The

(d) The 2 (d) and (e) aspects, the Commission said, stem from the fact that exhibitor-suppliers would be vulnerable to a charge that they were illegally discriminating between their customers in according promotional benefits. section 5 aspects involve questions as to whether the chain and the landlord would be inducing a violation of section 2(d) by participating exhibitor-suppliers. [31 F.R. 8585, June 21, 1966]

§ 15.63 Disclosure of terms and conditions in guarantee advertising.

(a) A television station has been advised by the Federal Trade Commission that it would be improper in commercials it produces for local automobile dealers to mention the manufacturer's guarantee but to refer viewers to the manufacturer's national advertising for a description of the guarantee's terms.

(b) "In brief," the Commission's advisory opinion stated, "the law requires that when a guarantee is mentioned in the advertising of a product all the material terms and conditions of the guarantee must be clearly and conspicuously disclosed in the same advertisement. The objective is to avoid the possibility of a reader or hearer being misled by concluding, erroneously, that the guarantee is broader or affords more protection than is in fact the case, and, obviously, this objective is not attained by a mere reference in the advertisement to the fact that one may ascertain the terms and conditions of the guarantee by looking elsewhere.

(c) "The Commission is aware of the fact that the advertising of automobile guarantees may present complications because of the numerous conditions which the guarantees contain. But this factor alone makes the disclosure all the more important in order to avoid deception of consumers."

[31 F.R. 8621, June 22, 1966]

§ 15.64 Pledge of adherence to FTC trade practice rules as a condition to membership in trade association.

(a) A trade association proposing to require applicants for membership to certify to it that they are following the Federal Trade Commission's trade practice rules for the industry involved, as a condition of membership, has been advised by the Commission that this would not be illegal.

(b) The association informed the FTC

it is aware of the fact that it is not authorized to enforce the law, but that it feels those who do not observe the rules. are not operating their businesses in a manner which is strictly in the public interest and therefore should not be eligible for membership. It stated that it contemplates no enforcement program beyond requiring the pledge and referral of appropriate cases to the Commission.

(c) "On the basis of the information you have presented," the FTC's advisory opinion said, "the Commission has concluded that the inclusion of this pledge on the application for membership would not, in and of itself, appear to violate any of the laws administered by the Commission. This, of course, assumes that the pledge will be required of all applicants alike."

[31 F.R. 8621, June 22, 1966]

§ 15.65 Broadcast of suppliers' commercials in retail stores conditionally approved.

(a) In an advisory opinion the Federal Trade Commission has given conditional approval to the proposal of a promotional concern to arrange for the broadcast of suppliers' commercials in retail stores.

(b) The concern presently providesfor a monthly charge-retailers with a tape player unit, necessary speakers and tapes for retailer controlled in-store background music.

(c) The concern proposes to add on the tapes commercial messages of various manufacturers who supply products sold by retailers. The commercials will play at timed intervals. The concern will solicit various manufacturers for the commercials on a contract basis, record the messages, retain all money paid by suppliers for the service, and offer the background music, commercial tapes and equipment free of charge to all retailers on a nondiscriminatory basis in particular classifications of retailers in each geographic area in which the promoter markets his service.

(d) The Commission said the issue here "is whether this particular program is likely to result in the discriminatory furnishing of services or facilities by the manufacturers who might participate. The answer is wholly dependent upon the manner in which it is administered."

(e) The Commission pointed out that the proposal as submitted would not be subject to objection if (1) all customers

entitled to participate are notified of the program's availability, (2) the selection of trade areas and the definition of the same, in fact, include all customers competing in the distribution of the products of all participating manufacturers, and (3) the classification of retailers chosen to participate, such as food stores, does not exclude any retailers in another classification who in fact compete in the distribution of the products of the participating manufacturers.

(f) "Simply stated," the Commission said, "the law in this area requires a seller to treat his customers with fairness, whether in respect to the prices he charges, the allowances he pays, or the services he furnishes. This objective cannot be achieved by resort to mechanical formulas, but only by constant attention to the prevailing facts in any given situation. What may look fair on the drawing board may be found unfair in the market and, if so, the market must prevail." With the reservations above as to actual market conditions, it is the Commission's opinion that this proposal is not otherwise subject to objection. [31 F.R. 8871, June 25, 1966]

§ 15.66 Magazine publisher's promotional allowance program approved.

