of a consent order requiring divestiture resulting from an alleged
anticompetitive acquisition involving frozen foods (Nestle/Stouffers).

C

issuance of an opinion and order requiring Borden, Inc. to cease and desist from
monopolizing the processed lemon juice market with its ReaLemon product.

C

issuance of a final order prohibiting interlocking directorates between Kraftco Corp.
and SCM, two major producers of margarine and edible oils (recently affirmed by the
Court of Appeals).

ANNUAL REPORT 1979
C

3

issuance of a consent order prohibiting Howard Johnson Company from requiring its
restaurant franchisees to purchase certain food products and supplies from Howard Johnson.

These food matters are still in progress:
C

litigation involving the acquisition by Southland Corp., one of the nation's largest dairy
processors, of Knowlton's, the largest independent dairy processor in the San Antonio area,
on the grounds that the merger will reduce competition in an already highly concentrated
industry (case recently resolved by consent agreement barring dairy acquisitions by
Southland without Commission approval).

C

litigation of two complaints challenging the mergers of major supermarket chains, Grand
Union and Colonial Stores on the east coast, and National Tea and Applebaum's Food
Markets in the midwest, which allegedly decrease competition among grocery stores and
supermarkets in those areas (consent agreement accepted recently barring grocery store
acquisitions by National Tea without Commission approval).

C

a suit filed in District Court to seek civil penalties and enjoin a seller of bulk freezer meats
from "bait and switch" practices.

C

a rulemaking involving alleged false or deceptive food advertising claims for energy, fat and
cholesterol attributes of food products.

C

litigation involving ITT--Continental Baking Company, alleging attempts to monopolize the
wholesale baking industry.

C

litigation involving Sunkist Growers, Inc. for alleged exclusive dealing, contracts in restraint
of trade, stabilization of prices, and monopolization of the Western United States citrus fruit
industry.

C

litigation involving Beatrice Foods Co. for the allegedly anticompetitive acquisition of
Tropicana, a major producer of ready-to-serve orange juice.

C

litigation against Kellogg and other major breakfast cereal manufacturers, involving alleged
monopolization.

C

litigation involving General Foods (maker of Maxwell House coffee) alleging predatory
pricing and other abuses of market power to prevent the entry of new competitors into the
Eastern U.S. coffee market.

C

examination of the effect of state-imposed retail price controls on the prices consumers pay
for milk.

C. HOUSING.

C

issuance of consent orders involving two allegedly anticompetitive mergers in the cement industry
(Lone Star Industries/Keystone Portland Cement, Crane Co./Medusa Corp.).

4

FEDERAL TRADE COMMISSION
C

issuance of consent orders barring allegedly anticompetitive pricing practices in the roofing
industry (Inland Empire Roofing Contractors Association), in pest control (New Jersey Pest
Control Association), and in the home appliances market (Appliance Dealers Cooperative).

C

issuance of three consent orders prohibiting MacLeod Mobile Homes, Inc., Harper Sales,
Inc. and Mobile Home Multiplex Corp. from renting or selling lots in their mobile home
parks only to those who purchase mobile homes from specified dealers.

C

the filing of an injunction suit resulted in the parties abandoning plans for two allegedly
anticompetitive mergers of construction equipment manufacturers (Harnischfeger Corp.,
Mannesmann A.G.).

C

a consent order with Bankers Life and Casualty Company requiring the refund of up to $14
million (in payments and contract cancellations) to buyers of land who were allegedly
victims of deceptive marketing.

C

a consent order with Montgomery Ward and Company requiring the installation of
protective heat shields or the removal of up to 200,000 woodburning stoves allegedly sold
with improper fire protection instructions.

C

consent orders with two mobile homes dealers requiring the extension of warranties because
of alleged deception. Both companies must notify their customers that their warranties
contained errors and that the owners are entitled to broader warranty coverage.

These housing matters are still in progress:

D.

C

an administrative law judge decision (on appeal) barring IMREP Corp., one of the nation's
largest land sellers, from using deception in the marketing of land.

C

examination of the functioning of the real estate brokerage industry. Two of the key issues
being examined are: 1) Why do real estate commission rates appear not to vary with changes
in the supply of and demand for the services of real estate agents? 2) Are there activities by
brokers and agents which pose consumer protection problems?

C

a rulemaking proceeding to determine whether warranty obligations on mobile homes are
fairly honored.

TRANSPORTATION.
C

issuance of Commission opinion holding illegal a conspiracy to divide markets between two
firms selling roller bearings to the automotive aftermarket. (SKF Industries and FederalMogul Corp.).

C

issuance of an order requiring Reuben H. Donnelly Corp. to refrain from alleged abuses of
monopoly power and to list connections for commuter

ANNUAL REPORT 1979

5

flights in its Official Airline Guide, which is the only source of its kind for information on
regularly scheduled flights.
C

consent order requiring General Motors Corp. to stop selling cars with engines
manufactured by GM divisions other than the one whose name appears on the car, unless
it discloses that fact.

C

consent order requiring manufacturers of heavy-duty trucks in the United States to list model
years on identification papers to prevent deceptive marketing.

C

consent order barring Ford Motor Company from misrepresenting fuel economy, structural
strength, or quietness of Lincoln and Mercury cars.

These transportation matters are still in progress:
C

an administrative law judge decision (on appeal) requiring General Motors to end allegedly
anticompetitive discrimination among its dealers and between its dealers and independent
body shops in the pricing of bumpers, fenders, grilles, moldings, and other crash parts.

C

a rulemaking involving optional disclosures on the condition of the major components of
used cars.

C

litigation involving charges that an automobile dealer allegedly advertised credit terms on
television in a deceptive manner.

C

litigation involving Hertz Corp. for allegedly violating the Holder-in-Due-Course rule in the
sale of used cars.

C

investigation of competition in the automobile industry.

C

litigation involving Tenneco, Inc., for allegedly anticompetitive acquisition of a competing
manufacturer of shock absorbers and a potential competitor in the manufacture of
automotive exhaust systems (administrative trial completed).

C

litigation involving Ford and General Motors for allegedly granting anticompetitive
advertising allowances to major automobile rental firms.

E. ENERGY.
C

issued rule requiring the disclosure of octane ratings on gasoline pumps.

C

issued rule requiring refrigerators, freezers, water heaters, washing machines, dishwashers,
room air conditioners, and furnaces to be sold with a label disclosing relative energy costs.

C

issued consent orders stopping alleged deception in the advertising and marketing of several
"energy-saving" devices, including a water heater timer, a "gasoline-saving" valve that
attaches to a car's carburetor, and aluminum siding.

6

FEDERAL TRADE COMMISSION
These energy matters are still in progress:

F.

C

Obtained a District Court injunction requiring that Reliance Electric Corporation's Drives
Group be completely insulated from Exxon Corporation until the Commission can rule on
allegedly anticompetitve effects of the acquisition by the nation's largest energy firm of the
nation's leading producer of electronic variable speed drives.

C

issuance of complaint against Ethyl Corp. and three other manufacturers of gasoline
additives for allegedly engaging in practices which facilitate the reduction or elimination of
competition.

C

litigation against the 8 major oil companies for alleged illegal monopolization of the
production and distribution of petroleum products in the Gulf Coast and eastern U.S.
markets.

C

in response to a Congressional request, public comments are being solicited and an
investigation is being conducted on the need for rulemaking regarding whether the major
integrated oil companies should be required to divest their ownership interests in major
crude oil pipelines in the U.S.

C

a rulemaking that would require manufacturers of home insulation to test and label their
products with a standard measure of performance, or "R value."

C

examination of the effects of federal regulation of petroleum product prices and product
allocation on the structure and performance of the domestic petroleum industry.

CLOTHING.
C

issuance of consent orders against Jonathan Logan and other manufacturers of well-known
clothing brands (Pendleton, Gant, Jaymar-Ruby, Huk-A-Poo, Pranx, Motherhood Maternity)
banning interference with competitive retail pricing.

C

issuance of a consent order prohibiting Federated Department Stores from entering into
agreements with shopping center developers which would exclude discount or other pricecompetitive stores.

This clothing matter is still in progress:
C

G.

examination of proposals to amend the care labeling rule to require laundering and cleaning
instructions in labels.

CREDIT.
C

issuance of a consent order requiring Hertz Corp. to refund approximately $1.25 million in
cash to customers with credit balances. The complaint

ANNUAL REPORT 1979

7

alleges that Hertz did not notify its credit customers that their accounts reflected a credit
balance and that Hertz did not refund the credit balances without a specific request from the
customer.
C

issuance of a consent order requiring Montgomery Ward to pay $175,000 in civil penalties
to settle charges that it violated the Equal Credit Opportunity Act. Wards allegedly failed
to provide reasons for denial of credit to those customers who requested an explanation, in
violation of the Act.

C

Federated Department Stores agreed to pay $50,000 to settle charges that it violated the
Equal Credit Opportunity Act by failing to include alimony and other forms of income in
assessing credit worthiness of applicants.

C

consent order requiring Ford and Ford Motor Credit Co. to establish an accounting system
for its dealers to refund promptly any excess credit balance funds realized from the sale of
repossessed cars.

These credit matters are still in progress:
C

a rulemaking to amend the "Holder-in-Due-Course" rule to provide broader protection for
consumers who purchase a product or service on credit.

C

a rulemaking that is examining terms and conditions contained in consumer credit contracts.

C

an administrative law judge decision (on appeal) ordering Household Finance Corp. to stop
allegedly miscalculating finance charges on loans in violation of the Truth in Lending Act.

III. REMEDIES
With direction and encouragement from Congress (as exemplified by the Magnuson-Moss Act), the
FTC has evolved a range of strategies within each critical consumer sector. While the traditional
administrative complaint remains an important weapon in the Commission's arsenal, it is augmented by other
techniques.

