The Code of Federal Regulations of the United States of America

advertising and labeling and by the distribution company as well under the principle that one who places in the hands of others the means and instrumentality of deception is himself guilty of deceit. Thus it was stated to be important for both to make certain that the prices used to represent the values of these premiums comply with the criteria of the Guides.

132 FR. 787, Jan. 24, 1967]

§ 15.110 Agreement among retailers for uniform store hours.

(a) The Commission was requested to furnish an advisory opinion with respect to a proposal by a retail trade association to conduct an informal survey of a number of grocery operators in the area to determine their individual preferences as to hours of doing business.

Upon com

pletion of the survey, the association plans to announce the results thereof. Although a majority of store operators may elect thereafter to operate on uniform hours, as determined by the survey, no sanctions are planned nor will there be any attempt to enforce or insure uniformity of closing hours. There are a number of stores which will not subscribe to such a suggestion and will remain open at other times.

(b) The Commission stressed its understanding that while a majority may voluntarily elect to subscribe to uniform hours of doing business as a result of the survey of individual preferences, those who do not wish to do so will not be subject to any form of coercion or compulsory process and, indeed, it was expected that many will not so subscribe for business reasons of their own. On the basis of this understanding and assuming that the agreement or plan will relate to nothing other than hours of doing business, the Commission advised that it did not believe the plan would violate any laws it administers.

[32 F.R. 788, Jan. 24, 1967]

§ 15.111 Functional discounts unlawful whenever an adverse effect on competition results therefrom.

(a) The Commission issued an Advisory Opinion to the effect that the 14 percent discount which would be offered under the plan outlined below probably would result in violation of Commission administered law.

(b) At present, the manufacturer sells his product to manufacturers of a complementary product exclusively. The

66-033-72- -9

purchasing manufacturers resell the product to independent distributors and to ultimate consumers.

(c) The selling-manufacturer proposes to sell independent distributors direct, charging them approximately 14 percent more than the purchasing-manufacturers would be charged on shipments to the warehouses of the latter. On drop shipments to purchasers buying through the purchasing-manufacturers, the manufacturers would be charged the independent-distributors' price. On drop shipments to consumers of the product, the independent-distributor price would be charged. Drop shipments could be ordered by any customer and would be openly available to all on the same terms.

(d) There would be no agreement between purchasing-manufacturers or distributors and the manufacturer as to prices the former would charge; however, the manufacturer does now suggest and would continue to suggest prices to be charged consumers. No other form of control over resale of the product is now or would be exercised by the manufacturer.

(e) The Commission pointed out that the price difference which would result from the proposed discount is within the purview of section 2(a) of the RobinsonPatman amendment to the Clayton Act. Section 2(a) provides, in essence, that it is unlawful for a seller in commerce to discriminate between different purchasers of goods of like grade and quality where the effect may be substantially to lessen competition or to tend to create a monopoly.

(f) The Commission added that the 14 percent discount to be offered to purchasing-manufacturers is a functional discount and that such discounts are not prohibited by the applicable law or judicial interpretations thereof unless the discounts result in the adverse competitive effects the law proscribes. The Commission was of the view that such adverse effects were likely to result due to the fact that purchasing-manufacturers would compete against distributors in selling to ultimate consumers and the manufacturers would enjoy a 14 percent price advantage on such sales. The Commission pointed out that unless the 14 percent only made due allowance for differences in the cost of manufacture, sale or delivery resulting from the differing methods or quantities in which the tile cement would be sold or delivered to

the manufacturers, substantial anticompetitive effects probably would result from implementation of the plan. Such a result would be violative of section 2(a) of the Robinson-Patman amendment to the Clayton Act.

[32 F.R. 1171, Feb. 2, 1967]

§ 15.112 Foreign origin disclosure not required on outside of packaged badminton sets.

(a) In response to a question involving the sale of badminton sets which will be sold in an opened display case with the foreign country of origin marked on each imported component readily visible to prospective purchasers, the Commission ruled that it would not be necessary to disclose the foreign origin of each imported component on the outside of the package.

