and where the effect is, or where there is a reasonable probability that the effect will be, to substantially injure, suppress, or stifle competition or to create a monopoly. Among the situations in which the requisite purpose or intent would ordinarily be lacking are cases in which such sales were (a) of seasonal goods near the conclusion of the season; (b) of perishable goods in respect to which deterioration is imminent; (c) of obsolescent goods; (d) made under judicial process; or (e) made in bona fide discontinuance of business in the goods concerned.

(c) As used in paragraphs (a) and (b) of this section, the term "cost" means the respective seller's cost and not an average cost in the industry whether such average cost be determined by an industry cost survey or some other method. It consists of the total outlay or expenditure by the seller in the acquisition, production, and distribution of the products involved, and comprises all elements of cost such as labor, material, depreciation, taxes (except taxes on net income and such other taxes as are not properly applicable to cost), and general overhead expenses, incurred by the seller in the acquisition, manufacture, processing, preparation for marketing, sale, and delivery, of the products. Not to be included are dividends or interest on borrowed or invested capital, or nonoperating losses, such as fire losses and losses from the sale or exchange of capital assets. Operating cost should not be reduced by items of nonoperating income, such as income from investments, and gain on the sale of capital assets.

(d) Nothing in this section shall be construed as relieving an industry member from compliance with any of the requirements of the Robinson-Patman

Act.

§ 202.14 Prohibited forms of trade restraints (unlawful price fixing, etc.)' It is an unfair trade practice for any member of the industry, either directly

'The inhibitions of this section are subject to Public Law 542, approved July 14, 1952, 66 Stat. 632 (the McGuire Act) which provides that with respect to a commodity which bears, or the label or container of which bears, the trade-mark, brand, or name of the producer or distributor of such commodity and which is in free and open competition with commodities of the same general class produced or distributed by

or indirectly, to engage in any planned common course of action, or to enter into or take part in any understanding, agreement, combination or conspiracy, with one or more members of the industry, or with any other person or persons, to fix or maintain the price of any goods or otherwise unlawfully to restrain trade; or to use any form of threat, intimidation, or coercion to induce any member of the industry or other person or persons to engage in any such planned common course of action, or to become a party to any such understanding, agreement, combination, or conspiracy.

others, a seller of such a commodity may enter into a contract or agreement with a buyer thereof which establishes a minimum or stipulated price at which such commodity may be resold by such buyer when such contract or agreement is lawful as applied to intrastate transactions under the laws of the State, Territory, or territorial jurisdiction in which the resale is to be made or to which the commodity is to be transported for such resale, and when such contract or agreement is not between manufacturers, or between wholesalers, or between brokers, or between factors, or between retailers, or between persons, firms, or corporations in competition with each other.

AUTHORITY: The provisions of this Part 205 issued under secs. 6, 5, 38 Stat. 721, 719; 15 U.S.C. 46, 45, unless otherwise noted.

SOURCE: The provisions of this Part 205 appear at 17 F.R. 416, Jan. 15, 1952, unless otherwise noted.

§ 205.1

GROUP I

Misrepresentation (general).

It is an unfair trade practice to make or publish, or cause to be made or published, directly or indirectly, any false, misleading, or deceptive statement or representation, by way of advertisement or otherwise, with respect to the grade, quality, freedom from defects or imperfections, quantity, use, size, material content, thread count, origin, shrinkage properties, proof against or resistance to wrinkling, creasing or crushing, colorfastness, washability, resistance to or immunity from moth, fire or flame damage, production, manufacture, or distribution of any upholstery or drapery fabrics, or to misrepresent any upholstery or drapery fabric in any other material respect.

The labeling, marking, or branding of upholstery and drapery fabrics in any manner which is false, misleading, or deceptive in respect to the grade, quality, freedom from defects or imperfections, quantity, use, size, material content, thread count, origin, shrinkage, properties, proof against or resistance to wrinkling, creasing or crushing, colorfastness, washability, resistance to or immunity from moth, fire or flame damage, production, manufacture, or distribution of such products, or in any other material respect is, an unfair trade practice.

