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 industry member 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 industry member 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) Exemptions. The inhibitions of this section shall not apply to purchases of their supplies for their own use by schools, colleges, universities, public libraries, churches, hospitals, and charitable institutions not operated for profit.

NOTE: In complaint proceedings charging discrimination in price or services or facilities furnished, and upon proof having been made of such discrimination, the burden of rebutting the prima facie case thus made by showing justification shall be upon the person charged; and unless justification shall be affirmatively shown, the Commission is authorized to issue an order terminating the discrimination: Provided, however, That nothing contained in this section shall prevent a seller rebutting the prima facie case thus made by showing that his lower price or the furnishing of services or facilities to any purchaser or purchasers was made in good faith to meet an equally low price of a

competitor, or the services or facilities furnished by a competitor. See section 2-b. Clayton Act.

§ 26.4 Substitution of products.

It is an unfair trade practice to make an unauthorized substitution of products, where such a substitution has the capacity and tendency or effect of misleading or deceiving the purchasing or consuming public, by:

(a) Shipping, delivering, or installing industry 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 advising the purchaser of the substitution and obtaining his consent thereto prior to making shipment or delivery; or

(b) Falsely representing the reason for making a substitution.

§ 26.5 Misrepresenting products as conforming to standard.

In connection with the sale or offering for sale of industry products, it is an unfair trade practice to represent, through advertising or otherwise, that such products conform to any standards recognized in or applicable to the industry when such is not the fact.

NOTE: Illustrative of the type of misrepresentation inhibited by this section is the practice of an industry member advertising or otherwise claiming that a product has been approved by a governmental authority or private agency, or meets certain specifications or standards, when in fact the product has not been so approved or does not meet the certain specifications or standards. § 26.6 Deceptive prices.

(a) The publishing or circulating of false or misleading price quotations, price lists, or terms or conditions of sale, with the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers, is an unfair trade practice.

(b) It is also an unfair trade practice to make or publish, directly or indirectly, any false, misleading, or deceptive statements or representations, through advertising or otherwise, concerning installment sales contracts used or their terms and conditions, including down payments, interest, carrying charges, etc., or respecting any other matters relative to such contracts or their terms and conditions.

$ 26.7 Misrepresentation as to character

of business.

It is an unfair trade practice for any industry member, in the course of or in connection with the sale and installation of industry products, to represent, directly or indirectly, that he is an air-conditioning or refrigeration contractor when such is not the fact; or in any other manner to misrepresent the character, extent, or type of his business.

§ 26.8 Inducing breach of contract.

(a) 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.

(b) Nothing in this section is intended to imply that it is improper to solicit the business of a customer of a competing industry member; nor is the section to be construed as in anywise authorizing any agreement, understanding, or planned common course of action by two or more industry members not to solicit business from the customers of either of them, or from customers of any other industry member.

§ 26.9 Prohibited sales below cost.

(a) The practice of selling products of the industry at a price less than the cost thereof to the seller, with the purpose or intent, 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 tend to create a monopoly, is an unfair trade practice.

(b) This section is not to be construed as prohibiting all sales below cost, but only such selling below the seller's cost as is resorted to and pursued with the wrongful intent or purpose referred to and where the effect is, or where there is 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: (1) Of seasonal goods near the conclusion of the season; (2) of perishable goods in respect to which deterioration is imminent; (3) of ob

solescent goods; (4) made under judicial process; or (5) 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, delivery, and installation 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. § 26.10 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 sold and installed 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.

intent and effect of thereby unduly hampering or injuring competitors in their business and destroying or substantially lessening competition: Provided, That nothing in this section shall be construed as prohibiting employees from seeking more favorable employment, or as prohibiting employers from hiring or offering employment to employees of competitors in good faith and not for the purpose of injuring, destroying, or preventing competition.

§ 26.12

Deception as to used or rebuilt products.

(a) It is an unfair trade practice to represent, directly or indirectly, that any industry product or part thereof is new, unused, or rebuilt, when such is not the fact.