A.

REPORTS AND COUNSEL.

In Section 6 of the FTC Act, Congress authorized the agency to compile information about business
structure and practices, make the information public, and advise Congress. In 1979 the Commission issued
several key Commission and staff reports and provided independent counsel to Congress, the states and sister
agencies:

1.

Independent Counsel to Congress.

C

International Energy Program. On the basis of monitoring by FTC staff, which is required
by the Energy Conservation Policy Act of 1975, two reports were submitted to Congress on
the competitive impact of IEP ac-

8

FEDERAL TRADE COMMISSION
tivities, involving planning by international oil companies for the allocation of oil supplies
among member nations in the event of an emergency disruption in middle eastern oil
supplies.

2.

C

Oil Industry. The Commission staff testified before Congress several times regarding a
number of competition concerns in the oil industry (for example, acquisition of nonpetroleum energy firms by large oil companies and the leasing of oil drilling rights on the
outer continental shelf).

C

Conglomerate Mergers. The FTC forwarded a statement favoring consideration of new
legislation limiting conglomerate mergers. The Chairman testified before the Senate on the
need for conglomerate merger legislation and endorsed the approach taken in a staff
proposal for legislation which was also submitted to the Senate.

C

Media Concentration. A symposium was held, and Congressional testimony was presented
by Commission staff about the issues raised by mergers and acquisitions in the media sector,
such as impact on diversity of information sources.

C

Medigap Insurance. A report was issued and testimony presented questioning the value
some consumers receive from health insurance designed to supplement their Medicare or
Medicaid insurance.

C

Land Sales. FTC staff testified in favor of strengthening legislation that would prevent
deception in land sales.

C

Credit Insurance. FTC staff testified on the growing credit insurance industry and the sales
practice of tying that insurance in with the granting of credit.

C

Automobile Warranties. FTC staff testified in favor of a stronger warranty protection bill
for the automobile industry.

Support to the States.
C

The Commission staff, in response to requests from state antitrust officials, continued to
provide informal advice on a large range of issues. Staff also provided specific factual
information where appropriate (e.g., for state Attorneys General who have followed up the
Commission's Levi Strauss order with treble damage actions on behalf of their citizens), and
participated in various antitrust training programs sharing experience and knowledge with
state officials who have an increasing role in antitrust enforcement.

C

Automotive Pollution. The Commission staff filed written documents with the California
Air Resources Board supporting revision of state regulations to preserve competition in the
servicing of automotive pollution control devices without sacrificing environmental goals.

C

Life Insurance Cost Disclosure. The Commission proposed model legisla-

ANNUAL REPORT 1979

9

tion on life insurance cost disclosure which, if adopted by the states, would permit
consumers to make price comparisons among life insurance policies.
C

3.

B.

Generic Drug Substitution. The FTC staff is providing support to requesting states on its
model act designed to save consumers money by allowing pharmacists to substitute lowerpriced generic drugs.

Support and Advice to Other Agencies.
C

Railroads and Trucking. The Commission and its staff continue to participate in Interstate
Commerce Commission proceedings, urging an end to antitrust immunities for rate bureaus
and greater rate and entry flexibility, in order to lower prices and improve service.

C

Deepwater Ports. A competition impact report was filed with the Department of
Transportation concerning the proposed deepwater crude' oil port in Texas.

C

Residential Conservation. The Commission filed with the Department of Energy comments
on consumer and competitive effects of a DOE program aimed at making the nation's
dwellings more efficient.

C

Oil, Natural Gas, and Gasoline. Also before DOE, the staff filed comments analyzing the
effects of price decontrol on the supplies of leaded and unleaded gasoline, analyzing a DOE
proposal for the phased decontrol of crude oil, and supporting a newly proposed accounting
system for oil and gas producers.

C

Auto Emission Warranties. The Commission filed comments with the Environmental
Protection Agency urging it to consider the potentially anticompetitive effects of its
proposed warranty regulations for automobile emission control systems as well as the effects
of California's emission control warranty regulations. Of particular concern to the
Commission was the possible adverse impact on small independent automobile repair shops
and the independent auto parts manufacturing sector.

C

Public Service Announcements. The FTC filed comments at the Federal Communications
Commission urging that more time be freed on commercial television and radio stations for
messages from government and nonprofit organizations.

C

Government Advertising. The FTC offered its staff assistance to nine government agencies
that disseminate national advertising so that the agencies could guard against deception in
their ads.

INJUNCTIONS.

In Section 13(b) of the FTC Act, Congress authorized the Commission to seek injunctions in Federal
court when it has reason to believe that such a remedy

10

FEDERAL TRADE COMMISSION

for a law violation would be in the public interest. During FY 1979 the Commission used this important tool
in support of both its competition and consumer protection missions. For example:

C.

C

the Commission sought a preliminary injunction to block the acquisition by Exxon Corp. of
Reliance Electric, and obtained an order permitting the stock acquisition but requiring
Exxon Corp. to hold Reliance's Drive Group as a wholly separate entity until the case can
be decided on its merits. This decision was the first time in the sixty-year history of the
Clayton Act that interim equitable relief had been entered solely on the basis of the actual
potential competition doctrine.

C

the Commission sought an injunction against the acquisition of Harnischfeger Corporation
by Mannesmann A.G. After oral argument, the merger was abandoned and no decision was
ever rendered.

C

in the first try for a permanent injunction without having obtained a cease and desist order
or without the respondent's stipulating to the injunction, the FTC is seeking an order
requiring a mobile homes seller to notify past customers of additional warranty rights that
may save them substantial repair expenses.

INNOVATIVE REMEDIES.

A traditional order to "cease and desist" may not always be the most effective way to ensure
protection of the public interest. In 1979 the Commission applied several new and frequently innovative
remedies:
C

three aircraft manufacturers signed consent orders agreeing not to make payments to foreign
officials for the purpose of eliminating Consideration of competitors' products and to keep
documented records of other payments to foreign officials.

C

by obtaining a consent order providing for repairs on allegedly defective heat pumps
manufactured by the Fedders Corporation, the FTC effected a "recall" for the first time in
its history and perhaps the first time in government for a nonsafety-related defect.

C

the Commission is seeking $2.64 million in civil penalties from Hertz Corporation for
alleged violations of the Holder-in-Due-Course rule in used car contracts.

C

in an effort to save consumer redress won in a 1974 consent order, the Commission modified
the order against GAC Corporation to protect customers' rights over those of creditors.

C

for the first time, the FTC attempted to transfer part of the responsibility of ad substantiation
to the creators of the advertisements. In a consent order with the nation's largest advertising
agency, J. Walter Thompson,

ANNUAL REPORT 1979

11

the FTC provided an incentive for the agency to indicate to the advertiser in advance of any
ad campaign all claims the agency thought the prospective advertising suggested, so that the
advertiser could substantiate them
C

as part of a consent settlement, AMF, Inc., which had run advertisements for bicycles
depicting children using the bicycles in an allegedly unsafe manner, agreed to produce a
public service television message on bicycle safety and to disseminate the message as widely
as possible.

C

the Commission is exploring whether effective consumer education can discourage potential
law violations as much as or more than traditional litigation or rulemaking remedies. Radio
and television public service announcements have been aired as an adjunct to law
enforcement.

IV. EFFECTIVENESS
The FTC's effectiveness is demonstrated by both the direct dollar benefits its actions have brought
consumers and by reported indirect effects on the marketplace.

A.

DIRECT BENEFITS.

While precise savings are difficult to determine, some examples of the amounts returned to
consumers as a result of FTC actions are available. For example:

B.

C

the Commission accepted a consent order with Bankers Life and Casualty Company in
which Bankers agreed to refund up to $8 million to dissatisfied purchasers of land and to
cancel $6 million worth of remaining obligations.

C

Universal Training Service agreed to make up to $750,000 available as refunds to more than
4,000 students who were allegedly misled on its heavy-construction, motel and insuranceadjustor courses.

C

in a case settled with Ford Motor Company and its credit subsidiary, involving consumers
whose cars were repossessed because of debt-but who were not reimbursed when the sale
price exceeded the debt-over $100,000 will be returned to consumers.

C

a major heat pump manufacturer is notifying consumers of its offer to repair allegedly
defective parts in some 40,000 of its products and to reimburse owners who have already
paid for repairs.

INDIRECT EFFECTS.

Often times preliminary actions taken by the Commission, such as the initiation of investigations,
the issuance of policy statements, and the commencement of rulemaking and adjudicative proceedings,
prompt voluntary responses by concerned parties. Such voluntary action, taken without the compulsion of
a final order or rule, may have far-ranging therapeutic effects in the marketplace.

12

FEDERAL TRADE COMMISSION

Following are some examples that observers have cited, although it should be cautioned that in the
underlying Commission action mentioned, no final determinations have been made by the Commission as
to what the proper disposition should be:

C.

C

Business Week reports that FTC intervention has intensified competition and helped lower
prices in the soft contact lens market. Bausch & Lomb, Inc., whose market share dropped
from almost 100% in the early 1970's to about 50% in 1979, responded in April of 1979 by
cutting its prices 28%.

C

the Interstate Commerce Commission has issued a notice of proposed rulemaking seeking
public comments on, among other things, the FTC petition to establish a zone within which
motor carriers may raise or lower their rates without risk of rate suspension. If adopted, this
rule would permit greater price competition in the industry.

C

in its decision adopting a new, procompetitive policy for motor carrier entry cases, the
Interstate Commerce Commission noted that it had relied on comments and data submitted
by the FTC to support its new policy.

C

according to Allendale Mutual Insurance Company and Arkwright Boston Manufacturers
Mutual Insurance Company, the firms "abandoned their proposed merger as a result of the
Bureau of Competition's recommendation to the Commission that a complaint be issued."
The staff's recommendation was based on the probability that competition would have been
reduced as a result of the merger.