(b) The company which requested the advisory opinion intends to merchandise badminton sets to various department stores throughout the United States. The package, instructions for use and the steel poles will be manufactured here in the United States. The remaining three items in the sets will be imported from three different foreign countries and each will be marked as to its specific country of origin. For example, the rackets will be imported from Japan, the shuttlecocks from England, and the net from Pakistan. The badminton sets will be sold in an opened display case with the country of origin marked on each imported component readily visible to prospective purchasers. [32 F.R. 1171, Feb. 2, 1967]

§ 15.113 Premerger clearance.

(a) A small manufacturer of a product used in the paper industry applied for clearance of the sale of 67 percent of its stock to another small company in the same line of business. There was strong competition in the line of business, a few companies dominated the market, and the selling company had had net losses for a number of years.

(b) The Commission advised the applicant proceedings would not be initiated if the acquisition was made. [32 F.R. 2844, Feb. 14, 1967]

§ 15.114 Retail discount selling organizations.

(a) The Commission recently advised the promoter of a membership organization of retailers which would grant discounts on purchases and services except

where prohibited by law that the plan was unobjectionable. More specifically, the plan provided—

(1) The promoter would set up a discount program for independent retailers such as auto dealers, appliance, furniture, and clothing stores. Chain stores and other discount houses would not be admitted to membership.

(2) For $5 per week for 26 weeks or 6 months, the retailer would become a member of the organization. There would be no fee for consumer-members to join. The promoter would guarantee retailers 30,000 discount member/customers. The retailers would be listed in

a book showing the discount each had decided to give on purchases and services except on "fair traded" items or where prohibited by law. There would be no coordination or combination on prices by participating retailers. A free book with customer's membership card as the cover would be mailed to all residents in the area in which the plan is tried.

(3) Although all competing retailers would be offered the opportunity, only one retailer, the first participant in an area, in each category of business would be allowed to join in each of the various areas in which the plan is tried. Participating retailers would "cooperate" only in the sense that all give discounts to member/customers; however, if a group of retailers wished to purchase an item several sold, the promoter would order the item direct from manufacturers, distributors or importers with whom the promoter has business connections.

(b) The Commission advised the applicant that the plan itself is unobjectionable. The Commission added however that:

(1) The participating retailers should grant the discount off the manufacturer's suggested price, where there is one and where a number of the principal retail outlets in the area are regularly engaged in making sales at that price; or off the usual trade area price so that the consumer will in fact receive a discount.

(2) The booklet listing participating retailers should note that listing does not imply that other businesses in the community do not offer similar or even greater discounts and that the listing of the retailer is done for a fee.

(3) If participation in the plan results in agreement as to prices, discounts, terms of sale, and the like, such agreement or agreements would be violative of Commission administered law.

(4) If the literature you use in seeking to persuade retailers or consumer-members to participate actually does or has the capacity to mislead or deceive, it would be actionable under Commission administered law.

(5) If implementation of the plan results in discriminatory acts which may substantially affect competition, same would violate the Robinson-Patman Amendment to the Clayton Act. [32 FR. 3387, Mar. 1, 1967]

§ 15.115 Trade association code of ethics governing pricing and selling practices.

(a) The Commission rendered an advisory opinion to a trade association of jobbers advising that while some of the submitted Code provisions appear innocuous, the Code as a whole is shot through with anticompetitive implications.

(b) The Commission pointed out, by way of exampies, that the question of establishing fair and adequate profit levels is not an appropriate trade association exercise; the use of price as an economic weapon is integral to the competitive process and becomes anticompetitive only when used destructively; urging the frequent checking of competitive prices suggests an attempt of achieving price uniformity; complaining to a competitor about his practices could be construed as an unfair method of competition depending upon the practice involved for if the "practices" were low prices, the complaint could be construed as an appeal for price maintenance.

(c) In disapproving the Code of Ethics as submitted the Commission advised that because the effect of issuance of such a Code would be coercive upon the members, the cumulative effect of its provisions could well operate to reduce or eliminate price competition and impair the right of each member to price and promote his products as he sees fit. [32 F.R. 3818, Mar. 8, 1967]

§ 15.116 Advertising claim: "America's most warranted *

(a) The Commission advised a manufacturer who wished to use the advertising claim "America's most warranted

"that it would be inappropriate and impracticable for it to give the desired advisory opinion.

