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.

§ 21.10 Exclusive deals.

It is an unfair trade practice for any member of the industry to contract to sell or sell any industry product, or fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement, or understanding that the purchaser thereof shall not use or deal in the products of a competitor or competitors of such industry member, where the effect of such sale or contract for sale, or of such condition, agreement, or understanding, may be substantially to lessen competition or tend to create a monopoly in any line of commerce.

§ 21.11 Guarantees, etc.

(a) It is an unfair trade practice to use any guarantee respecting an industry product which does not make reasonable disclosure of the conditions or limitations of such guarantee, or which contains statements, representations, or assertions which have the capacity and tendency or effect of misleading or deceiving in any respect, or which are of such form, text, or character as to represent or imply that the guarantee is broader than is in fact true.

modity and which is in free and open competition with commodities of the same general class produced or distributed by 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.

(b) It is an unfair trade practice for the guarantor to fail to observe scrupulously his obligation under the guarantee by him used or caused to be used.

(c) This section shall be applicable also to warranties or any writing purported to be a guarantee or warranty. § 21.12 Push money.

It is an unfair trade practice for any industry member to pay or contract to pay anything of value to a salesperson employed by a customer of the industry member as compensation for, or as an inducement to obtain, special or greater effort or service on the part of the salesperson in promoting the resale of products supplied by the industry member to the customer.

(a) When the agreement or understanding under which the payment or payments are made or are to be made is without the knowledge and consent of the salesperson's employer; or

(b) When the terms and conditions of the agreement or understanding are such that any benefit to the salesperson or customer is dependent on lottery or chance; or

(c) When any provision of the agreement or understanding requires or contemplates practices or a course of conduct unduly and intentionally hampering sales of products of competitors of an industry member; or

(d) When, because of the terms and conditions of the agreement or understanding, including its duration, or the attendant circumstances, the effect may be to substantially lessen competition or tend to create a monopoly; or

(e) When similar payments are not accorded to salespersons of competing customers on proportionally equal terms in compliance with section 2 (d) and (e) of the Clayton Act.

NOTE: Payments made by an industry member to a salesperson or a customer under any agreement or understanding that all or any part of such payments is to be transferred by the salesperson to the customer, or is to result in a corresponding decrease in the salesperson's salary, are not to be considered within the purview of this section, but are to be considered as subject to the requirements and provisions of section 2 (a) of the Clayton Act.

§ 21.13 Discriminatory returns.

It is an unfair trade practice for any member of the industry to discriminate in favor of one customer-purchaser against another customer-purchaser of industry

products, bought from such member of the industry for resale, by contracting to furnish, or furnishing in connection therewith, upon terms not accorded to all customer-purchasers on proportionally equal terms, the service or facility whereby such favored customer is accorded the privilege of returning industry products so purchased and receiving therefor credit or refund of purchase price: Provided, however, That nothing in the rules in this part shall prohibit or be used to prevent the return of merchandise by purchaser for credit or refund of purchase price, when and because such merchandise has not been properly labeled by the seller in accordance with these rules or has been otherwise falsely or deceptively labeled or represented, or when and because such merchandise is defective in material, workmanship, or in any other respect is contrary to warranty or purchase contract: And provided, further, That nothing in this section shall prohibit a purchaser from exchanging the current season's merchandise for different sizes of the same style number in order to balance purchaser's stock. (Nothing in this section is intended to modify or affect any of the requirements of § 21.1, entitled "Prohibited Discrimination.")

4

§ 21.14 Consignment distribution.

(a) It is an unfair trade practice for any member of the industry to employ the practice of shipping goods on consignment, pretended consignment, or for delivery "on memorandum":

(1) When such practice is so used, or the terms and conditions thereof so varied or arranged, as to effectuate a discrimination contrary to the provisions of § 21.1; or

(2) When such consignment, pretended consignment, or delivery "on memorandum," is used for the purpose and with the effect of artificially clogging trade outlets and unduly restricting competitors' use of said outlets in getting their products to purchasers or consumers through regular channels of distribution, and thereby injuring, destroying, or preventing competition, tending to create a monopoly, or unreasonably restraining trade.

It is the consensus of the industry that where a purchaser is entitled to return goods for any of the reasons hereinabove set forth, such return shall be made within fifteen (15) days after receipt of the goods.

(b) Nothing in this section shall be construed as restricting or preventing consignment shipping, or marketing “on memorandum," when carried out in good faith and without illegal discrimination, suppression of competition, or undue interference with competitors' use of the usual channels of distribution.

§ 21.15 Seconds, irregulars, or rejects.

(a) Industry products which are “seconds," "irregulars," or "rejects," or which are represented as being "seconds," "irregulars," or "rejects," shall be so marked, clearly and conspicuously, to the end that confusion, misunderstanding, or deception of the purchasing or consuming public may be avoided and prevented. "Seconds" may be marked or referred to by the manufacturer as "seconds," "irregulars," or "rejects" provided that such marking or reference clearly indicates that the product is not of first quality. Such disclosure of "seconds," "irregulars," or "rejects" shall also be made on invoices as well as on the garment itself, and on the immediate package, if any, in which it is sold to the consumer, and on display cards, advertisements, or other representations under which such "seconds," "irregulars," or "rejects" are offered for sale or advertised to the purchasing or consuming public.

(b) It is an unfair trade practice deceptively to conceal the fact that said industry products are "seconds," "irregulars," or "rejects," or to fail or refuse to make such disclosure to the end specified in paragraph (a) of this section. § 21.16 Fictitious prices, price lists, etc.