(a) In an advisory opinion the Federal Trade Commission approved a promotional allowance program proposed by the publisher of a magazine.

(b) The publisher intends to grant newsstand operators an allowance of 10 cents per copy sold upon their certification that the magazine in question was displayed flat on a magazine stand or full cover vertical in a rack at each checkout position. The publisher will communicate this offer to magazine retailers by printing the display offer on an inner page of the magazine with an appropriate and conspicuous notice or "slug" on the outside cover alerting the retailer to the availability of the plan, details of which may be found on a page specified.

(c) "Since it appears," the Commission advised, "that all newsstand operators handling your publication would be alerted to the availabilty of the display allowance by reason of the conspicuousness of the 'slug,' it is our opinon that your promotional program, so long as it is implemented as described, complies with the requirements of section 2(d), amended Clayton Act, and newsstand operators receiving payments thereunder would not

be liable to a charge of violating the law. In reaching this conclusion the Commission has assumed that the promotional allowance offer will be repeated in like manner from time to time so that its availability will be made known to newsstand operators who begin selling your magazine subsequent to the date of the initial offer."

[31 F.R. 8871, June 25, 1966]

§ 15.67 Functional discount to "premium" book jobbers.

(a) The Federal Trade Commission has advised a publisher of soft cover books that its proposed plan-if implemented as outlined-to grant an extra discount to "premium jobbers" would not violate the law.

(b) The publisher distributes its books through retailers, wholesalers, and book jobbers, and grants identical discounts to the latter two who are in competition with each other.

(c) According to the plan as submitted to the Commission, the publisher proposes to grant an extra discount to all premium jobbers who sell books to institutional customers (savings banks, insurance companies, industrial corporations, etc.) for use as promotion pieces, premiums, or prizes on a giveaway basis. To the extent that any premium jobber also sells to the regular trade in competion with other wholesalers and retailers, the publisher will either refuse to fill orders or grant only a normal wholesale discount.

(d) The proposed extra discount, the Commission advised, "is obviously functional in nature" and while the Clayton Act, as amended by the RobinsonPatman Act, "does not mention functional pricing the Commission has held that a seller is not forbidden to sell at different prices to buyers in different functional classes provided that injury as contemplated in the law does not result. Applying the law to the facts presented by this request, it would appear that the granting of the extra discount to the premium jobbers would not result in a violation of law if the facts are exactly as represented * and if the proposal is implemented pre. cisely as outlined."

(e) The "discount must be granted only for those sales made to the institutional customers described who use the books as giveaways and not for resale" and the "discount must be made available" to all customers of the publisher

who in fact compete with each other in the resale of the publisher's books to institutional accounts, the Commission continued.

(f) It cautioned, however, that if the publisher should classify "certain distributors or wholesalers as premium jobbers and permits no one else to sell to the institutional customers, which could be accomplished by granting the extra discount only to those so classified, a serious question could be raised if the socalled premium jobbers also sell to regular retailers in competition with other wholesalers."

[31 F.R. 8913, June 28, 1966]

(a) The Commission rendered an advisory opinion advising an American manufacturer of razor blades that it would not be necessary to disclose the country of origin of imported plastic razor blade dispensers and end clips into which were packed domestically manufactured blades, nor was there any objection to labeling the completed package as made in this country. The Commission was of the view that such a description would be taken as applying to the blades and that the purchaser would have no real concern with the origin of the dispenser which is designed to be thrown away after the blades are used.

(b) The facts were that after the dispenser cases and end clips were received in this country, a spring and the blades would be inserted, a pusher slide added

and the end clip put in place. The spring, slide or pusher and the blades would be manufactured in the United States.

[31 F.R. 9214, July 6, 1966]

§ 15.70 Bargain offers based upon pur

chase of other merchandise.

