§ 15.235

American manufacturer may not place labels "Made in U.S.A." on garments manufactured in this country from imported cloth.

(a) The Commission issued another advisory opinion among several dealing with products of foreign origin or containing significant components originating in foreign countries.

(b) In reply to a request, the Commission advised an American manufacturer that he may not place labels "Made in U.S.A." on garments manufactured in this country from cloth produced in a foreign country. The Commission noted that the cloth is a significant component of the finished garment. The Commission stated that "Made in U.S.A." means made in the United States of America completely and accordingly cannot be applied where a significant component originates in a foreign country. The Commission suggested that such labels on the proposed garments might violate section 5 of the Federal Trade Commission Act. [33 F.R. 6158, Apr. 23, 1968]

§ 15.236 Foreign country of origin disclosure of imported picture compo

nents.

(a) The Commission rendered an advisory opinion concerning the proper marking of the origin of various imported picture components. The opinion involved two specific factual situations.

(b) In the first situation, the frame is imported from one foreign country, the picture motif is from another, and the glass, mat, and other finishing of the product is of U.S. origin. Second, all of

the components are of domestic origin, except the picture motif which is imported.

(c) In the absence of any affirmative representation that the finished product is made in the United States, or any representation that might mislead the public as to the country of origin, the Commission expressed the opinion that, under the facts as presented, the failure to mark the origin of the imported components in either of the two factual situations would not be regarded by the Commission as deceptive. Accordingly, the Commission ruled that no marking is required on the imported components beyond what is imposed by the Bureau of Customs.

[33 F.R. 6158, Apr. 23, 1968]

§ 15.237 Foreign origin disclosure on containers of repackaged toy kits.

(a) The Commission rendered an advisory opinion in regard to the question of whether it is necessary to disclose the foreign origin on the container of various imported toys packaged therein.

(b) Under the factual situation presented to it, the requesting party imports plastic articles in bulk which are, whenever possible, marked as to their foreign origin. Moreover, the imported articles are repackaged in the United States for resale, and sometimes domestically made components are added, and at other times components from another foreign country are also added. The imported components come principally from two foreign countries. There is no fixed percentage of imported components in each kit and the amount may vary as much as 1-75 percent, and only a few of the toy kits contain wholly imported components. The toys are sealed in the container and prospective purchasers cannot examine the goods prior to the purchase thereof in order to be apprised of the foreign origin markings thereon.

(c) Based upon its understanding of the facts and because of the special circumstances presented by the product and the packaging thereof, the Commission expressed the opinion that it would be appropriate to mark the container in substance as follows: "Some items or components of items are made in (name of foreign country) and (name of foreign country)."

[33 F.R. 6534, Apr. 30, 1968]

§ 15.238

Clearance denied for proposed merger of substantial local independent producer of a food product and a leading national processor and distributor of the same product.

(a) In an advisory opinion the Federal Trade Commission denied clearance to a substantial local independent producer of a particular food product to sell its assets or capital stock to a leading national processor and distributor of the same product.

(b) The Commission noted that, while the two companies do not now sell their product in each other's markets, they appear to be potential competitors of each other. The national company appears to rank as fourth largest distributor nationally of the product involved, and first in several cities with very substantial shares of the markets. The local company ranks second among all sellers of this food product in one principal metropolitan market, first there among the independents, and has enjoyed a substantial share of the market for many years. The merger would be a (geographic) market extension for the national company, eliminating each as a potential competitor of the other and removing the local independent from competition. The proposed merger would appear to violate section 7 of the Clayton Act and consequently the Commission must refuse to grant the premerger clearance requested. [33 F.R. 6534, Apr. 30, 1968]

§ 15.239 Net weight labeling of mesquite chips.

(a) The Commission rendered an advisory opinion to a manufacturer of mesquite chips, a product designed to flavor food cooked with charcoal.

