leather, disclosure should be made consistent with subparagraphs (1), (2), and (3) of this paragraph (b).

(5) Disclosure as to the composition of an industry product, composed of more than one kind of leather or composed of leather and nonleather material having the appearance of leather, should clearly indicate the part to which the representation is applicable. Thus, some examples of the manner in which products composed of top grain cowhide except for the handles have the appearance of leather may be described are:

"Top Grain Cowhide with Handle of
Simulated Leather"

"Top Grain Cowhide with Plastic Handle" "Top Grain Cowhide with Split Leather Handle"

[Guide 2]

§ 247.3 Form of disclosure as to material composition.

All disclosures under § 247.2 should appear in the form of a stamping on the product, or on a tag, label, or card attached thereto, and be affixed with such degree of permanence as to remain on or attached to the product until it is received by the consumer purchaser. All such disclosures on industry products shall also appear in all advertising of the products irrespective of the media used whenever statements, representations or depictions appear in such advertising which in the absence of such disclosures would have the capacity and tendency to create a false impression that the products, or parts thereof, are of a certain kind of composition. The disclosures affixed to products and made in advertising should be of such conspicuousness and clarity as to be noted by purchasers and prospective purchasers casually inspecting the products or casually reading, or listening to, such advertising. A disclosure made in connection with any such statement, representation or depiction should be in close conjunction therewith. [Guide 3]

§ 247.4 Misrepresentation_as to aniline finish, graining, embossing, and processing.

A representation should not be made that an industry product has been:

(a) Colored, finished, or dyed with aniline dye when such is not the fact; or

(b) Dyed, embossed, grained, processed, finished, or stitched in a certain manner when such is not the fact.

[Guide 4]

§ 247.5 Misuse of terms such as "Scuffproof", "Scratchproof", "Scuff Resistant", and "Scratch Resistant”.

(a) An industry product should not be represented as "Scuffproof", "Scratchproof", or as not subject to wear in any other respect, unless the outer surface of the product is immune to scuffing, scratches, or is in fact not subject to wear as represented.

(b) An industry product should not be represented as "Scuff Resistant", "Scratch Resistant", or as resistant to wear in any other respect, unless the surface of the product is in fact meaningfully and significantly resistant to scuffing, scratches, or to wear as represented. [Guide 5]

§ 247.6 Deceptive pricing.

Members of the industry should not represent directly or indirectly in advertising or otherwise that an industry product may be purchased for a specified price, or at a saving, or at a reduced price, when such is not the fact; or otherwise deceive purchasers or prospective purchasers with respect to the price of any product offered for sale; or furnish any means of instrumentality by which others engaged in the sale of industry products may make any such representation.

NOTE: The Commission's Guides Against Deceptive Pricing furnish additional guidance respecting price savings representations and are to be considered as supplementing this section. See Part 233 of this chapter for the Guides Against Deceptive Pricing. [Guide 6]

§ 247.7

Discriminatory prices, rebates, discounts, etc.

NOTE: § 247.7 is interpretive of sections 2 (a) and (b) of the amended Clayton Act.

(a) Industry members, engaged in commerce, in the course of such commerce, should not grant or allow, secretly or openly, directly or indirectly, any rebate, refund, discount, credit, or other form of price differential, where such rebate, refund, discount, credit, 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 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, and are not purchased by the U.S. Government, State and local government entities, schools, colleges, universities, public libraries, churches, hospitals, and charitable institutions not operated for profit, as supplies for their own use;

(2) That nothing contained in this section 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 industry products are sold or delivered to different purchasers;

NOTE: Cost justification under the above proviso (2) depends upon savings in cost based on all facts relevant to the transactions under the terms of such proviso. For example, if a seller regularly grants a discount based upon the purchase of a specified quantity by a single order for a single delivery, and this discount is justified by cost differences, it does not follow that the same discount can be cost justified if granted to a purchaser of the same quantity by multiple orders or for multiple deliveries.

