W. Green signed an assurance of discontinuance with the State of New York in 1965 and a consent judgment at a later time, both involving bait and switch practices.2 Counsel for Mr. Green not only confirmed that Green signed these two consent orders, but admitted that he had been criminally prosecuted for bait and switch advertising in the District of Columbia.3 Thus, it would appear that this is at least the fourth time that legal sanctions have been imposed upon him as a result of alleged bait and switch conduct. In short, were we to accept the statements of counsel at oral argument, we could easily find Mr. Green to be a bait and switch recidivist.

As an adjudicatory body, however, we must proceed cautiously when considering matters not raised until oral argument. Since none of the prior judgments are a part of this record, and since the parties have not been given an opportunity to brief and argue fully the circumstances and effect of the prior judgments, we cannot properly consider these judgments in framing our order. Accordingly, I concur in the judgment of the Commission.

Had the record been more complete, however, I would not have hesitated to support an order including "consumer warning" relief of the kind ordered by the administrative law judge. Requiring a "consumer warning" is clearly within the power of the Commission; it is "reasonably related" to prohibiting further conduct found to have violated our Act. When dealing with an individual who has repeatedly engaged in bait and switch practices, a consumer forewarned will be far less likely to fall victim to such practices.

Such a remedy should not be used indiscriminately. If the other order provisions were obeyed, there would be no need for a "consumer warning." Where dealing with a known recidivist, however, we may infer a significant likelihood that our order would be disobeyed. In such a case, it is my view that a "consumer warning" remedy may well be both appropriate and necessary.

FINAL ORDER

This matter is before us on cross-appeals by respondents, Herbert Millstein, Harold J. Green, John W. Green, Peter W. Galarneau, and Joseph W. Green, and by complaint counsel from the administrative law judge's initial decision filed June 27, 1974. For the reasons stated in the accompanying opinion, the Commission has determined to adopt the initial decision as the decision of the Commission except insofar as it is inconsistent with said opinion and to issue the cease and desist order

* Transcript of Oral Argument of Oct. 16, 1974, 18-19.

a Id. at 33-37.

Jacob Siegel Co., v. F.T.C., 327 U.S. 608 (1946), National Lead Co., et al. v. F.T.C., 352 U.S. 419 (1957).

contained therein as the final order of the Commission with the modifications set forth below. Accordingly,

It is ordered, That the law judge's cease and desist order be modified so as to include respondents Mike McKeever, Sam Katz, George Edward Ommert, and Gerald Gautcher in all provisions and that the paragraph dismissing the complaint as to said respondents be stricken; It is further ordered, That the paragraph requiring respondents to include in their advertisements an affirmative disclosure to the effect that they are subject to a Federal Trade Commission order in Docket 8937 be stricken without prejudice to the Commission's right to reopen this proceeding to consider reinstating of this requirement or other appropriate relief should the future conduct of any of these respondents warrant such action,

It is further ordered, That in all other respects the appeals of respondents and complaint counsel be denied.

IN THE MATTER OF

REDMAN INDUSTRIES, INC., ET AL.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT

Docket C-2640. Complaint, Mar. 3, 1975 - Decision, Mar. 3, 1975

Consent order requiring a Dallas, Tex., manufacturer of mobile homes, among other things to cease unfair and deceptive warranty practices through the establishment of a prompt and effective system to handle warranty-related problems. The order requires respondent to provide warranty repairs or services on still-unrepaired mobile homes manufactured between 1972 and 1974 and to provide future retail purchasers with relief by establishing and maintaining a regular and effective system to handle complaints and service. Under this system, all repairs must be complete within thirty days after notification to the respondent of defects. Where the defects affect safety or habitability of the mobile home, the repairs must be started within three business days and be expeditiously completed.

Appearances

For the Commission: Walter E. Diercks, Robert Weinstock and Pamela B. Stuart.

For the respondents: Jerry L. Buchmeyer, Thompson, Knight, Simmons & Bullion, Dallas, Tex.

Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that Redman Industries, Inc., a corporation, and certain of its subsidiaries, (hereinafter referred to as respondents) have violated the provisions of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. For the purposes of this complaint and the order attached hereto the term "mobile home" means a movable or portable dwelling over thirty two feet in body length and over eight feet in width, constructed to be towed on its own chassis and designed so as to be installed with or without a permanent foundation for human occupancy as a residence, which may include one or more components which can be retracted for towing purposes and subsequently expanded for additional capacity, or two or more units separately towable but designed to be joined into one integral unit. "Mobile home" as used herein includes the mobile home structure, including the plumbing, heating and electrical systems.

PAR. 2. Respondent Redman Industries, Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware, with its principal office and place of business located at Redman Plaza East, 2550 Walnut Hill Lane, Dallas, Tex. Respondent Redman Mobile Homes, Inc. is a wholly-owned subsidiary corporation of Redman Industries, Inc., organized, existing and doing business under and by virtue of the laws of the State of Delaware, with its principal office and place of business located at Redman Plaza East, 2550 Walnut Hill Lane, Dallas, Tex. Respondent Redman Industries, Inc., dominates, controls, condones, approves and derives pecuniary benefits from the acts and practices of Redman Mobile Homes, Inc.