C

during the time the FTC's eyeglass advertising rule was in effect, the Consumer Price Index
for eyeglasses increased only 4.3%, compared to 9.1% for all goods and over 13% for
medical care generally.

C

the FTC order barring Levi's from fixing the retail price of its products continues to spur
competition: the Washington Post recently reported that blue jeans were one of the handful
of items whose price actually decreased in 1979. Inflation of less than two percent a year
in women's clothing has followed a series of FTC consent orders in the clothing field
banning retail price fixing.

C

the joint FTC/HEW model state law on generic drug substitution is beginning to have an
impact; already four states have used our model to improve their laws, and several others
are actively considering the issue.

C

anticipated FTC activity against car manufacturers because of unreasonable rust-spotting
on new cars probably contributed significantly to three manufacturers' recent adoption of
a rust warranty.

OTHER MEASURES OF EFFECTIVENESS.

Beyond such case-by-case evidence of effectiveness, the Commission has undertaken a major effort
to evaluate systematically the economic effects of its

ANNUAL REPORT 1979

13

activities. Information is now being gathered on the impact of the Commission's rulemaking efforts
concerning cooling-off, franchising, and vocational schools. Data are being collected before possible
issuance of proposed rules on R-value, care-labeling, and used cars.
In FY 1979, the Commission spent $776,000 to study the impact of other proposed rules or
enforcement efforts, including those governing contact lenses, eyeglasses advertising, and corrective
advertising. Results of all these studies should be available within the year.
The Commission also has undertaken a variety of projects to assess the effectiveness of its
antitrust litigation. It has contracted with several economists to measure the economic impact of
various antitrust cases brought by the FTC. If successful, these projects will provide an estimate of
the dollars consumers have saved as a result of these actions and the effect, if any, such actions have
had on the quality of products and services.
V. SIMPLIFYING, SPEEDING AND IMPROVING
THE ADMINISTRATIVE PROCESS
The FTC seeks to make its administrative process more efficient and less burdensome,
without sacrificing fairness, openness, or accuracy. The Commission also attempts to maximize
coordination with other government entities. In 1979 we took major steps toward improving our
administrative process:
A.

CUTTING DOWN ON REPORTING REQUIREMENTS.

The Commission has revised its premerger notification regulations to exempt certain smaller
mergers and acquisitions. This change exempts approximately 20% of the transactions previously
subject to a waiting period and reporting obligation.
B.

SPEEDING UP ADMINISTRATIVE LITIGATION.

The Commission adopted new rules to streamline the discovery process in adjudication.
These rules, which are patterned in some respects after the Federal Rules of Civil Procedure, are
intended to strengthen the ability of the Administrative Law Judge to control and speed up discovery.
C.

REGULATORY CALENDAR.

The Commission participates in the Administration's regulatory calendar in an effort to
inform the public at the earliest possible time of contemplated actions.

APPENDIX
A. PART II (Investigative Stage)
CONSENT AGREEMENTS ACCEPTED
AND PUBLISHED FOR COMMENT
1.

Consumer Protection Mission

792 3016

C.L. Energy Development, Inc., et al.
The order would prohibit the company from making gas-saving
claims for the "G.R. Valve" and similar products unless the claims
were true and substantiated.

792 3087

RR International, Inc.
The order would prohibit the company from making gas-saving
claims for the "G.R. Valve" and similar products unless the claims
were true and substantiated.

792 3038

Montgomery Ward and Co., Inc.
The order requires the company to notify the 200,000 purchasers of
certain wood-burning heaters and Franklin fireplaces of a potential
fire hazard and to correct the condition or refund the entire purchase
price.

762 3119

Home Centers, Inc.
A chain of appliance stores in Ohio would be stopped from allegedly
misrepresenting price reductions and potential savings to consumers.

782 3025

AMF, Inc.
The order would prohibit the company from engaging in advertising
depicting children riding its "Evel Kneivel" bicycles or tricycles in an
unsafe manner. The company also agreed to prepare and distribute
public service safety messages for use on children's television
programming.

792 3015

American Consumer, Inc., et al.
The order would prohibit the company from making gas-saving
claims for the "G.R. Valve" and similar products unless the claims
were true and substantiated.

792 3059

Admarketing, Inc.
This advertising agency that prepared television advertisements for

16

FEDERAL TRADE COMMISSION
the G.R. Valve would be required to have on hand reasonable
substantiation for any claims made in its ads.
792 3060

Gordon Cooper
The former astronaut and an endorser of the G.R. Valve would be
prohibited from making claims about the G.R. Valve and other
products without independent substantiation from a source other than
the advertiser.

782 3077

Westinghouse Credit Corp.
The order would require the company to disclose to credit applicants
the reasons they were rejected, to comply with the Equal Credit
Opportunity Act, and to notify applicants of their rights under the Act.
The company also would educate both its employees and parent
Westinghouse's retail dealers to guard against future violations of the
Act.

2.

Competition Mission

781 0009

Forbes Health System Medical Staff, et al.
The agreement would prohibit Forbes Medical Staff from excluding
any applicant from appointment to the medical staff because the
applicant is associated with a Health Maintenance Organization or
practices medicine on other than a fee-for-service basis.

761 0081

Eli Lilly and Co., et al.
The agreement would require that Eli Lilly license other companies
to use its U.S. patents and know-how in producing insulin.
B. PART II (Investigative Stage)
CONSENT AGREEMENTS ISSUED IN FINAL FORM

1.

Consumer Protection Mission

C-2938

Owens-Illinois, Inc., et al.
Ordered to refund an estimated $30,000 to 7,000 end-use purchasers
of disposable glass culture tubes as compensation for short count
packages purchased in the past.

C-2964

Aluminum Co. of America
Ordered not to make false fuel savings claims for its aluminum siding
and to disclose the "R-value" of the product in future ads.

C-2976

International Inventors, Inc.
This service company for inventors was ordered to disclose its

ANNUAL REPORT 1979

17

"success" ratio to prospective customers and provide a ten-day cooling-off period.
C-2932

National Indemnity Co., et al.
Ordered to cease violating the Fair Credit Reporting Act's
prenotification requirement when seeking an investigative consumer
report on insurance applicants.

C-2931

Marathon Oil Company
Prohibited from retail credit collection lawsuits in counties other than
where the defendant currently resides or resided at the time the credit
contract was signed.

C-2933

Moore and Associates, Inc.
Ordered to comply with the Fair Credit Reporting Act by preventing
the improper use of obsolete information.

C-2934

Bede aircraft, Inc., et al.
Ordered to place itself under the control of a trustee to serve the twofold purpose of protecting consumers as well as preserving options
for the continued viability of this small business, an order which was
designed to provide consumer redress of about $9,000,000.

C-2936

Credit Bureau Associates, et al.
Ordered to stop alleged violations of the Fair Credit Reporting Act,
to promptly reinvestigate disputed information in consumer reports,
and to notify the consumer of the results.

C-2937

Corning Classworks
Ordered to refund an estimated $118,000 to 6,000 end-use purchasers
of disposable glass culture tubes as compensation for short-count
packages purchased in the past.

C-2940

Aldens, Inc.
Required to contact all waitresses who were denied credit from
October 28, 1975 until March 22, 1977 and to invite them to reapply
for credit, and to consider the new applications without regard to sex.
This action was brought under the Equal Credit Opportunity Act.

C-2941

Nelson Brothers Furniture Corp.
Prohibited from false pricing and savings claims and required to give
customers the option to submit to arbitration, at no cost, any
unresolved dispute over the quality, condition or failure to replace' or
make refunds for damaged or defective merchandise.

18

FEDERAL TRADE COMMISSION
C-2939

Womack Nursery Co.
This mail-order nursery in Tennessee was ordered to disclose in its
advertising a warning of the risk of receiving dead trees and nursery
stock when ordering by mail and to stop allegedly deceptive practices.
The agreement provides up to $200,000 in redress to consumers.

C-2945

The Hertz Corporation
Required to notify and to refund over $1.25 million to customers with
credit balances, and to refund automatically unclaimed money after
seven months.

C-2946

Norris Industries, Inc.
Required to have a reasonable basis for making performance claims
for any major home product.

C-2948

Kelcor Corp.
Required to stop violating the Truth-In-Lending Act, and to tell
borrowers that credit insurance may result in interest charged at
higher annual percentage rates.

C-2949

Art Instruction School
Ordered not to misrepresent that its students would earn high salaries
or readily obtain employment through the school's placement service.
The company also agreed to refund up to 25% of the tuition paid by
former students.

C-2954

Kaufman and Broad, Inc.
The nation's fifth-largest home builder was ordered to repair major
construction defects and certain other plumbing, electrical, heating,
and cooling defects in approximately 20,000 homes sold since 1972.

C-2961

Interrnatic, Inc.
The manufacturer of the electric waterheater timer called the "Little
Gray Box" was ordered to stop allegedly deceptive advertising of the
device (use of which allegedly causes consumers to spend more in
energy in reheating their water than they save in not having to keep
it warm throughout the day). The company agreed to provide a full
refund of purchase price and installation charges.

C-2960

Renault USA, Inc.
Ordered to extend some warranty coverage for approximately 50,000
cars manufactured after July 1975.

ANNUAL REPORT 1979

19

C-2965

General Mills Fun Group, Inc.
Ordered not to use any film or camera technique that misrepresents
to children a toy's size, appearance or performance.

C-2966

General Motors Corporation
Ordered to stop selling cars with engines and other auto parts
manufactured by GM divisions other than the one whose make
appears on the car unless it discloses that to purchasers.

C-2971

Fedders Corporation
Ordered to repair more than 40,000 allegedly defective heat pumps
and to reimburse owners for the cost of past repairs (thus saving
consumers an average $250-$400).