(3) That nothing contained in this section 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 section 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;

(5) That nothing contained in this section shall prevent the meeting in good faith of an equally low price of a competitor or a greater promotional allowance or other service or facility paid for or furnished by a competitor.

NOTE: "Meeting competition in good faith" is an affirmative defense which may be undertaken by a supplier charged with a violation of subsection (a), (d), or (e) of section 2 of the amended Clayton Act who

can defend his actions by establishing that his lower price or granting of disproportionate promotional allowance or other service or facility was made in good faith to meet an equally low price of a competitor or a greater promotional allowance or other service or facility paid for or furnished by a competitor. This defense, however, is subject to important limitations. For instance, it is insufficient to defend a charge of violating subsection (a), (d), or (e) of section 2 of the amended Clayton Act solely on the basis that competition in a particular industry is very keen, requiring that special prices or allowances be given to some customers if a seller is "to be competitive."

(b) The following are examples of price differential practices to be considered as subject to the provisions of this section when involving goods of like grade and quality which are sold for use, consumption, or resale within any place under the jurisdiction of the United States, and which are not purchased by the U.S. Government, State and local government entities, schools, colleges, universities, public libraries, churches, hospitals, and charitable institutions not operated for profit, as supplies for their own use, and when

(1) The commerce requirements specified in this section are present; and

(2) The price differential has a reasonable probability of substantially lessening competition or tending to create a monopoly in any line of commerce, or of injuring, destroying, or preventing competition with the industry member or with the customer receiving the benefit of the price differential, or with customers of either of them; and provided that

(3) The price differential was not justified by cost savings (see paragraph⠀ (a) (2) of this section); or

(4) The price differential was not made in response to changing conditions affecting the market for or the marketability of the goods concerned (see paragraph (a) (4) of this section); or

(5) The lower price was not made to meet in good faith an equally low price of à competitor (see paragraph (a)(5) of this section):

Example 1. At the end of a given period an industry member grants a discount to & CUBtomer equivalent to a fixed percentage of the total of the customer's purchases during such period and fails to grant a discount of the same percentage to other customers on their purchases during such period.

Example 2. An industry member sells handbags to one or more of his customers at a

higher price than he charges other customers for like merchandise. It is immaterial whether or not such discrimination is accomplished by misrepresentation as to the grade and quality of the products sold.

Example 3. An industry member sells handbags directly to a retailer at a lower price than he charges distributors whose retail customers compete with the favored retailer.

Example 4. An industry member pays freight on shipments to one customer and does not pay freight on shipments to another customer, or pays freight on shipments to & distributor's customer and does not pay such freight on shipments to other distributors' customers thereby effecting a difference in price between customers.

Example 5. Terms of 10 prox. are granted by an industry member to some customers on handbags purchased by them from the industry member. Another customer or customers are, nevertheless, allowed to take an additional discount when making payment to the industry member within the time prescribed or granted an extended period of time within which to avail themselves of the originally offered discount.

Example 6. An industry member invoices handbags to all his customers at the same price but supplies additional quantities of such goods at no extra charge to one or more, but not to all, such customers; or supplies other goods or premiums to one or more, but not to all, such customers for which he makes no extra charge and which effects an actual price difference in favor of certain of his customers.

NOTE: Functional discounts. Neither this section, nor section 2(a) of the Clayton Act, as amended, of which this section is interpretive, expressly permits or prohibits the granting of functional discounts. The propriety of such discounts is contingent, principally, on whether they may substantially iessen competition or tend to create a monopoly. Ordinarily, however, a seller may grant & lower price to wholesalers than to retailers to the extent that such wholesalers resell to retailers, without such effects as may substantially lessen competition or tend to create a monopoly. But if such wholesalers also sell at retail, in competition with other of the seller's retail customers, they may not properly be granted a price lower than the prices granted to competing retailers on that portion of the goods they sell at retail. [Guide 7]

§ 247.8 Advertising or promotional allowances, or services or facilities. (a) Advertising or promotional allowances. No member of the industry engaged in commerce should 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 industry products manufactured, sold, or offered for sale by such member, unless such payment or consideration is offered to and made available on proportionally equal terms to all other customers competing in the distribution of the seller's products of like grade and quality.