§ 205.3 False invoicing.

Withholding from or inserting in invoices any statement or information by reason of which omission or insertion a false record is made, wholly or in part, of the transactions represented on the face of such invoices, with the capacity and tendency or effect of thereby misleading or deceiving purchasers, prospective purchasers. or the consuming public, is an unfair trade practice.

§ 205.4 Deception as to origin.

With respect to any upholstery and drapery fabrics of the following types:

Fabrics which have been woven or fabricated in a foreign country and imported in the grey or other unfinished state and dyed or finished in the United States; and fabrics which have been imported in the finished state and dyed, redyed, or refinished in the United States; it is an unfair trade practice:

(a) To offer for sale, sell, or distribute any such fabrics under marks, stamps, brands, labels, or representations which have the capacity and tendency or effect of misleading or deceiving purchasers, prospective purchasers, or the consuming public into the belief (1) that such fabrics were woven or fabricated in the United States, when such is not the fact; or (2) that they were dyed, finished, redyed, or refinished elsewhere than in the United States, when such is not true;

or

(b) To offer for sale, sell, or distribute any such fabrics without the same being marked, stamped, branded, or labeled so as to indicate clearly and nondeceptively (1) the country of origin of the fabrics, and (2) that such fabrics were woven or fabricated in said country and were dyed or finished or redyed or refinished in the United States, as the case may be, where the failure, refusal, or omission to so mark, stamp, brand, or label such fabrics has the capacity and tendency or effect of thereby promoting, abetting, or effectuating the marketing of such products under conditions which are misleading or deceptive to purchasers, prospective purchasers, or the consuming public.

NOTE: Nothing in this section shall be construed as relieving any member of the industry or other party of the necessity of complying with requirements of the customs laws or regulations, or other applicable provisions of law or regulations, relating to the marking of imported articles.

§ 205.5 Identification and disclosure of fiber or material content.

(a) In the sale, offering for sale, or distribution of upholstery and drapery fabrics, it is an unfair trade practice to misrepresent or deceptively conceal the identity of the fiber or material content of any such product.

(b) All upholstery or drapery fabrics which are composed wholly or in part of rayon, acetate, silk, or linen shall be identified as to their fiber content in accordance with the requirements of the trade practice rules heretofore promulgated by the Commission for the rayon and acetate textile industry, the silk in

dustry, and the linen industry,' except that, due to the provisions of section 14 of the Wool Products Labeling Act of 1939, labeling identification of any wool, reprocessed wool, or reused wool' contained in any such fabrics is not to be considered as required. In the case of upholstery and drapery fabrics which contain a kind of fiber or fibers required to be identified by label under said trade practice rules, and which also contain fibers of wool, reprocessed wool, or reused wool,' the label identification of the fiber content thereof shall be made in a manner which does not have the capacity and tendency or effect of deceiving purchasers or prospective purchasers as to the proportion of the identified fiber or fibers contained in such products. Examples of proper fiber identification by label in the case of an upholstery or drapery fabric composed of 60 percent rayon fibers and 40 percent wool' fibers are as follows:

"CONTAINS RAYON"

or

"60% RAYON"

or

"RAYON AND WOOL"

or

"60% RAYON AND 40% WOOL"

NOTE A: When an upholstery or drapery fabric containing wool, reprocessed wool, or reused wool 2 is sold, offered for sale, or dis

A copy of the above-mentioned trade practice rules may be obtained by any industry member making request therefor to the Commission.

'As here used, the meanings of the terms "wool," "reprocessed wool," and "reused wool." are to be understood as according with those set forth for such terms in subsections (b), (c) and (d) of section 2 of the Wool Products Labeling Act of 1939, said subsections (b), (c), and (d) reading as follows:

(b) The term "wool" means the fiber from the fleece of the sheep or lamb or hair of the Angora or Cashmere goat (and may include the so-called specialty fibers from the hair of the camel, alpaca, llama, and vicuna) which has never been reclaimed from any woven or felted wool product.