Respondent Redman Western Corporation is a wholly-owned subsidiary corporation of Redman Mobile Homes, Inc., organized, existing and doing business under and by virtue of the laws of the State of Delaware with its principal office and place of business located at Redman Plaza East, 2550 Walnut Hill Lane, Dallas, Tex. Respondents Redman Industries, Inc. and Redman Mobile Homes, Inc. dominate, control, condone and approve the acts and practices of Redman Western Corporation.

PAR. 3. Respondents are now and have been engaged in the design, manufacture, advertising, offering for sale, sale and distribution of

mobile homes to selected mobile home dealers. Manufacturing is accomplished in approximately 26 facilities controlled and operated by respondents, located in approximately 14 states.

PAR. 4. In the further course and conduct of their aforesaid business respondents are now and have been soliciting persons (individuals, partnerships and corporations) to become "authorized" dealers, and are also solicited by persons who desire to become "authorized" dealers. Respondents select certain of these persons as "authorized" dealers. In the normal course of business respondents sell and distribute the aforesaid homes only to these "authorized" dealers who then resell these products to the public. In the normal course of business the way in which the aforesaid homes are purchased new at retail unused by a first purchaser is through an "authorized" dealer.

PAR. 5. In the further course and conduct of their aforesaid business respondents place primary reliance on their "authorized" dealers to ascertain which of their aforesaid mobile homes contain defects which are subject to the aforesaid warranty, and to notify respondents of defects for which respondents assume responsibility. Respondents also place primary reliance on their "authorized" dealers to effect such repairs and services as are necessary to correct defects covered by the aforesaid warranty and to notify respondents of those defects covered by the aforesaid warranty which said dealers are unable or unwilling to fully correct, so that respondents may repair the aforesaid defects either directly with their own personnel or through the use of an independent service contractor.

PAR. 6. In the further course and conduct of their aforesaid business, respondents now cause and have caused, their mobile homes to be transported to "authorized" dealers located in various States of the United States and to be sold to retail purchasers by such dealers. Respondents therefore maintain and have maintained a substantial course of trade in said mobile homes in commerce, as "commerce" is defined in the Federal Trade Commission Act.

PAR. 7. In the further course and conduct of their aforesaid business respondents are now, and have been, orally or in writing, directly or through their dealers and others, granting or disseminating certain warranties or certain statements concerning their warranties to each retail purchaser of their aforesaid mobile homes by various means in commerce, as "commerce" is defined in the Federal Trade Commission Act.

(a) Each written warranty represents directly or by implication that respondents will fully correct and repair within a reasonable period of time all defects in the materials or workmanship in each of their aforesaid mobile homes which become evident within a twelve month or

ninety day period (depending on the character of the defect) subsequent to the date of their purchase at retail, except for certain specifically enumerated components, including but not limited to furniture and certain major appliances. Respondents' written warranty further represents that the aforesaid obligation is limited to repairing or replacing parts of their mobile homes which are returned to their nearest factory with transportation charges prepaid and which respondents shall determine to be defective, and that if it is impractical to send any part to the nearest factory, respondents shall have no liability for the labor cost involved in the repair or replacement but shall be liable solely for providing the necessary material for such repair or replacement.

Respondents' written warranty further purports to disclaim all other warranty rights which are imposed by force of law, including but not limited to the implied warranties of merchantability and fitness for a particular purpose, and represents directly or by implication that the aforesaid warranty sets forth the full extent of respondents' warranty obligations.

(b) Notwithstanding the foregoing, it is respondents' uniformly applied warranty policy that the aforesaid service and repair of defects covered by the written warranty will be provided at the mobile home site and that the return of the home, or the defective parts, as the case may be, with transportation charges prepaid is not a condition precedent to such performance.

PAR. 8. In the further course and conduct of their aforesaid business respondents have engaged in acts and practices which result in, and have resulted in, the failure to maintain an adequate, regular and effective system which assures that every retail purchaser of respondents' mobile homes in fact receives full service and repair of defects covered by the aforesaid warranty within a reasonable time. Typical, but not inclusive of such acts and practices, are:

(a) The dissemination of a written warranty as described in Paragraph Seven which fails to disclose the true nature and extent of purchasers' warranty rights and those warranty obligations which respondents in fact undertake in the normal course of business, including but not limited to:

(1) the fact that pursuant to respondents' policies it is regarded as the "authorized" dealers' sole and complete responsibility, at least in the first instance, to perform repairs and service for certain classes of defects covered by the aforesaid warranty without compensation or reimbursement by respondents and without regular and effective action by respondents to determine whether such repairs and service are in fact fully performed within a reasonable time.