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Home > Journals > Michigan Law Review > MLR > Volume 40 > Issue 8 (1942)

 

Abstract

During recent years "phony" wholesalers have been defrauding the public by selling merchandise at "wholesale" prices which are actually higher than the retail prices of the same articles. These sales are made by three methods: (a) through the use of open showrooms, in which the articles are displayed as they would be at a wholesale house, although the actual business carried on is with individuals; (b) by distributing courtesy cards entitling the bearer to discounts at certain retail or wholesale houses, and (c) by sending out to members of organizations or to individuals catalogs which advertise standard brands at low prices, and then after the order and money are sent in by a customer, delivering some other similar product to him with the excuse that the company is "just out of the product ordered but the article sent is just as good." Such practices are detrimental to the public because they are misled into thinking that they are getting bargains when they are not, and for this reason they forego many of the retail services such as credit facilities, exchange privileges, and free deliveries. Recent studies have shown that in most instances the public is so far misled that they actually pay on an average of forty-eight per cent more for articles purchased in this manner. No guarantee is given with such sales, and since such practices are usually carried on by irresponsible persons a great deal of dissatisfaction results when the article does not work out as expected. Such practices are also detrimental to legitimate retailers from whom trade is diverted and to the state itself, since collection of the sales tax is made more difficult by the dealers' holding themselves out to be wholesalers and thus not subject to the tax on retail sales.

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