(c) The term "reprocessed wool" means the resulting fiber when wool has been woven or felted into a wool product which, without ever having been utilized in any way by the ultimate consumer, subsequently has been made into a fibrous state.

(d) The term "reused wool" means the resulting fiber when wool or reprocessed wool has been spun, woven, knitted, or felted into a wool product which, after having

tributed by an industry member with know!edge of facts indicating its probable use in a product or products other than upholsteries or draperies, such fabric shall be labeled as to its fiber content in accordance with the requirements of the Wool Products Labeling Act of 1939.

NOTE B: Nothing in this section is intended to limit or restrict the requirements of § 205.6 relating to disclosure of the fact that an upholstery or drapery fabric is composed of used material, whether such used material be used wool fiber or other used material.

§ 205.6 Disclosure of presence of used fiber or material.

It is an unfair trade practice to fail or to refuse to make full and nondeceptive disclosure of the fact that any upholstery or drapery fabric offered for sale or sold or distributed is composed of used fiber or material, in whole or in part, where such failure or refusal to disclose has the capacity and tendency or effect of misleading or deceiving purchasers prospective purchasers.

§ 205.7 Substitution of products.

or

The practice of shipping or delivering products which do not conform to samples submitted, to specifications upon which the sale is consummated, or to representations made prior to securing the order, without the consent of the purchasers to such substitutions and with the capacity and tendency or effect of misleading or deceiving purchasers, prospective purchasers, or the consuming public, is an unfair trade practice.

§ 205.8 Inducing breach of contract.

Knowingly inducing or attempting to induce the breach of existing lawful contracts between competitors and their customers or their suppliers, or interfering with or obstructing the performance of any such contractual duties or services, under any circumstance having the capacity and tendency or effect of substantially injuring or lessening present or potential competition, is an unfair trade practice. Nothing in this section is intended to imply that it is improper for any industry member to solicit the business of a customer of a competing industry member; nor is the rule to be construed as in anywise authorizing any agreement, understanding, or common

been used in any way by the ultimate consumer, subsequently has been made into a fibrous state.

course of action by two or more industry members to not solicit business from the customers of either of them, or from customers of any other industry member. § 205.9 Commercial bribery.

It is an unfair trade practice for a member of the industry directly or indirectly to give, or offer to give, or permit or cause to be given, money or anything of value to agents, employees, or representatives of customers or prospective customers, or to agents, employees, or representatives of competitors' customers or prospective customers, without the knowledge of their employers or principals, as an inducement to influence their employers or principals to purchase or contract to purchase products manufactured or sold by such industry member or the maker of such gift or offer, or to influence such employers or principals to refrain from dealing in the products of competitors or from dealing or contracting to deal with competitors.

§ 205.10 Imitation of trade-marks, etc. The practice of imitating, or causing to be imitated, or directly or indirectly promoting or aiding the imitation of, the trade-marks, trade names, other exclusively owned symbols or marks of identification of competitors, or the exclusively owned designs or patterns of competitors which have not been directly, or by operation of law, dedicated to the public, where such imitation has the capacity and tendency or effect of misleading or deceiving purchasers, prospective purchasers, or the consuming public, is an unfair trade practice.

§ 205.11 Defamation of competitors or false disparagement of their prod

terms or conditions of sale, or reports as to production or sales, with the capacity and tendency or effect of misleading or deceiving purchasers, prospective purchasers, or the consuming public, is an unfair trade practice.

§ 205.13 Use of lottery schemes.

The offering or giving of prizes, premiums, or gifts in connection with the sale of industry products, or as an inducement thereto, by any method which involves lottery or scheme of chance, is an unfair trade practice.

§ 205.14 Misrepresentation as to character of business.