(b) Citing § 1.51 of this chapter, the Commission stated that the proposed claim was such that an informed decision

thereon could be made only after extensive investigation, clinical study, testing, or collateral inquiry.

(c) If the statement in question is true, the Commission added, then of course there is nothing in the statutes which it administers to prohibit its use. The question, however, is enormously complicated and to answer it would require both quantitative and qualitative determinations which could only be made after extensive investigation. While the Commission must of necessity investigate the use of extravagant claims, such investigation should not be initiated in support of an advisory opinion..

(d) Moreover, because of the nature of the proposed claim, Commission approval could be construed and exploited! as Government endorsement. [32 F.R. 3818, Mar. 8, 1967]

(a) The Federal Trade Commission advised a marketer of hand cream that it would be improper and a violation of Commission administered law to represent, contrary to fact, that the product had been "medically prescribed."

(b) There are many precedents for the proposition that it is an unfair trade practice to misrepresent approval or endorsement of products by medical associations, doctors, dentists, and related professional groups.

[32 F.R. 4308, Mar. 21, 1967]

§ 15.118 Reduced price on shopper's guide advertising for radio advertis

ers.

(a) The Federal Trade Commission advised a radio station that it might properly give reduced advertising rates in a printed shopper's guide which it plans to publish to those advertisers buying radio time at regular station. rates.

The Commission was informed that radio advertisers would not be required to buy shopper's guide space, and that shopper's guide space could be purchased at regular shopper's guide rates by those not buying radio time.

(c) Three other radio stations and two newspapers are available to advertisers within the market area in question. [32 F.R. 4569, Mar. 28, 1967]

(a) The Commission advised a trade association that the objectives sought by its proposed code of ethics appeared to be unobjectionable and that adherence to the code should not operate to effect an unreasonable restraint of trade. Accordingly it is the Commission's view that the mere act of becoming a member of the association and joining in its activities for the purposes outlined will not in itself violate any statute administered by the Commission.

(b) The association was advised, however, that if enforcement of the code operated so as to effect an unreasonable restraint of trade, serious questions would be raised as to the plan's validity. The general test, the Commission stated, is whether concerted action by competitors unreasonably affects a businessman's ability to compete. Thus, if association membership is an important competitive factor, arbitrary or discriminatory refusal of membership to a qualified applicant because of alleged failure to abide by the code would raise serious questions under Commission-administered law, as would arbitrary or discriminatory expulsion of association members.

(c) In conclusion, the Commission noted that it confined itself in its answer to so much of the question as falls within Commission jurisdiction. The extent, if any, to which another Government agency may be concerned with the association's activity is a matter to be determined by reference to that agency. [32 FR. 5620, Apr. 6, 1967]

§ 15.120 Permissible period of time during which new product may be described as "new".

(a) The Commission was requested to render an advisory opinion as to the permissible period of time during which an advertiser could continue to describe a new product as being "new".

(b) The Commission pointed out that the word "new" may be properly used only when the product so described is either entirely new or has been changed in a functionally significant and substantial respect. A product may not be called "new" when only the package has been altered or some other change made which is functionally insignificant or insubstantial.

"new" in the first instance, the opinion noted that there is little precedent for determining how long an advertiser may truthfully continue to describe it as "new". The Commission stated it was aware, of course, that the word has been frequently abused and that it is in the interest of all advertisers to have established ground rules for its use. However, the time period during which a particular product may be called "new" will depend upon the circumstances and is not subject to precise limitations; any selection of a fixed period of time or a rigid cut-off date would have to be arbitrary in nature. Further, any such attempt would not only fence in advertisers without regard to the circumstances, but would fence in the Commission as well, and deprive it of all flexibility in dealing with individual situations.

all

(d) Instead, the Commission felt it would be preferable, considering the absence of precedents, to establish a tentative outer limit for use of the claim, while leaving itself free to take into consideration unusual situations which may arise. Thus, the Commission's position was that until such a time as later developments may show the need for a different rule, it would be inclined to question use of any claim that a product is "new" for a period of time longer than 6 months. This general rule would apply unless exceptional circumstances warranting a period either shorter or longer than 6 months were shown to exist.