C-2972

Arnaudville Industries, Inc.
This manufacturer of mobile homes was ordered to extend warranty
coverage to several thousand mobile home owners and to stop
advertising its allegedly misleading "full one-year limited warranty,"
in violation of the Magnuson-Moss Warranty Act.

C-2973

Madison Mobile Modular Homes
This manufacturer of mobile homes was ordered to extend warranty
coverage to several thousand mobile home owners and to stop
advertising its allegedly misleading "full one-year limited warranty,"
in violation of the Magnuson-Moss Warranty Act.

C-2975

The Clorox Company
Ordered Soft-Scrub cleanser to carry a label warning that its use can
scratch certain surfaces.

C-2979

Chrysler Corporation
This manufacturer of heavy-duty trucks was ordered to assign model
years to trucks, where previously the model years were not assigned,
which allegedly facilitated representing them as new if they were left
over from a previous year.

C-2978

Mack Trucks, Inc.
This manufacturer of heavy-duty trucks was ordered to assign model
years to trucks, where previously the model years were not assigned,
which allegedly facilitated representing them as new if they were left
over from a previous year.

C-2982

White Motor Corp.

This manufacturer of heavy-duty trucks was ordered to assign model
years to trucks, where previously the model years were not assigned,
which allegedly facilitated representing them as new if

20

FEDERAL TRADE COMMISSION
they were left over from a previous year.
C-2981

Paccar, Inc.
This manufacturer of heavy-duty trucks was ordered to assign model
years to trucks, where previously the model years were not assigned,
which allegedly facilitated representing them as new if they were left
over from a previous year.

C-2983

International Harvester, Inc.
This manufacturer of heavy-duty trucks was ordered to assign model
years to trucks, where previously the model years were not assigned,
which allegedly facilitated representing them as new if they were left
over from a previous year.

C-2980

Ford Motor Co.
This manufacturer of heavy-duty trucks was ordered to assign model
years to trucks, where previously the model years were not assigned,
which allegedly facilitated representing them as new if they were left
over from a previous year.

C-2984

Woodland Mobile Homes, Inc., et al.
California's largest mobile home dealer was ordered to comply with
the Magnuson-Moss Warranty Act and openly display written
warranties on mobile homes and appliances.

C-2884

Diners Club, Inc., et al.
The order modifies a 1977 consent order by removing Diners Club's
responsibility for assuring compliance by another company, which
was recently sold by Diners Club.

C-2987

Korvette's, Inc.
Ordered to comply with the Magnuson-Moss Warranty Act and an
FTC trade regulation rule requiring stores to have on hand pre-sale
warranty information for consumers on products costing more than
$15 and to disclose to consumers that it is available.

C-2989

ITT Continental Baking Co., Inc.
The manufacturer of "Fresh Horizons" and "Wonder Bread" was
ordered to disclose the presence of wood pulp and other
"uncommonly used" ingredients in its bread products.

C-2523

GAC Corporation
The Commission modified a 1974 consent order against GAC to

preserve customers' rights to refunds for their land sales purchases
during the company's reorganization. A $10 million fund was
established to improve land sites, and a federal court in Florida ruled
that customers would be given first priority over

ANNUAL REPORT 1979

21

other creditors if the company is forced to liquidate.
2.

Competition Mission

C-2935

National Fire Hose Corp., et al.
Ordered to stop imposing territorial and customer restrictions on
distributors of fire hose.

C-2943

The Boeing Corp.
Prohibited from giving preferential payments to foreign parties to
secure aircraft sales.

C-2944

Lockheed Aircraft Corp.
Prohibited from giving preferential payments to foreign parties to
secure aircraft sales.

C-2942

McDonnell-Douglas
Prohibited from giving preferential payments to foreign parties to
secure aircraft sales.

C-2947

Advertising Checking Bureau, Inc.
The order prohibits Advertising Checking Bureau, Inc. from
developing or administering cooperative advertising programs which
limit the rights of dealers to receive cooperative advertising credits
when they sell merchandise at reduced prices.

C-2951

Zayre Corp.
Prohibited from requiring suppliers to participate in trade shows and
from soliciting preferential advertising and promotional allowances.

C-2952

American Society of Anesthesiologists
Ordered to stop prohibiting its members from accepting salaried,
rather than fee-for-service, employment.

C-2953

Federal Signal Corp.
The order bars the nation's largest manufacturer of civil defense
warning equipment from engaging in specified collusive and anticompetitive activities and in competitive restraints in the sale to state
and local governments of public safety equipment, such as radios,
sirens, and signaling devices.

C-2955

CPC International, et al.
The order requires the divestiture of an aerosol packaging facility by

CPC International, Inc., and its wholly-owned subsidiary
Peterson/Puritan Inc.

22

FEDERAL TRADE COMMISSION
C-2956

Louisiana Pacific Corporation
Required to divest an acquired plant that manufactures medium
density fiberboard, acquired in a merger with Fiberboard Corp.

C-2958

Federated Department Stores
Prohibited from entering into any agreement between a Federatedoperated department store and a shopping center developer that would
enable the department store to influence the makeup of shopping
centers.

C-2959

Crane Co., et al.
Required to divest an Illinois cement plant owned by Medusa
Corporation.

C-2957

Indiana Dental Association, et al.
Prohibited from restricting the efforts of health insurers to hold down
the cost of dental care for their policyholders.

C-2967

California Medical, Association
Prohibited from publishing relative value scales for use in setting fees
for professional services. (Relative value scales set fixed ratios among
fees for various services.)

C-2962

Huk-,A-Poo Sportswear, Inc., et al.
Two affiliated national clothing concerns are prohibited from setting
retail prices of their products, leaving retailers free to make their own
pricing decisions.

C-2963

International Brotherhood of Teamsters, Local 959
Ordered not to engage in agreements that require general contractors
to boycott non-union subcontractors.

C-2968

Inland Empire Roofing Contractors Assoc.
Prohibited from interfering with the prices charged or the guarantees
offered by its members in Idaho and Washington.

C-2969

Appliance Dealers Cooperative
Prohibits a New Jersey retailers cooperative from interfering with
some members' pricing and marketing decisions.

C-2970

Cooper Industries, Inc.
This major manufacturer of gas compressors and hand-held industrial
air tools was ordered to divest certain assets after its acquisition of

Gardner-Denver Co.
C-2974

Motherhood Maternity Shops, Inc., et al.
Prohibits a manufacturer and retailer of maternity clothes from

ANNUAL REPORT 1979

23

fixing or suggesting the prices at which independent retailers sell its
products.
C-2977

Jonathan Logan, Inc.
The consent order bars one of the nation's largest suppliers of
women's apparel from fixing the resale prices of its apparel products,
leaving retailers free to make independent pricing decisions.

C-2985

Pendleton Woolen Mills, Inc.
Prohibited from fixing the retail prices of its clothing, blankets, and
fabric.

C-2986

Schering Plough Corp.
Required to divest Scholl, Inc.'s athlete's foot product business.

C-2988

Howard Johnson Co.
Prohibited from requiring its restaurant franchisees to purchase
certain food products from the respondent.

C-2990

Liquid Air Corp. of North America, et al.
Required to divest certain air-separation plants and certain retail
stores. Chemetron Corp., and its parent, Allegheny Ludium
Industries, Inc., also signed the consent agreement.

C-2950

New Jersey Pest Control Assoc.
Required to cease and desist from fixing prices, discouraging
discounters, and restricting price information in ads.

C-2930

John Hancock Mutual Life Insurance Co., et al.
Dissolved interlocking directorates between Liberty Mutual Insurance
Co., Boston, Mass. and the following three competing insurance
companies: John Hancock Mutual Life Insurance Company, New
England Mutual Life Insurance Company, and State Mutual Life
Assurance Company of America.
C. COMPLAINTS

1.

Consumer Protection Mission

Dkt. 9123

Litton Industries
The complaint alleges that Litton misrepresented its microwave
ovens' performance via a biased survey.

Dkt. 9124

24

George Irvin Chevrolet, Inc.
The complaint alleges violation of the Truth-in-Lending Act because
the required credit disclosures in television adverFEDERAL TRADE COMMISSION

tisements were too small or were shown too quickly to be "clear and conspicuous."
2.

Competition Mission

Dkt. 9119

Lancaster Colony Corp., et al.
The complaint alleges that the proposed acquisition of the entire
machine-made glassware manufacturing facilities of Federal Paper
Board Company by Lancaster Colony Corp could substantially lessen
competition in the machine-made glassware industry.

Dkt. 9118

Indiana Federation of Dentists
The complaint alleges that the Indiana Federation of Dentists has
restricted the efforts of health insurers to hold down the cost of dental
care for their policyholders.

Dkt. 9120

Borg-Warner Corporation, et al.
The complaint alleges that simultaneous membership by individual
respondents on the boards of directors of competing automotive parts
and products companies violates federal laws which prohibit
interlocking directorates.

Dkt. 9126

National Tea Company, et al.
The complaint challenges the proposed merger of National Tea
Company and Applebaum's Food Markets, Inc., two leading grocery
retailers in the Minneapolis-St. Paul area. The complaint charges
that the merger would eliminate competition between the companies,
increase concentration in the retail grocery store business and weaken
competition from independent retail grocery competitors.

Dkt. 9121

Grand Union Company/Colonial Stores, Inc.
The complaint alleges that the acquisition of Colonial Stores, Inc. (a
retail food chain) by Grand Union Company (the eleventh largest
retail food chain in the United States) may substantially lessen
competition and increase the probability of industry concentration.

Dkt. 9122

Lone Star Industries, Inc., et al.
The complaint alleges that the acquisition of Keystone Portland
Cement Co., an actual competitor, by Lone Star Industries, the
nation's largest cement producer, could eliminate competition

between the two companies, eliminate Keystone as a competitor in
the industry, and increase the probability of industry concentration.

