264 F. 509 | 2d Cir. | 1920
January 6, 1919, the Federal Trade Commission issued a complaint against the New Jersey Asbestos Company, under section 5 of the Act of September 26, 1914 (Comp. St. § 8836e), entitled “An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes,” alleging that the company had during the year 1918 been giving to employes of its customers and prospective customers liquors, cigars, meals, theater tickets, valuable presents, and sums of money and entertainments to induce them to influence their employers to purchase the company’s products and that
The company filed an answer, admitting that it is engaged in interstate as well as intrastate business, and that it had paid reasonable amounts in furnishing entertainment to employes of customers, and as incidental to such entertainment had supplied liquors, cigars, meals, and theater tickets, but denying that this was done for tire purpose of inducing them to influence their employers to buy its goods, and especially denying that it ever gave them valuable presents or sums of money.
The charge of giving valuable presents and sums of money has been abandoned by the commission. May 27, 1919, the commission filed its report and two findings of fact, and its conclusion of law, as follows:
“First. That the respondent, the New Jersey Asbestos Company, is a corporation organized, existing, and doing business under and by virtue of the laws of the state of New Jersey, having its principal office and place of business at the city of New York, in the state of New York, and is now, and for more than one year last past has been, engaged in manufacturing and selling engine packings composed of asbestos, metal and asbestos, flax, wood fiber, and kindred products, throughout the states and territories of the United States, and that at all times hereinafter mentioned, the respondent has carried on and conducted such business in direct competition with other persons, firms, copartnerships, and corporations manufacturing and selling like products.
“Second. That said respondent, the New Jersey Asbestos Company, in the course of its business of manufacturing and selling engine packings composed of asbestos, metal and asbestos, flax, wood fiber, and kindred products, throughout the states and territories of the United States, for more than one year last past, has been lavishly giving gratuities, such as liquor, cigars, meals, theater tickets, and entertainment, to employes of customers as an inducement to influence their employers to purchase or to contract to purchase from the said respondent, the New Jersey Asbestos Company, engine packings composed of asbestos, metal and asbestos, flax, wood fiber, and kindred products, without other consideration therefor.
“Conclusion.
“That the methods set forth in the foregoing findings of fact, under all the circumstances therein set forth, are unfair methods of competition, in violation of the provisions of section 5 of the act of Congress, approved September 26, 1914, entitled ‘An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes.’ ”
The findings of fact being mere conclusions, it is necessary to examine the evidence to see whether they are supported by any testimony or not. It shows that the officers'of the company in the year 1918 did entertain at the company’s expense both customers and employés of customers, and that the salesmen down to May 1st were employed on a salary or on a salary and commission basis, and were allowed to charge in their monthly accounts reasonable lump sums for entertainment. After May 1st they were on a commission basis only, and any entertainment given by them was given at their own expense.
“Spending It (may.■ — So-called spending or treating money, if actually advanced l>y corporations to their traveling salesmen to be used by them as a part of the expenses incident to selling the product of such corporations, is an allowable deduction in a return of income by such corporations. The deduction of such expenditures is conditioned upon a satisfactory showing that all the allowance claimed as a deduction was actually expended for and was an ordinary and usual expense incurred in selling the product or merchandise of the corporation.”
The order is reversed.