(a) The Commission rendered an advisory opinion disapproving a retailer's proposal to offer a free sewing machine with the purchase of a cabinet.

(b) Under the terms of the proposed plan, the retailer intends to place one sewing machine on display in various locations, such as bowling alleys, supermarkets, shopping centers, etc. A nearby sign will invite one to fill out a registration card and deposit same in a box. Each month one name will be drawn from the box in each location where the machine is on display and the winner will receive a free sewing machine with cabinet. In addition, 50 names will be drawn from each box and these persons will be sent a letter informing them they can obtain a free sewing machine head simply by purchasing the cabinet. According to the letter to be sent to the 50 winners, the cabinets range in price "from $39.95."

(c) In its opinion, the Commission concluded as follows: "* * * that part of your plan which provides for prospective customers to win a free sewing machine with cabinet is unobjectionable. However, the Commission is of the opinion that part of the proposed plan which offers to 50 persons a 'free' sewing machine head for the price of the cabinet involves the sale of merchandise by means of a lottery or by means of a chance or gaming device and therefore would be illegal as an unfair trade practice under section 5 of the Federal Trade Commission Act. As a result, the Commission cannot give its approval to this aspect of your proposed plan in its present form."

(d) Commenting upon other features of the proposed plan, the Commission said: "When a seller offers to supply one article 'free' or 'at no extra cost' in conjunction with the purchase of another article, he is thereby representing to prospective customers that the article which is to be purchased is being sold at no more than the price at which it is usually sold in substantial quantities. Accordingly, if you should eliminate that aspect of your proposed plan appealing

to the public's gambling instinct, then the price of the cabinets which the consumer is to purchase in order to obtain a 'free' sewing machine head must meet this standard."

(e) "Finally," the Commission's opinion concluded, "there must be a bona fide effort to sell the merchandise offered and a plan of this nature may not be used simply as a means to obtain leads which will be used to sell more expensive cabinets and/or sewing machines." [31 F.R. 9214, July 6, 1966]

$ 15.71 Products composed of ground leather may not be described as "leather" without proper qualification.

(a) In an advisory opinion issued by the Commission, it said that a product composed of ground leather may not be described as "leather" without proper qualification.

(b) The product in question involved a manicure case, the outer portion of which was composed of 85 percent to 90 percent ground leather combined with latex rubber. In its opinion the Commission said, "the use of the word 'leather,' without qualification, means top grain leather." "Since the manicure case is composed of ground leather," the Commission added, "it would be improper to describe it as leather without proper qualification." The Commission opinion then pointed out several ways in which this could be done, such as: "Ground leather" (or "shredded leather" or "pulverized leather"). "Composed of ground leather." "Contains ground leather."

(c) The Commission's opinion further pointed out that, if the requesting party decided not to disclose the ground leather composition of the case, it would be necessary to disclose that the outer portion is not leather by such language as:

"Not leather." "Imitation leather." "Simulated leather."

"The reason for this," the Commission added, "is that the outer portion of the case has the appearance of leather and in order to remove the potential deception inherent in its appearance, it is necessary to disclose the fact that the material is not leather."

[31 F.R. 9794, July 20, 1966]

(a) A distributor of electronic equipment requested the Commission to render an advisory opinion with respect to the legality of a proposed franchise agreement with its dealers. A Schedule of Fair Trade Prices was to be attached to and made a part of the agreement and the dealer must agree that he will not advertise, offer for sale or sell any products at less than the fair trade prices, nor make any refunds, discounts, allowances, or concessions which will have the effect of decreasing those prices, nor offer any of the fair traded items in combination with other merchandise at a single, combination, or joint price. The agreement further provided that this provision should be applicable only in those States where agreements of this character are lawful.

(b) The Commission advised that in view of the McGuire Act amendment to section 5 of the Federal Trade Commission Act it could see no objection to inclusion of the provision in the agreement. However, the Commission added, the responsibility rests squarely upon the seller exacting such agreements from his dealers to see that they are not given effect outside those areas where permitted by State law, for then no exemption would exist to protect the agreements from established antitrust rules applying to resale price maintenance.