ANNUAL REPORT 1979

25

Dkt. 9125

BASF Wyandotte Corporation
The complaint challenges the acquisition of a U.S. producer
(Chemetron Pigments Division) of organic pigments by the domestic
subsidiary of a leading worldwide pigments producer (BASF A.G.).
The complaint alleges that the acquisition will substantially lessen
competition or tend to create a monopoly in the manufacture and sale
of organic pigments. These products are a family of chemicals used
in a wide variety of applications ranging from printing inks to
automotive coatings.

Dkt. 9127

The Southland Corporation/Knowlton's, Inc.
The complaint challenges the proposed acquisition of Knowlton's,
Inc. by the Southland Corporation. Southland is a major operator and
franchiser of convenience food stores as well as one of the nation's
largest dairy processors. Knowlton's is one of the largest,
independent dairy processors in the San Antonio market area. The
complaint alleges that the acquisition will eliminate Knowlton's as a
competitor, lessen competition, and increase already high levels of
industry concentration.

Dkt. 9128

Ethyl Corporation, et al.
The complaint charges "antiknock" additive makers for gasoline have
engaged in practices that unlawfully reduced or eliminated
competition. The complaint alleges that Ethyl Corp., E.I. DuPont de
Nemours & Co., PPG Industries, Inc., and Nalco Chemical Co.
facilitated maintenance of uniform prices by, among other things,
"signaling" future price changes to competitors. In addition to
"signaling," the complaint alleges that each company lessened
uncertainty about price movements and facilitated maintenance of
substantially uniform prices by selling only on a uniform delivered
price basis. With the exception of PPG Industries, the companies are
also alleged to have used 11 most favored" customer agreements
promising a buyer the lowest price the seller charges other buyers.

Dkt. 9129

Michigan State Medical Society
The complaint alleges that the Michigan State Medical Society has
acted unlawfully to reduce or eliminate price competition among
physicians in Michigan. The complaint charges that the society
deprived subscribers and consumers of the benefits of Blue Cross and
Blue Shield of Michigan's independently determined reimbursement
policies or health-care cost-containment efforts.

Dkt. 9130

Exxon Corporation/Enco Inc.

The complaint challenges Exxon's acquisition of Reliance Elec-

26

FEDERAL TRADE COMMISSION
tric Company, a leading producer of electronic variable speed
industrial drives (ESVD). The complaint alleges that the acquisition
will increase the level of concentration in the market or eliminate
competition in the development of ESVD technology and products.
D.

PART III (Litigation Stage) CONSENT AGREEMENTS

1.

Consumer Protection Mission

Dkt. 9082

Vital-E, et al.
Required to stop making allegedly false claims about vitamin
products and weight-loss devices, to disclose any health or cosmetic
risks these products pose, and to offer full refunds to purchasers of
such products.

Dkt. 9090

Royal Furniture Company, Inc.
Required to provide appropriate Truth-in-Lending disclosures in
consumer credit transactions, to stop using allegedly harassing debt
collection practices, and to establish a procedure for handling
consumer complaints regarding defective or damaged merchandise.

Dkt. 9055

Cavanagh Communities Corporation
Ordered to disclose that certain land it sold as homesites was roadless
or susceptible to flooding, to disclose that the land might not be as
valuable as it was marketed to be, and to allow purchasers to stop
making payments on the land at a lesser penalty that the purchaser
had agreed to in the original contract.

Dkt. 9106

Universal Training Service, Inc.
Ordered to pay up to $750,000 in tuition refunds to students and to
disclose to prospective students job placement rates for previous
students along with their starting salaries.

Dkt. 9042

Coventry Builders, Inc.
This home improvement company was prohibited from failing to
provide credit cost disclosures required by the Truth-in-Lending Act.

Dkt. 9078

National Systems Corp., et al.
North America's ten correspondence schools (in drafting, hotel
management, advertising, and conservation, among others) ordered
to refund up to $200 per course to former students and to refrain from
misleading prospective students about their

ANNUAL REPORT 1979

27

ability to get jobs after having completed a course.
Dkt. 9001

Ford Motor Company
Ordered not to misrepresent the fuel economy, structural strength, or
quietness of its Lincoln and Mercury Cars and placed all Ford cars
under a general requirement that any performance claim be
substantiated.

Dkt. 9075

Bankers Life and Casualty Company, et al.
Ordered to refund up to 70% of the purchase price of land sites to as
many as 7,600 customers, to cancel current customer's contracts
without penalty because the company allegedly misleadingly
marketed the land, and to stop claiming the land is a good investment
unless it can substantiate the claims. Up to 88 million in refunds and
$6 million in contract cancellations should result. Irving Miller, a
principal of Bankers Life, agreed in a separate order not to be a party
to any future false or deceptive advertising or marketing of land.

Dkt. 8922

Beneficial Corporation
Ordered to stop using the term "instant Tax Refund" unless it also
disclosed that the company was merely offering a regular consumer
loan that is irrelevant to the tax return.

Dkt. 9073

Ford Motor Company and Ford Motor Credit Co., Inc.
Ordered to establish an accounting system for its dealers to refund
promptly any excess credit balance funds realized from the sale of
repossessed cars.

Dkt. 9104

/ . Walter Thompson
The nation's largest advertising agency was ordered to have on hand
a "reasonable basis" for ads for dishwashers.

Dkt. 9109

Karr Preventative Medical Products
The order would require the manufacturer of Acne-Statin skin cream
and its advertising agency, National Media Group, Inc., not to claim
that the product cured acne without a reasonable basis for the claim,
to notify past purchasers of its allegedly misleading advertising, and
to refund up to $235,000 to past purchasers.

Dkt. 9099

Bell & Howell Company
In one of the largest monetary settlements in the history of the FTC,
the company would be ordered to refund up to $1.4 million to certain
of its vocational school students. The FTC, for the first time, would

have control over how the redress is distributed to the eligible classes
of students.

28

FEDERAL TRADE COMMISSION
2.

Competition Mission

Dkt. 9003

Nestle Alimentana, S.A., et al.
Nestle is a Swiss corporation marketing a variety of food products
worldwide. Under the terms of the consent order, Nestle agreed to
divest a Wisconsin frozen-food plant within one year in settlement of
a Commission complaint challenging the company's 1973 acquisition
of Stouffer Foods. The complaint alleged that the acquisition would
substantially reduce competition in the frozen entree market.

Dkt. 9068

MacLeod Mobile Homes, Inc.
Prohibited from conditioning the rental of space in mobile home
parks on the purchase of homes from the park's operator.

Dkt. 9069

Mobile Homes Multiplex Corporation
Prohibited from conditioning the rental of space in mobile home,
parks on the purchase of homes from the park's operator.

Dkt. 9070

Harper Sales, Inc.
Prohibited from conditioning the rental of space in mobile home
parks on the purchase of a home from the park's operator.

Dkt. 9093

American Dental Association
The American Dental Association agreed not to restrict truthful
advertising by dentists under an interim settlement reached with the
Commission. Final settlement of this case depends upon the outcome
of a similar suit brought against the American Medical Association.
The ADA and other respondents agreed to be bound by the final
outcome of the AMA suit.

Dkt. 9107

Harnischfeger Corporation
Harnischfeger terminated a merger agreement that would have
combined manufacturers of lattice boom cranes.

Dkt. 9098

Harnischfeger, Inc.
Airco, one of the nation's largest producers of industrial gases, also
sells welding products and industrial gases to welders and other
industrial users for resale. The Commission consent order settles
allegations that Airco required its distributors to purchase their total
requirements of each gas from Airco in order to purchase any gas or
welding product from the company. Under terms of the consent order,
distributors for Airco can demand private arbitration to determine
whether Airco's refusal to sell them any gas or welding product was

in reprisal for the distributor's election to purchase from another
supplier.

ANNUAL REPORT 1979

29

Dkt. 9122

Lone Star Industries
The Commission accepted a consent order which settles a complaint
challenging a proposed merger of Lone Star Industries, Inc. and
Keystone Portland Cement Co. The two companies agreed to
terminate their agreement to merge.

Dkt. 9089

Atlantic Richfield Co.
Under the consent order designed to increase competition in the
domestic copper industry, the Atlantic Richfield Co. is required to
divest itself of, among other properties, its 50 percent interest in a
joint copper mining venture in Arizona, three undeveloped copper
hearing land properties and ARCO's 20 percent interest in a copper
mining company.
E. INITIAL DECISIONS

1.

Consumer Protection Mission

Dkt. 9111

Household Finance Corporation
Ordered by an FTC administrative law judge to comply with the
Truth-in-Lending Act by properly computing the annual percentage
rate of the total charge for credit and by undertaking other remedial
measures.

Dkt. 9067

Market Development/Columbia Research Corporation
These mail-order marketers of vacations and household products were
ordered by an FTC administrative law judge to stop using deceptive
means of selling their products, such as offering "free" vacations in
connection with land-sales schemes and offering other "free" products
whose value is substantially less than advertised.

Dkt. 9102

The Kroger Company
Ordered by an FTC administrative law judge to stop using price comparison surveys in its grocery stores unless it employs an
independent firm and discloses to consumers the limitations of using
such a survey.

Dkt. 9115

Georges Radio and Television Company
Ordered by an administrative law judge to comply with the
Magnuson-Moss Warranty Act and an FTC trade regulation rule by
offering pre-sale warranties to consumers on appliances costing more
that $15 and by not mischaracterizing its own warranties as "full
limited," in violation of the Act.

30

FEDERAL TRADE COMMISSION
Dkt. 8988

California Milk Producers Advisory, Board
An FTC administrative law judge dismissed the complaint which
alleged the Board deceptively advertised that "Every Body Needs
Milk" when some medical authorities claimed milk was unhealthful
to some people.