[32 F.R. 6023, Apr. 15, 1967]

§ 15.121 Resale price maintenance of books held on consignment.

(a) The Commission was requested to render an advisory opinion concerning the legality of an agreement between a university press and a scholarly association that the press would not sell the annual publication of the association, which it held on consignment, at less than the minimum resale price stipulated by the association. The book normally sells by mail order for the same amount as is charged by the association for annual dues. Members of the association are entitled to receive a copy of the book at no extra charge. The association wishes to include a provision in the contract prohibiting the press from selling to educational institutions, mainly libraries, at any discount below the usual retail price, its purpose being to prevent such buyers from obtaining the book at

a lower price than they could by joining the association. This would mean that the press could not give libraries the normal trade discount.

(b) In addition, the Commission was assured that the relationship between the press and the association was strictly one of agency. The press does not print the books for the association, which subcontracts the printing and simply wishes to use the selling facilities of the press to handle sales to nonmembers. Legal title to the books remains in the association, which owns the copyrights, and the books are being handled by the press on a consignment basis.

(c) The Commission advised that it could see no objection to the inclusion of this provision under the precise factual situation presented. In arriving at this conclusion, the Commission stated that it was mindful of the fact that consignment agreements can, under certain circumstances, be used as a device for illegal resale price maintenance, even where patented or copyrighted articles are involved. However, it was of the opinion that this proposal would not fall within that category in view of the fact that the contemplated consignment agreement containing the clause in question will be with only one consignee and there will be no other outlets competing in the distribution of these books. This view of the law was limited solely to the factual situation involved. Hence, generalizations from this opinion or its extension to other factual situations would not be warranted.

[32 F.R. 6362, Apr. 22, 1967]

§ 15.122 Propriety of publishing marketing area price lists.

(a) The Federal Trade Commission advised a manufacturer who had requested an adivsory opinon that there is nothing inherently illegal about area price lists which make only due allowance for differences in the cost of shipment and delivery.

(b) The Commission advised the manufacturer further that price discriminations in sales to customers located in different areas who in fact compete with each other could amount to conduct in violation of section 2(a) of the Clayton Act, unless cost justified or unless the lower price is a good faith meeting of a competitor's equally low price.

lists permitted sales producing monopoly profits in one area to subsidize sales at much lower prices in another area or to a particular customer or group of customers to the competitive injury of a competitor of the seller. [32 F.R. 6362, Apr. 22, 1967]

§ 15.123 Selling merchandise by lottery methods condemned by Commission. (a) The Commission issued an advisory opinion in which it ruled that a proposed plan calling for the sale of merchandise by means of a lottery would be contrary to the provisions of section 5 of the FTC Act.

(b) "Moreover," the Commission said, "the fact that the purchaser receives something of value for his consideration does not negate the existence of a lottery."

(c) Under the terms of the proposed plan which was the subject of the advisory opinion, the promotion would consist of a store display carton containing 36 $1 plastic scale model kits, with a different number to be marked on the end of each kit box. The display header would announce to prospective purchasers they could win a $2 chrome plated model if the number on the end of the box corresponds with the number to be posted by the store manager in 4 weeks.

[32 F.R. 6929, May 5, 1967]

§ 15.124 Agricultural cooperatives may market their products through a common sales agent.

(a) In an advisory opinion the Commission stated that agricultural cooperatives formed under pertinent provisions of the Capper-Volstead Act may establish and market their member's products through a common sales agent. (b) Counsel for the requesting parties described his clients as cooperative associations of milk producers representing some 361 farmers and dairymen who produce about 2 million pounds of milk per month in excess of that consumed in their trading area. Counsel said that formation of the sales agency by his clients will enable them to dispose of this excess through bidding on Government contracts to supply milk to military bases in competition with milk now imported from other milk marketing areas for that purpose.

« Previous Continue »

Books