(c) Even though the contract provides that this provision shall be applicable only in those States where such agreements are lawful, it would appear that to some extent the burden is placed upon the dealer to ascertain whether or not the agreement is lawful in his own State before he can know whether or not he is obligated to honor it. If this has the effect of creating a situation whereby the Schedule is generally adhered to in States where fair trade is not legal, the presence of the provision in the franchise agreement could raise a serious inference of an unlawful resale price maintenance program in those States.

(d) The Commission further advised that such pitfalls can be avoided in the franchise agreements with dealers in nonfair trade States by specifically eliminating therefrom provisions relating to the maintenance of fair trade prices. If the distributor desires to circulate price schedules to dealers in nonfair trade States, it would be more

appropriate to circulate them under the heading "Suggested Prices" rather than "Fair Trade Prices." In the alternative, the danger of involving dealers in illegal resale price maintenance could be avoided by expressly noting on the franchise agreement those States wherein the provisions relating to maintenance of fair trade prices cannot be given effect.

the Commission

(e) Additionally, noted the provision that the distributor will establish, with the aid of the latest marketing information, a reasonable yearly sales volume objective of $--‒‒ and this volume will be a consideration in yearly franchise renewal. The Commission advised that it could see no objection to the establishment of such quotas so long as they are reasonable. However, the distributor was advised that much of the legality of any franchise system depends upon the manner in which the agreements are implemented and enforced, for if apparently reasonable reservations of rights by the distributor are in practice administered in an unreasonable manner, so as to unfairly encroach upon the freedom of the licensees, an agreement which is legal on its face can become illegal in effect. [31 F.R. 9794, July 20, 1966]

§ 15.73 Rejection of description "golden" for nongold thimble.

(a) The Federal Trade Commission has rendered an advisory opinion objecting to both the description "golden" for a nongold thimble, and the accompany explanatory phrase "electroplated with real gold".

(b) "Since the thimble in question is not composed throughout of 24 karat gold, unqualified use of the word 'golden' would be improper," the FTC's advisory opinion stated.

(c) Further advising that "the phrase, 'electroplated with real gold', would constitute neither adequate qualification of the word 'golden', nor a proper representation standing alone", the Commission pointed out that the gold flashing on the thimbles is between three and seven millionths of an inch thick and that "a coating of gold of less than 7/1,000,000 of an inch in thickness is too thin and insubstantial to warrant the description 'gold electroplate'."

[31 F.R. 9977, July 22, 1966]

§ 15.74 Conditional approval given 3party promotional plan.

(a) The Federal Trade Commission has given conditional approval to a promotional concern's plan to provide a music service to supermarkets which would include "spot” advertisements paid for by their suppliers.

(b) The requesting party would set up a background music network specializing in supermarkets. It would own the equipment and install same without charge to the store operator. About every 22 minutes a "spot" advertisement paid for by advertiser-suppliers to the store would be made over the network, for each of which, each participating store outlet would receive a small commission.

(c) In addition, the requesting party will offer an in-store promotion service to advertiser-suppliers so that they may provide proportionally equal treatment for nonparticipating stores, who will receive either in-store advertising materials or cash payments based on a designated formula.

(d) Most of the advertisements would feature products sold in the stores. In some stores, announcements regarding house brands could be made by means of separate circuits. Advertisers would pay for the service on a per spot-per store basis. The contracts between the parties are to contain a clause to the effect that suppliers agree not to discriminate between participating and nonparticipating customers.

(e) In the advisory opinion the Commission said that "implementation of the plan probably would not result in violation of Commission administered statutes. This approval is being given conditionally and is contingent on the plan when in operation actually providing on a realistic basis for promotional assistance to all competitors entitled to it under sections 2 (d) and (e) of the Robinson-Patman Amendment to the Clayton Act."

[31 F.R. 9977, July 22, 1966]

§ 15.75 Publisher's display allowance plan given conditional approval.

(a) A magazine publisher has received conditional approval from the Federal Trade Commission of its promotional assistance program proposed for the New York City area.

(b) The Commission said its under