Dkt. 9073

Francis Ford, Inc.
This Portland, Oregon dealer was ordered by an FTC administrative
law judge to refund excess proceeds from the sale of customers'
repossessed cars.

Dkt. 9018

Amrep Corporation
Ordered by an administrative law judge to stop using high pressure
sales tactics in the sale of land, to disclose to purchasers the
limitations of the use and value of such land, and to inform past
purchasers of their current options, which might include canceling
their contracts.

2.

Competition Mission

Dkt. 9016

Herbert R. Gibson, Sr., et al.
The initial decision prohibits present and former officials of several
Gibson Corporations from boycotting suppliers who failed to pay fees
for participation in The Gibson Trade Show. The order also prohibits
Herbert R. Gibson, Sr. from accepting commissions from a seller
while acting as a buyer for Gibson retail stores.

Dkt. 9079

Reuben H. Donnelly Corp.
The initial decision orders the publisher of the Official Airline Guide
to list flights of commuter and intrastate airlines on the same basis
that it lists flights of certificated airlines. The administrative law
judge found that Reuben H. Donnelly Corp. discriminated against the
commuter airlines by failing to list commuter airline flights in the
same tables with major airlines.

Dkt. 9108

E.I. Du Pont de Nemours and Company
In the initial decision the administrative law judge dismissed the
complaint which had charged Du Pont with an attempt to monopolize
the domestic titanium dioxide pigment market. Du Pont is the largest
domestic producer of titanium dioxide, a pigment used in the
production of paints, inks, paper, and other materials to make them
white and opaque. The judge ruled that Du Pont did not engage in a
growth strategy designed to exclude its competitors.

ANNUAL REPORT 1979

31

Dkt. 9077

General Motors Corporation
The initial decision ordered General Motors to change a substantial
part of its method of distributing crash-susceptible motor-vehicle
parts following a finding by the administrative law judge that the
existing method was unlawful. The order requires GM to propose a
distribution plan that does not discriminate against independent body
shop operators and other commercial purchasers who compete with
GM dealers in repairing crash damaged autos and light trucks.

Dkt. 9080

Kaiser, Aluminum and Chemical Corp.
The initial decision orders Kaiser Aluminum to divest two industrial
plants acquired from the Lavino Division of International Minerals &
Chemical Corporation. At the time of the acquisition, Kaiser was the
nation's second largest producer of basic refractories. Lavino was the
fourth largest producer. The administrative law judge found that the
acquisition eliminated substantial actual competition between the two
firms and increased concentration in an already highly concentrated
industry.

Dkt. 9064

American Medical Association
In the initial decision, the administrative law judge concluded that the
American Medical Association, the nation's largest association of
physicians, had restricted and frustrated competition in the provision
of physicians' services throughout the United States and caused
substantial injury to the consumer. The judge ruled that the AMA's
ban on advertising was unlawful and deprived consumers of the free
flow of information about the availability of health care services. The
decision further noted that the AMA's restrictions have discouraged,
restricted, and, in some instances, eliminated new and innovative
forms of health care such as Health Maintenance Organizations. The
order requires the AMA to revoke any existing ethical principles or
guidelines which restrict physicians' advertising, solicitation, or
contractual relations. The order does not affect ethical standards
which deal with the medical or therapeutic aspects of a physician's
practice.

Dkt. 8904

Heublein, Inc.
In the initial decision, the administrative law judge ruled that the
acquisition of the nation's second largest vintner by the fifth largest
alcoholic beverage producer may substantially diminish wine industry
competition. The judge ordered Heublein, Inc. to divest itself of the
wine producer, United Vintners, Inc. In addi-

32

FEDERAL TRADE COMMISSION
tion, for the next 10 years, Heublein is required to obtain prior
Commission approval of any acquisition of a wine company that
would give Heublein control of more than 10 percent of the wine
market.
Dkt. 9116

Rhinechem Corp.
In the initial decision, the administrative law judge dismissed the
complaint against respondents Allegheny Ludlum Industries, Inc. and
Chemetron Corporation, wholly-owned subsidiary of Allegheny
Ludlum. Since the assets of Chemetron's Pigment Division were no
longer under the control of Allegheny and Chemetron but were
purchased by BASF in a transaction challenged by the Commission
in another proceeding the ALJ determined that it was unlikely that the
challenged acquisition of these assets by Rhinechem Corp. could ever
take place.

Dkt. 8859

National Industries, Inc.
In the initial decision, the administrative law judge dismissed the
complaint against respondents National Industries, Inc. and Cott
Corporation on the grounds that neither respondent is now engaged
in the soft drink business nor in the practices which were the focus of
the complaint.
F. FINAL LITIGATED ORDERS

1.

Consumer Protection Mission
Dkt. 9096

Howard Enterprises, Inc.
This publisher of lists of bad check passers used by retail
establishments in Washington, Oregon, Idaho, Wyoming, and Ohio
was ordered to comply with the privacy safeguards of the Fair Credit
Reporting Act. An FTC administrative law judge had ruled the "Alert
Lists" were not subject to the Act.

Dkt. 9045

The Raymond Lee Organization
This idea and invention promotion firm was ordered to disclose to
prospective clients that it does not evaluate the merits of any ideas
sent to it and to disclose the number of clients in recent years who
actually received more money from the firm's services than they
wound up paying in fees. Also, the company was ordered to offer a
ten-day cooling-off period during which a customer may cancel the
contract for any reason.

Dkt. 8987

National Commission on Egg Nutrition
Ordered to stop advertising that there is no scientific evidence that
eating eggs increases the risk of heart disease. The U.S.

ANNUAL REPORT 1979

33

Supreme Court in October 1978 refused to review the order.
2.

Competition Mission

Dkt. 8992

Coca-Cola Bottling Company of New York
The Commission dismissed the complaint against Coca-Cola Bottling
Company citing insufficient evidence that Coca-Cola's acquisition of
Franzia Brothers Winery, a U.S. producer of generic table wines,
would lessen competition.

Dkt. 9023

Amway Corp., Inc.
The Commission's final order prohibits Amway Corporation, a doorto-door marketer of household and consumer products from fixing the
resale prices of its products and from misrepresenting to its
prospective distributors the amounts of money Amway distributors
are likely to earn.

Dkt. 9080

Kaiser Aluminum and Chemical Corp.
The Commission ruled that the acquisition by Kaiser of the assets of
the Lavino Division of International Minerals & Chemicals
Corporation was unlawful and ordered Kaiser to divest itself of the
assets it obtained by the illegal acquisition and to restore Lavino as a
viable entity of roughly the same competitive capacities it possessed
before the acquisition.

Dkt. 8859

National Industries, Inc.
The Commission's final order adopts and makes effective the initial
decision and order dismissing the complaint against National
Industries and Cott Corporation. The initial decision found that
neither respondent is now engaged in the soft drink business nor in
the practices which were the focus of the complaint.

Dkt. 9091

Pillsbury Company, et al.
The Commission dismissed a complaint against Pillsbury Co. and
Fox Deluxe Foods, Inc., finding that a 1976 merger between the two
companies did not violate the federal antitrust laws. The Commission
found that the merger was not likely to have significant anticompetitive effects on the frozen/prepared pizza market.

Dkt. 9046

SKF Industries Inc., et al
The Commission ruled that an arrangement between SKF Industries,
Inc. and Federal-Mogul Corp. unlawfully restrained competition in
the distribution of automotive tapered roller bearings. The

Commission found that the two firms had unlawfully allocated their
combined share of the market for the

34

FEDERAL TRADE COMMISSION
distribution of bearings in the automotive aftermarket. As a result,
direct competition between the two firms was eliminated and
potential competition was foreclosed.
Dkt. 8978

Borden Inc.
The Commission ordered Borden to cease attempting to hinder,
restrain or eliminate competition in the processed lemon juice market
by granting improper price reductions and promotional allowances to
its customers, or by selling its product, ReaLemon, below cost or at
unreasonably low prices.

Dkt. 9084

TRW, Inc./Horace A. Shepard
The Commission ordered TRW, Inc. not to have as a director one
who simultaneously served as a director of a competing company.
The Commission also ordered the individual involved not to serve
simultaneously on the board of TRW and any competitor.

Dkt. 9035

Kraftco Corp., et al.
The final order on remand is identical to that issued by the
Commission on January 11, 1977 (89 F.T.C. 46) and requires SCM
Corporation, a New York City producer of margarine, edible oils and
barbeque sauce to cease seating on its board of directors any
individual who is simultaneously serving on the board of Kraftco
Corporation, or any other competitive company.

Dkt. 9116

Rhinechem Corp., et al.
The Commission's final order sustains the administrative law judge's
dismissal of the complaint on the ground that changed circumstances
precluded the possibility of the challenged merger.

ANNUAL REPORT 1979

A.

35

INJUNCTIONS
Consumer Protection Mission

1.
Virginia Homes Manufacturing Corp. The FTC has filed an action in the district
court to obtain a permanent injunction ordering this mobile homes seller to notify past
customers of additional warranty rights which may save them substantial repair expenses.
This was the first time the FTC had sought a permanent injunction without first obtaining a
cease and desist order or without the defendant's stipulating to the injunction.
2.
Ronald S. Kazdin, et al. An action filed in the district court to obtain a permanent
injunction ordering the defendant to cease selling and performing artificial hair implants and
to provide refunds to consumers.
B.