(b) In the marketing of industry products which are second-hand or rebuilt, or which contain second-hand or rebuilt parts, it is an unfair trade practice to fail to make full and nondeceptive disclosure, by a conspicuous tag or label firmly attached to the products, and in all advertising and promotional literature relating thereto, of the fact:

(1) That such products are secondhand, rebuilt, or contain second-hand or rebuilt parts, as the case may be, when such products have the appearance of being new; or

(2) That the rebuilding of rebuilt products was done by other than the original manufacturer, when such is the case.

§ 26.13 Defamation of competitors or false disparagement of their products.

The defamation of competitors by falsely imputing to them dishonorable conduct, inability to perform contracts, questionable credit standing, or by other false representations, or the false disparagement of competitors' products in any respect, or of their business methods, selling prices, values, credit terms, policies, or services, is an unfair trade practice.

§ 26.14 Exclusive deals.

It is an unfair trade practice 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 to substantially lessen competition or tend to create a monopoly in any line of commerce.

§ 26.15 Prohibited forms of trade restraints (unlawful price fixing, etc.).2

It is an unfair trade practice, either directly 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 industry members, 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.

2 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 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.

27.11 Defamation of competitors or false disparagement of their products.

27.12 Inducing breach of contract. 27.13 Enticing away employees of competitors.

27.14 Commercial bribery.

27.15 Procurement of competitors' confidential information.

27.16 Tie-in sales; coercing purchase of one product as a prerequisite to the purchase of other products.

27.17 Arrangements to exclude sales of competitors' products.

27.18 Prohibited forms of trade restraints (unlawful price fixing, etc.). 27.19 Unlawful interference with competitors' purchases or sales.

27.20 Consignment distribution.

AUTHORITY: The provisions of this Part 27 issued under secs. 6, 5, 38 Stat. 721, 719; 15 U.S.C. 46, 45.

SOURCE: The provisions of this Part 27 appear at 21 F.R. 3830, June 5, 1956, unless otherwise noted.

§ 27.0 The industry and its products defined.

(a) Products of the industry respecting which these rules are promulgated consist of any kind or type of building units or materials which are, or are represented directly or indirectly as being, brick or structural tile.1

(b) Members of the industry are persons, firms, corporations, and organizations engaged in the manufacture, sale, offering for sale, or distribution of any such products.

§ 27.1

GROUP I

Prohibited discrimination.❜

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

1 As here used, the term "structural tile” does not include the veneer types of tile used for floor or wall surfacing.

'As used in this section, 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

nation. 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 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.

(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, distress sales under court process, or sales in good faith in discontinuance of business in the goods concerned.

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."

(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 (c) and (d) of this section.)

(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 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.

the

(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) Purchases by U. S. Government; applicability of Robinson-Patman Antidiscrimination Act to same. In an opinion submitted to the Secretary of War under date of December 28, 1936, the U. S. Attorney General advised that the Robinson Patman Antidiscrimination Act "is not applicable to Government contracts for supplies." (38 Opinions, Attorney General 539.)

§ 27.2 Misrepresentation and deception

(general).

It is an unfair trade practice to make or publish, or cause to be made or published, by way of advertising, labeling, stamping, or otherwise, any statement or representation which, directly or indirectly, or by reason of concealment of material fact, has the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers concerning the grade, quality, quantity, use, size, material, finish, character, nature, strength, thickness, composition, durability, design, origin, preparation, manufacture, or distribution of any industry product, or in any other material respect.

§ 27.3 Misrepresentation as to character of business.

It is an unfair trade practice for any member of the industry to represent, directly or indirectly, through the use of any word or term in his corporate or trade name, in his advertising, or otherwise, that he is a producer or manufacturer of, wholesaler or jobber of, contractor or dealer in, industry products, or that he owns or controls a factory making such products, when such is not the fact, or in any other manner to misrepresent the character, extent, volume, or type of his business. (See also note to § 27.8.)