(a) The publishing or circulating by any member of the industry of false or misleading price quotations, price lists, 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, or the advertising, sale, or offering for sale of industry products at prices purporting to be reduced from what are in fact fictitious prices, or at purported reductions in prices when such purported reductions are in fact fictitious or are otherwise misleading or deceptive, is an unfair trade practice.

(b) It is an unfair trade practice, in connection with the sale, offering for sale, or distribution of industry products at prices that are in any manner repre

sented as reduced from or lower than current, former, or regular prices, to use, or to furnish or supply for such use, price tags, labels, or advertising material that set forth a false, fictitious, or exaggerated current, former, or regular price, or a false, fictitious, or exaggerated manufacturer's or distributor's suggested retail selling price, or that contain what purport to be bona fide price quotations which are in fact higher than the prices at which such products are regularly and customarily sold in bona fide retail transactions. It is likewise an unfair trade practice to distribute, sell, or offer for sale to the consuming public in such manner products bearing such false, fictitious, or exaggerated price tags or labels.

§ 21.17 Misuse of terms "close-outs," "discontinued lines," "special bargains," etc.

It is an unfair trade practice to offer for sale, sell, advertise, describe, or otherwise represent, industry products as "Close-outs," "Discontinued Lines," or "Special Bargains," by use of such terms or by words or representations of similar import, when such is not true in fact; or to so offer for sale, sell, advertise, describe, or otherwise represent industry products where the capacity and tendency or effect thereof is to lead the purchasing or consuming public to believe such products are being offered for sale or sold at greatly reduced prices, or at so-called "bargain" prices, when such is not the fact.

(a) Products of this industry consist of vegetables, fruits, juices, fish and shellfish, baked goods, and other miscellaneous prepared foods, which are packed, marketed, and delivered to the ultimate consumer in a frozen state. Not included as products of the industry are meats and poultry, and frozen dairy products including ice cream and sherbets.

(b) The term "member of the industry" means any person, firm, corporation, or organization engaged in the production and/or marketing of products of the industry.

GROUP I

§ 22.1 Prohibited discrimination.1

(a) Prohibited discriminatory prices, rebates, refunds, discounts, credits, etc., which effect unlawful price discrimination. It is an unfair trade practice for

1 As used in § 22.1, 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."

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 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 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, and are not purchased by schools, colleges, universities, public libraries, churches, hospitals, or charitable institutions not operated for profit, as supplies for their own use;

(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;

NOTE: Cost justification under the above proviso depends upon net savings in cost based on all facts relevant to the transactions under the terms of subparagraph (2) of this paragraph. 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 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 obsolescence of seasonal goods, actual or imminent deterioration of perishable 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 the services or facilities furnished by a competitor (see paragraphs (d) and (e) of this section).

NOTE: In complaint proceedings, justification of price differentials under subparagraphs (2), (4) and (5) of this paragraph is a matter of affirmative defense to be established by the person or concern charged with price discrimination.

(b) The following are examples of price differential practices to be considered as subject to the prohibitions of paragraph (a) 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 schools, colleges, universities, public libraries, churches, hospitals, or charitable institutions not operated for profit, as supplies for their own use, and when:

(1) The commerce requirements specified in paragraph (a) of 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

(3) The price differential is not justified by cost savings (see paragraph (a) (2) of this section); and

(4) The price differential is 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); and

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

Example No. 1. At the end of a given period an industry member grants a discount to a customer equivalent to a fixed percentage of the total of the customer's purchases during such period and fails to grant such discount to other customers under like conditions.

Example No. 2. An industry member sells goods 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 No. 3. An industry member makes a sale of industry products to a purchaser under an arrangement whereby the products are shipped by the industry member's supplier directly to such purchaser and charges a lower price than that charged other purchasers under similar circumstances, or a price which, when compared with the price charged purchasers on sales made out of the stock of the industry member, constitutes a discount greater than can be justified by the difference in costs resulting from the differing quantities or method of sale or delivery.

Example No. 4. An industry member sells to some customers industry products at prices of drop shipments when in fact such transactions are out-of-stock sales which are made to other customers at higher prices, even though the quantities involved are large enough to be delivered on a direct shipment basis. (As here used an "out-of-stock" sale is one from the industry member's stock on hand and a "drop shipment" sale is one in which the industry member arranges to have the goods shipped by the industry member's supplier directly to the industry members customer.)

Example No. 5. Terms of 2/10th prox. are granted by an industry member to some customers on goods purchased by them from the industry member. Another customer or customers are, nevertheless, allowed to take a 5 percent instead of a 2 percent discount when making payment to the industry member within the time prescribed.

(c) 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.

(d) 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.

(e) 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.

(f) 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 paragraphs (a) to (e) of this section.

NOTE: Paragraph (f) of this section is a restatement of section 2 (f) of the Clayton Act as amended. In a complaint proceeding under this section, in order to make out a prima facie violation, the Commission must show that the favored buyer induced or received the lower price knowing, or knowing facts from which he should have known, that such price was violative of section 2 (a) of said act and not justified under paragraph (a) (2), (4), or (5) of this section. When, in any such proceeding, the issue is limited to the question of whether the price differ

'The term "services." as here used, includes, but is not limited to, the installation, maintenance, and repair of cabinets designed for use by retail stores in the display, preservation, and storage of frozen food products.

The term "facilities," as here used, inIcludes, but is not limited to. cabinets designed for use by retail grocery stores in displaying, preserving, and storing frozen food products.