It is an unfair trade practice for any member of the industry to represent, directly or indirectly, through use of the word "mill" or "mills," or the word "manufacturer," or any other word, term, or representation of similar import or meaning, in his corporate or trade name, or otherwise, that he is a manufacturer of upholstery and drapery fabrics, or that he is the owner or operator of a mill, factory, or producing company manufacturing upholstery and drapery fabrics, when such is not the fact, or in any other manner to misrepresent the character, extent, or type of his business.

$ 205.15 Prohibited discrimination.'

(a) Prohibited discriminatory prices, or discounts, rebates, refunds, credits, etc., which effect unlawful price discrimination.

It is an unfair trade practice for any member of the industry engaged in commerce, in the course of such commerce, to grant or allow, secretly or openly, directly or indirectly, any discount, rebate, refund, credit, freight or other transportation cost or any percentage thereof, or other form of price differential, where such discount, rebate, refund, credit, freight or other trans

'As used throughout § 205.15, the word "commerce" means "trade or commerce among the several States and with foreign nations, or between the District of Columbia or any Territory of the United States and any State. Territory, or foreign nation, or between any insular possessions or other places under the jurisdiction of the United States, or between any such possession or place and any State or Territory of the United States or the District of Columbia or any foreign nation, or within the District of Columbia or any Territory or any insular possession or other place under the jurisdiction of the United States."

portation cost or any percentage thereof, or other form of price differential, effects a discrimination in price between different purchasers of goods of like grade and quality, where either or any of the purchases involved therein are in commerce, and where the effect thereof may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them: Provided, however:

(1) That the goods involved in any such transaction are sold for use, consumption, or resale within any place under the jurisdiction of the United States;

(2) That nothing contained in this paragraph shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered;

(3) That nothing contained in this paragraph shall prevent persons engaged in selling goods, wares, or merchandise in commerce from selecting their own customers in bona fide transactions and not in restraint of trade;

(4) That nothing contained in this paragraph shall prevent price changes from time to time where made in response to changing conditions affecting the market for or the marketability of the goods concerned, such as but not limited to actual or imminent deterioration of perishable goods, obsolescence of seasonal goods, distress sales under court process, or sales in good faith in discontinuance of business in the goods concerned.

(b) Prohibited brokerage and commissions. It is an unfair trade practice for any member of the industry engaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, except for services rendered in connection with the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction or to an agent, representative, or other intermediary therein, where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect

control, of any party to such transaction other than the person by whom such compensation is so granted or paid.

(c) Prohibited advertising or promotional allowances, etc. It is an unfair trade practice for any member of the industry engaged in commerce to pay or contract for the payment of advertising or promotional allowances or any other thing of value to or for the benefit of a customer of such member in the course of such commerce as compensation or in consideration for any services or facilities furnished by or through such customer in connection with the processing, handling, sale, or offering for sale of any products or commodities manufactured, sold, or offered for sale by such member, unless such payment or consideration is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities.

(d) Prohibited discriminatory services or facilities. It is an unfair trade practice for any member of the industry engaged in commerce' to discriminate in favor of one purchaser against another purchaser or purchasers of a commodity bought for resale, with or without processing, by contracting to furnish or furnishing, or by contributing to the furnishing of, any services or facilities connected with the processing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all competing purchasers on proportionally equal terms.

(e) Inducing or receiving an illegal discrimination in price. It is an unfair trade practice for any member of the industry engaged in commerce, in the course of such commerce, knowingly to induce or receive a discrimination in price which is prohibited by the foregoing provisions of this section.

(f) Prohibited discriminatory return and exchange privileges. It is an unfair trade practice for any member of the industry to grant or contract to grant privileges of merchandise return, refund, exchange, or other special privileges, upon terms which, under the provisions of this section, effect any unlawful discrimination in price, services or facilities in favor of one purchaser against another purchaser or purchasers.

(g) Exemptions. The inhibitions of this section shall not apply to purchases of their supplies for their own use by schools, colleges, universities, public li

3 See footnote on p. 231.