Competition Mission

1.
The Southland Corp., et al. The Commission filed an action in federal district court
to obtain an injunction barring the acquisition of Knowlton's, by the Southland Corporation.
Knowlton's is one of the largest independent dairy processors in the San Antonio market
area. The injunction was denied but the court entered a hold separate order pending the
resolution of the administrative complaint.
2.
National Tea Co., et al. The Commission sought a preliminary injunction in federal
district court in Minneapolis barring the merger between National Tea Co. and Applebaum's
Food Markets, Inc., until the complaint was resolved. National Tea Co. proposed to acquire
Applebaum's, which would make National the largest operator of retail grocery stores in the
Minneapolis area. The injunction was denied.
3.
Mannesmann AG, et al. The Commission filed a motion for preliminary injunction
in the federal district court in Washington, D.C. to block the planned takeover of the
Harnischfeger Corp. by a West German firm, Mannesmann AG. The markets affected by the
proposed acquisition included industrial cranes, mining shovels, hoists and other heavy
equipment. The parties abandoned this proposed acquisition and no action was taken by the
court on the injunction.
4.
Exxon Corp. et al. The Commission sought an injunction barring Exxon
Corporation's proposed acquisition of Reliance Electric Co. in a motion filed in federal
district court for the District of Columbia. The injunction was denied but the court entered
a hold separate order pending the outcome of the administrative complaint.

36

FEDERAL TRADE COMMISSION
CIVIL PENALTY CASES

A.

Consumer Protection Mission

FTC Docket Nos. D-7305 and D-8803
United States v. National Dynamics Corp., et al.
Complaint Filed: 10/20/78
This case is currently in litigation in the United States District Court of New York. A civil penalty
suit was filed on October 20, 1978 against the marketer of "VX-6" battery additive. In violation of
two FTC orders, the firm allegedly made false claims with respect to the existence of laboratory
testing, endorsements and testimonials, and earnings and profits to induce sales and attract new
distributors (82 F.T.C. 488; 85 F.T.C. 391).

FTC File No. 772 3044
United States v. Panacolor, Inc., et al.
Complaint Filed: 10/27/78
Judgment Entered: 10/27/78
United States v. Panacolor, Inc., American Consumer, Inc., and Canyon House, Inc., Civ. Act. No.
78-1997, United States District Court for the District of Columbia. Consent decree entered October
27, 1978, in the amount of $40,000 for civil penalties and an injunction. The complaint alleged
violations of the FTC's Trade Regulation Rule pertaining to The Use Of Negative Option Plans by
Sellers in Commerce, 16 CFR 425.

FTC File No. 782 3038
United States v. Jim Clark's Beef, Inc., et al.
Complaint Filed: 11/09/78
This case is currently in litigation in the United States District Court for Kansas. The complaint
alleges that defendants have advertised bulk freezer meats by engaging in practices that the FTC
previously had determined to be unfair and deceptive in proceedings against Seekonk Freezer Meats,
Inc., (FTC Docket 8880, 82 F.T.C. 1025 (1973)); Charnita, Inc., (FTC Docket 8829, 80 F.T.C. 892
(1972)); Southern States Distributing Company, (FTC Docket 8882, 83 F.T.C. 1126 (1973)); and
Beauty Style Modernizers, Inc., (FTC Docket 8898, 83 F.T.C. 1761 (1975)).

FTC Docket No. C-1551
United States v. Maylis Textile Corp., et al.
Complaint Filed: 11/13/78
Judgment Entered: 11/13/78
United States v. May Textile Corporation, Morris Ellis, Sidney Landau, and Milton Steiger, 78 Civ.
5098 (WK)

ANNUAL REPORT 1979

37

United States District Court for the Southern District of New York. Consent decree entered
November 13, 1978, in the amount of $41,000 for civil penalties, a requirement that defendants have
all wool products they import tested for fiber quality, and an injunction. The complaint alleged
violations of an FTC order to cease and desist certain practices prohibited by the Wool Products
Labeling Act of 1939.

FTC File No. 772 3057
United States v. Federated Department Stores, Inc.
Complaint Filed: 11/16/78
Judgment Entered: 11/16/78
United States District Court for the Southern District of Ohio, Western Division. Consent decree
entered November 16, 1978, in the amount of $50,000 for civil penalties, a requirement that
defendant invite rejected applicants for credit to re-apply, an explication of how rejected applications
for credit are to be explained to the applicants, and an injunction. The complaint alleged violations
of the Equal Credit Opportunity Act and its implementing regulation B, 12 CFR 202.

FTC Docket No. C-2037
United States v. The J.B. Williams Company, Inc., et al.
Complaint Filed: 2/16/79
Judgment Entered: 2/16/79
United States District Court for the Southern District of New York; judgment in the amount of
$75,000 was entered on February 16, 1979, against defendant J.B. Williams and its advertising
agency, for violating an FTC order (79 F.T.C. 420) by failing to disclose clearly and conspicuously
that any weight reduction occurring after use of P.V.M. would be the result of a diet restricting
caloric intake or exercise program.

FTC Docket No. C-2491
United States v. Atlantic Hosiery, Inc., et al.
Complaint Filed: 2/28/79
This case is currently in litigation in the United States District Court for the Southern District of
Florida. The firm, a marketer of ladies hosiery and related products, allegedly misbranded and failed
to clearly label the textile fiber products, in violation of a 1974 FTC order (83 F.T.C. 1365).

FTC File No. 792 3034
United States v. Lawson Hill Leather and Shoe Company, Inc.
Complaint Filed: 3/08/79
Judgment Entered: 3/08/79
United States District Court for the District of Massachusetts; judgment was entered on March 8,

1979, in the amount of $15,000 for civil penalties and

38

FEDERAL TRADE COMMISSION
an injunction, for failure to send customers the proper delay notices as required under the Mail Order
Trade Regulation Rule.

FTC Docket No. C-2711
United States v. Maralco Enterprises, Inc., et al.
Complaint Filed: 5/10/79
Judgment Entered: 5/15/79
United States District Court for the Southern District of New York. Defendant has agreed to pay
$15,000 in civil penalties to settle charges that it distributed inaccurate placement information and
success rates of its graduates to prospective vocational school students. The company, also known
as New York School of Computer Technology, is prohibited by a 1975 FTC order from making
certain misrepresentations in selling vocational school courses (86 F.T.C. 319).

FTC File No. 782 3023
United States v. General Mills Fun Group, Inc.
Complaint Filed: 5/22/79
Judgment Entered: 5/23/79
United States District Court for the District of Minnesota; judgment in the amount of $100,000
($90,000-Kenner Product Division, $10,000-Fundimensions Division). The complaint alleged that
defendant had advertised toys by engaging in practices that the FTC previously had determined to
be unfair and deceptive in proceedings against Ideal Toy Corporation (FTC Docket No. 8530, 64
F.T.C. 297 (1964)) and Walco Toy Company, Inc., (FTC Docket No. 8921, 83 F.T.C. 1783).

FTC File No. 782 3001
United States v. Montgomery Ward & Co., Inc.
Complaint Filed: 5/29/79
Judgment Entered: 5/29/79
United States District Court for the Eastern District of Virginia; judgment in the amount of $175,000
for failure to provide accurate and specific reasons for denial of credit under the Equal Credit
Opportunity Act and a requirement that Wards send to approximately 200,000 consumers who were
denied credit a letter offering them a new opportunity to apply for credit.

FTC Docket No. 8941
United States v. Atlantic Industries, Inc.
Complaint Filed: 3/13/78
Judgment Entered: 8/17/79
United States District Court for the Southern District of Florida; defendant

ANNUAL REPORT 1979

39

has agreed to refund a total of $40,000 to over 1,200 dissatisfied customers. The agreement settles
charges that the company used deceptive means to sell its photographic enlargement plan and to
collect accounts in violation of a 1975 order. Atlantic will pay $10,000 in civil penalties (85 F.T.C.
903).

FTC File No. 742 3207
United States v. Tri-Texas, Inc., et al.
Complaint Filed: 9/27/79
Judgment Entered: 9/27/79
United States District Court for the Northern District of Texas; a consent judgment in the amount
of $25,000 was entered on September 27, 1979, as a result of the respondent's misrepresentations
concerning profit potential, demand for its product, as an inducement to purchase a franchise;
availability of an exclusive territory, training and promotional assistance and onerous franchise
requirements. Additionally, injunctive provisions supplementing the Commission's Trade
Regulation Rule covering franchising and business opportunity ventures were imposed.

FTC File No.772 3010
United States v. Dixieland Construction Company, Inc., et al.
Complaint Filed: 9/28/79
Judgment Entered: 9/28/79
United States District Court for the Northern District of Alabama; Civ. Action No. 79M 1054 S. A
consent judgment in the amount of $10,000 in civil penalties and an injunction was entered on
September 28, 1979 for violations of the Commission's Trade Regulation Rule Concerning a
Cooling-Off Period for Door-to-Door Sales and for engaging in unfair and deceptive practices in the
offering of home improvement services.

FTC File No. 772 3010
United States v. Modern Home Improvement Corporation, et al.
Complaint Filed: 9/28/79
Judgment Entered: 9/28/79
United States District Court for the Northern District of Alabama; Civ. Action No. 79M 1054 S. A
consent judgment in the amount of $10,000 in civil penalties and an injunction was entered on
September 28, 1979 for violations of the Commission's Trade Regulation Rule Concerning a
Cooling-Off Period for Door-to-Door Sales and for engaging in unfair and deceptive practices in the
offering of home improvement services.

FTC File No. 772 3010
United States v. National Siding Corporation, et al.
Complaint Filed: 9/28/79

40

FEDERAL TRADE COMMISSION
This case is currently in litigation in the United States District Court for the Northern District of
Alabama; Civ. Action No. 79X-1052 S. The respondent has been charged with violating the
Commission's TRR concerning a Cooling-Off Period for Door-to-Door Sales and for engaging in
unfair and deceptive practices in the offering of home improvement services through fictitious
pricing and energy claims, and by falsely representing themselves to be a manufacturer.