(b) Services or facilities. No member of the industry engaged in commerce should discriminate in favor of one purchaser against another purchaser or purchasers of industry products 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 products unless such services or facilities are offered to and made available on proportionally equal terms to all other customers competing in the distribution of the seller's products of like grade and quality.

NOTE 1: The "meeting competition in good faith" defense which is set forth in the note following paragraph (a) (5) of § 247.7 is also applicable to provisions of both (a) and (b) of this section.

NOTE 2: For further guidance in this area see Part 240 of this chapter for the Commission's Guides for Advertising Allowances and Other Merchandising Payments and Services. [Guide 8]

§ 247.9 Inducing or receiving illegal discrimination_in price, advertising or promotional allowances, or services or facilities.

NOTE: § 247.9 is interpretive of section 2(1) of the amended Clayton Act and of section 5 of the Federal Trade Commission Act, as amended.

(a) Industry members engaged in commerce, in the course of such commerce, should not knowingly induce or receive a discrimination in price, advertising or promotional allowances, or services or facilities, as reflected in §§ 247.7 and 247.8.

(b) The following are examples of inducing or receiving discriminations in price, advertising or promotional allowances, or services or facilities, to be considered as subject to this section when the requisites of an improper discrimination on the part of the seller as reflected in §§ 247.7 and 247.8 are present and the party receiving the discriminations

knows or has reason to know that the discriminations are illegal.

Example 1. An industry member purchases handbags purportedly for resale to retailers, and is charged a lower price than the seller charges other customers for handbags which they resell at retail; but the member then transfers such handbags to another part of its business where they are resold at retail, thereby receiving a discrimination in price which is covered in § 247.7.

Example 2. An industry member induces suppliers to contribute sums of money to defray some or all of the costs of advertising sponsored by such member and designed to promote the sale of such suppliers' handbags in its place of business, when the industry member knows or should know that allowances for such purpose are not made available on proportionally equal terms by the same suppliers to other customers competing with the favored member, thereby receiving a discrimination in promotional allowances subject to the provisions reflected in § 247.8.

248.14 Advertising or promotional allowances, or services or facilities.

248.15 Inducing or receiving an illegal discrimination in price, advertising or promotional allowances, or services or facilities.

AUTHORITY: The provisions of this Part 248 issued under secs. 5, 6, 38 Stat. 719, as amended, 721; 15 U.S.C. 45, 46: 49 Stat. 1526; 15 U.S.C. 13, as amended, unless otherwise noted.

SOURCE: The provisions of this Part 248 appear at 33 F.R. 11987, Aug. 23, 1968, unless otherwise noted.

§ 248.0 Definitions.

As used in this part the terms “industry products," "industry member," "beauty salon," "beauty school,” “beauty clinic," "cosmetology," "hairdressing,' "barber shop," and "barber school" shall have the following meanings, respectively:

(a) Industry products. Items used by or marketed through barber shops, barber schools, beauty parlors, beauty salons, beauty schools and beauty clinics. (Such products embrace a wide range of beauty and barber preparations; also the many articles or items of equipment, furnishings and supplies for such aforementioned establishments.)

(b) Industry member. Any person, firm, corporation, organization, barber shop, beauty salon, beauty school, beauty clinic or similar establishment engaged in the manufacture, distribution, or sale (including utilization in connection with services) of industry products.

(c) Beauty salon. An establishment providing cosmetology and hairdressing services to the public.

(d) Beauty school. An institution established to render instruction in cosmetology and hairdressing.

(e) Beauty clinic. The segment of a beauty school furnishing the students with practical experience in hairdressing and cosmetology.

(f) Cosmetology. Art or practice of treating, protecting, cleaning or beautifying the skin, hair or nails of human beings, and the art or practice of treating, protecting or beautifying synthetic hair, wigs, or hair pieces to be worn by human beings.