FTC File No. 772 3010
United States v. Nationwide Construction Company, Inc., et al.
Complaint Filed: 9/28/79
Judgment Entered: 9/28/79
United States District Court for the Northern District of Alabama; Civ. Action No. 79M-1053 S
USDC ND ALA. A consent judgment in the amount of $10,000 in civil penalties and an injunction
was entered on September 28, 1979 for violations of the Commission's Trade Regulation Rule
Concerning a Cooling-Off Period for Door-to-Door Sales and for engaging in unfair and deceptive
practices in the offering of home improvement services.

B.

Competition Mission
1. ICI Industries Inc.-This civil penalty suit was filed and a judgment for $100,000
agreed to on August 14, 1979. IC Industries, Inc. was charged with failure to divest
certain Midas Muffler Shops within one year of their acquisition.
2. ARA Services, Inc.-This civil penalty action, filed on November 2, 1977, charged
that ARA had acquired assets of a periodical distributor without prior Commission
approval. A $300,000,judgment was rendered on August 14, 1979.

ANNUAL REPORT 1979

41

APPELLATE COURT DECISIONS
REVIEWING COMMISSION ORDERS
American General Insurance Company v. F.T.C., 589 F.2d 462 (9th Cir. 1979) (Case remanded for
further proceedings)
Trans World Accounts, Inc. v. F.T.C., 594 F.2d 212 (9th Cir. 1979) (Part of order affirmed and
enforced; one provision in order remanded for further proceedings)
Reichhold Chemicals v. F.T.C., 598 F.2d 616 (4th Cir. 1979) (Order affirmed and enforced)
Jay Norris, Inc. v. F.T.C., 598 F.2d 1244 (2d Cir. 1979) (Order affirmed and enforced)
US Life Credit Corp. v. F.T.C., 599 F.2d 1387 (5th Cir. 1979) (Commission decision reversed and
order vacated)
RSR, Inc. v. F.T.C., 602 F.2d 1317 (9th Cir. 1979) (Order affirmed and enforced)
Freuhauf Corporation v. F.T.C., 603 F.2d 345 (2d Cir. 1979) (Order set aside)
Encyclopedia Britannica, Inc. v. F.T.C., 605 F.2d 93 (7th Cir. 1979) (Order affirmed and enforced)
SUPREME COURT DECISION
REVIEWING FINAL COMMISSION ORDER
The Great Atlantic & Pacific Tea Company v. F.T.C., 440 U.S. 69 (1979) (Reversing a decision of
the Second Circuit which had upheld the Commission's Order)
OTHER IMPORTANT COURT DECISIONS
F.T.C. v. Rhinechem Corp. 459 F.Supp. 785 (N.D. Ill.) (October 20, 1978)
(The court granted the Commission's application for preliminary injunction against
Rhinechem's purchase of the pigments business of Chemetron Corporation.)
In re FTC Line of Business Report Litigation and FTC Corporate Patterns Report Litigation, 439
U.S. 958 (November 11, 1978)
(The Supreme Court denied petitions for certiorari leaving standing the Court of Appeals'
decision enforcing the Commission's orders.)
American Motors Corp. v. F. T. C., 601 F.2d 1329 (6th Cir., July 2, 1979)
(The court ordered dismissal of pre-enforcement challenge to Commission investigational
subpoena on ground that administrative and statutory remedies had not been exhausted.)

42

FEDERAL TRADE COMMISSION

F.T.C. v. Anderson (CCH 1979-2 Trade Cas. 162,837) (D.C. Cir., September 17,1979)
(The court affirmed the district court's order enforcing subpoenas duces tecum issued against
the oil company respondents in Exxon Corp., D 8934, and remanded on the question of
whether certain documents are to be considered "agency" records.)
F.T.C. v. National Tea Co., 603 F.2d 694 (8th Cir., July 16, 1979)
(Appeals Court affirmed judgment of district court denying commission's application for
preliminary injunction against acquisition pending completion of administrative
proceedings.)
F.T.C V. Rockefeller 591 F.2d 182 (2d Cir., January 18, 1979)
(Court affirmed district court's order of enforcement of subpoenas directed to bankholding
companies arising out of investigation of energy industry.)
F.T.C. v. Southland Corp., 471 F.Supp. I (D.D.C., May 18, 1979)
(Court denied the Commission's application for a preliminary injunction against acquisition
but entered an order enforcing hold-separate agreement.)
F.T.C v. Winters National Bank & Trust Co., 601 F.2d 395 (6th Cir., September 11, 1979)
(Court enforced Commission subpoena directed against bank arising out of investigation of
compliance by third parties of "Holder-In-Due-Course" Rule.

ANNUAL REPORT 1979

43

POLICY PLANNING PAPERS
(1)

Housing Policy Review Session Briefing Book.
November, 1978.

(2)

Drugs and Medical Devices Policy Review Session Briefing Book.
December, 1978.

(3)

Semiannual Regulatory Agenda.
December, 1978.

(4)

Life Insurance Sold to the Poor: Industrial and Other Debit Insurance, Policy
Planning Issues Paper.
January, 1979.

(5)

Trademarks, Consumer Information and Barriers to Competition, Policy Planning
Issues Paper.
January, 1979.

(6)

Tax Policy and Competition, Policy Planning Issues Paper.
February, 1979.

(7)

Compliance and Enforcement Policy Session Briefing Book.
March, 1979.

(8)

Mergers Policy Review Session Briefing Book.
May, 1979.

(9)

Consumer Information Remedies Policy Review Session.
June,1979.

(10)

Health Services Policy Review Session Briefing Book.
June,1979.

(11)

Semiannual Regulatory Agenda.
July, 1979.

44

FEDERAL TRADE COMMISSION
STAFF REPORTS PUBLISHED ON PROPOSED RULES
A.

Consumer Protection Mission
1.

Proposed Rule for Advertising and Labeling of Protein Supplements
A staff report was released for public comment on a proposed rule
dealing with the advertising and labeling of protein supplements
products. The report recommended a disclosure that such products
are usually unnecessary.

2.

Proposed Rule for Food Advertising-Phase I
A staff report was released for public comment on a proposed rule
that would eliminate unfair or deceptive advertising claims for the
energy, natural/organic, health, fat and cholesterol attributes for food
products.

3.

Proposed Rule for Used Cars
A staff report was released for public comment on a proposed rule to
help used car shoppers. According to the report, the condition of used
cars varies widely, and disclosing the existence of a warranty or
inspection for defects, if any, would assist consumers in their
purchase.

4.

Proposed Rule on Appliance Labeling
A staff report was released for public comment on a proposed rule
dealing with labels with an energy efficiency rating to be attached to
most major appliances and residential furnaces, thus allowing
purchasers to comparison shop for the most economical and energy
efficient models.

5.

Proposed Amendment of Holder-in-Due-Course Rule
A staff report was issued for public comment on a proposed rule to
provide broader protection for consumers who purchase a product or
service on credit.

6.

Proposed Rule on Octane Certification and Posting
A staff report was released for public comment on a rule that would
require the octane rating of gasoline to be calculated by a standard
formula and labeled on gas pumps.

7.

Proposed Rule on Standards and Certification
A staff report was released that proposed a rulemaking proceeding be
commenced to deal with the role product standards and seals of
approval may play in limiting the range of products available to
consumers.

ANNUAL REPORT 1979

45

B.

Competition Mission

1.

Medical Participation in Control of Blue Shield and Certain Other Open-Panel
Medical Prepayment Plans. (April, 1979)
This report presents the results of the Bureau of Competition's investigation into the
extent, impact, and legality of medical participation in the control of Blue Shield and
other open-panel medical prepayment plans. The principal focus of the investigation
has been the degree of control over such plans possessed by physicians and physician
organizations. The report found that medical participation in the control of many
Blue Shield plans is sufficiently great that physicians and physician organizations are
able to control or influence economically significant decisions made by the plans.
The report recommends initiation of a rulemaking proceeding and includes a draft of
a proposed trade regulation rule.
ECONOMIC REPORTS

Grocery Retailing Concentration in Metropolitan Areas, Economic Census Years 1954-72,
September 1979 (Joint Report with Economics, Statistics, and Cooperative Service, U.S. Department
of Agriculture).
An Analysis of Competitive Structure in the Uranium Supply Industry, August 1979.
Consumer Responses to Cigarette Health Information, August 1979.
Life Insurance Cost Disclosure, July 1979.
Brand Performance in the Cigarette Industry and the Advantage of Early Entry, 1913-1973, June
1979.
Statistical Report: Annual Line of Business Report, 1973, March 1979.
The Natural Gas Production Industry, February 1979.
The Brewing Industry, December 1978.
Statistical Report on Mergers and Acquisitions, 1977, December 1978.
The Structure of the Nation's Coal Industry, 1964-74, November 1978.

46

FEDERAL TRADE COMMISSION
ECONOMIC WORKING PAPERS
No. 14 Consumer Preference, Advertising and Sales: On the Advantage from Early Entry
By Ronald S. Bond and David F. Lean, October 1979
No. 15 Predicting 1972 Concentration Levels Using 1967 Concentration and Other Variables
for 280 4-Digit Industries
By Douglas W. Webbink, October 1979
No. 16 On the Competition for Shelf-Space in Grocery Stores
By James Case, October 1979
No. 17 Does the Choice of Concentration Ratio Really Matter?
By John E. Kwoka, Jr., October 1979
No. 18 Advertising Predation and the Areda-Turner and Williamson Rules
By John C. Hilke, October 1979
No. 19 Entry, Price-Cost Margins and Barriers to Entry in 280 4-Digit Industries, 1967-1972
By Douglas W. Webbink, October 1979
No. 20 Estimating Expected Losses in Auto Insurance
By Donald T. Sant, October 1979
No. 21 Output Under Second-Degree Price Discrimination
By John E. Kwoka, Jr., October 1979
No. 22 Differences Between the Levels of Spot and Network Television Advertising Rates
By John L. Peterman, October 1979