(g) Hairdressing. Art or practice of treating, grooming, protecting, cleaning, beautifying or styling of hair of human beings.

(h) Barber shop. An establishment which provides tonsorial services.

(i) Barber school. An institution established to render instruction in the art of tonsorial services. § 248.1

Misrepresentation in general.

An industry member should not use, or cause or promote the use of, any statement, representation, guarantee,1 testimonial, or endorsement, by way of ad

1 The Commission has adopted Guides Against Deceptive Advertising of Guarantees. See 16 CFR Part 239 for the Guides Against Deceptive Advertising of Guarantees for additional guidance with respect to guarantee and warranty representations.

vertising (through newspapers, magazines, circulars, booklets, or by radio, television or any other medium), oral representation, or otherwise, which has the capacity and tendency or effect of misleading or deceiving purchasers, prospective purchasers, or the consuming public including customers receiving cosmetology, hairdressing, or tonsorial services

(a) With respect to efficacy, permanency of the effects, medicinal or curative properties, grade, quality, quantity, substance, character, origin, size, preparation, manufacture, or distribution of any product of the industry; or

(b) Concerning the purported approval or endorsement of such product by State, Federal, medical or other authority, or

(c) In any other material respect.

NOTE: Among the provisions of this section is "false advertisement," as defined in section 15 of the Federal Trade Commission Act, of any "cosmetic" as such term is defined in the same section. Furthermore, nothing in this Part 248 is to be construed as relieving anyone of the necessity of complying with the cosmetic labeling requirements of the "Federal Food, Drug and Cosmetic Act" and the general regulations thereunder. [Guide 11

§ 248.2 Misrepresentation as to character of business.

An industry member should not misrepresent, directly, or indirectly, through the use of any word or term in his corporate or trade name, in his advertising, or otherwise:

(a) That he is a producer, manufacturer, wholesaler, distributor, importer, or retailer of industry products; or

(b) The character, including the nature, purpose or function, of his business or the type of services he offers.

Example: An industry member advertises his place of business as a beauty salon when in fact it is a clinic operated by a beauty school, thereby deceiving the public as to the true character of his establishment. In order to avoid such deception the industry member should clearly and conspicuously disclose that his establishment is a beauty school.

[Guide 2]

§ 248.3 Deceptive plaques and certifi

cates.

In the course of or in connection with the distribution, promotion, or sale (including utilization in connection with services) of any industry product, an in

dustry member should not display or place in the hands of others any plaque, emblem, seal, insignia, testimonial, or certificate which is false, misleading, or deceptive as to an industry member's professional proficiency or competence or as to his membership in any guild or industry association.

Example 1. A distributor of industry products awards a certificate to a beauty salon owner indicating that the recipient has attained a high degree of professional skill through some unusual or extended training, when in fact the award was not granted on the basis of professional competency but was given merely as an inducement to buy the products of such distributor.

Example 2. An industry member displays in his salon a seal which indicates he is a member of a guild when in fact he is not such a member.

[Guide 31

§ 248.4 Deceptive pricing.

Members of the industry should not represent directly or indirectly in advertising or otherwise that an industry product may be purchased for a specified price, or at a saving, or at a reduced price, when such is not the fact; or otherwise deceive purchasers or prospective purchasers with respect to the price of any product offered for sale; or furnish any means or instrumentality by which others engaged in the sale of industry products may make any such representation.

NOTE: The Commission's Guides Against Deceptive Pricing furnish additional guidance respecting price savings representations and are to be considered as supplementing this section. See 16 CFR Part 233 for the Guides Against Deceptive Pricing for additional guidance with respect to price savings representations.

[Guide 4]

§ 248.5 Deceptive use and imitation of trade or corporate names, trademarks, etc.

An industry member should not use any trade name, corporate name, trademark, or other trade designation, which has the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers as to the character, name, nature, or origin of any product of the industry, or of any material used therein, or which is false or misleading in any other material respect. (See also § 248.2.) [Guide 5]