(b) In the advisory opinion, the Commission dealt with two questions. The first question involved section 5 of the Federal Trade Commission Act and the propriety of such claims in labeling as whether the product will impart "real western barbecue" flavor to food and whether is may properly be labeled as mesquite chips. Second, under section 4 of the Fair Packaging and Labeling Act, is it proper to state the net weight as "32 OZ. (2 LBS.)" if the weight may vary as much as 2 ounces either way after it is shipped into interstate commerce, depending upon the presence or absence of humidity, and the package in fact contains 32 ounces when it is packed?

(c) Passing upon the first question, the Commission said that it had no objection to the proposed claims in the labeling insofar as section 5 of the Federal Trade Commission Act is concerned.

* *

(d) With respect to the second question, the Commission ruled that the proposed declaration of net weight complies with section 4 of the Fair Packaging and Labeling Act and comes within the variations in stated weight permitted under § 500.22(b) of this chapter. This section permits: "Variations from the stated weight * when caused by customary and ordinary exposure, after the commodity is introduced into interstate commerce, to conditions which normally occur in good distribution practice and which unavoidably result in change of weight or measure." In arriving at this conclusion, the Commission said that it has assumed that good distribution practices will be followed in the marketing of the product which unavoidably result in the change of weight in a relatively small percentage of cases, and that an overage is as likely to occur as often as a loss in weight.

(e) The Commission's opinion also advised the requesting party of certain technical requirements of its regulations, such as the location of the declaration of net weight, the exact size of the declaration in relation to the area of the principal display panel, and other information relating to the identity and location of the manufacturer of the product. [33 F.R. 6534, Apr. 30, 1968]

§ 15.240 Use of symbols and names having fur-bearing animal connotations in labeling textile fiber products. (a) The Commission was requested to render an opinion with respect to the labeling of textile fiber products manufactured so as to simulate a fur or fur product.

(b) The requesting party proposed to use a word closely resembling the name of a fur-bearing animal, the fur of which is commonly used in the manufacture of garments, in association with a pile fabric simulating that fur.

(c) In the Commission's view, the use of the proposed term to describe such a fabric would be violative of that part of section 5 of the Federal Trade Commission Act which makes deceptive acts or practices in commerce unlawful. [33 F.R. 6535, Apr. 30, 1968]

§ 15.241

Proposed promotional allowance program based on pyramiding sales of customers rejected.

(a) The Commission advised a requesting party that violation of section 5 of the Federal Trade Commission Act would result from the adoption of a proposed sales promotion plan described in essence as follows:

(b) A certain sum of money would be reserved from the proceeds of a sale to a first customer. That customer, if he wished to participate in the sales promotion program, would be paid up to one quarter of the reserved sum as commission on sales to ten additional customers. The first customer would also be paid up to one quarter of the reserved sum on sales made by his customers to yet another generation of customers and so through a fourth generation.

(c) The tabulation distributed to potential purchasers of the requesting party's merchandise showed that the original participant, in theory, might benefit from the efforts of 11,100 salespersons.

(d) This in the Commission's judgment was beyond the realm of possibility. The return to any given participant would unquestionably be a great deal less than the theoretically achievable amount set forth; more often than not it would be negligible. The initial purchaser would not surely benefit, if at all, beyond that amount which he can gain through his own efforts. Any further amount which he might receive would accrue to him sheerly through chance.

[33 F.R. 6860, May 7, 1968]

§ 15.242 Necessity for disclosing the country of origin of imported ink. (a) The Commission was requested to render an advisory opinion with regard to the necessity for disclosing the foreign origin of ink which is imported from Germany. The ink is imported in 50 liter drums and resold to the consumer in 34- and 2-ounce bottles.

(b) The opinion advised that in the Commission's view the country of origin of this ink must be disclosed in a clear and conspicuous manner on the bottles in which it is sold and, if the ink is packaged in separate boxes, on the boxes themselves in such a manner as to be readily seen by prospective purchasers. The opinion added that neither directly

nor indirectly could it be implied that the ink is manufactured in the United States. [33 F.R. 6860, May 7, 1968]

§ 15.243 Receipt of discount in lieu of brokerage by respondent wholesale food distributor.

(a) A wholesale food distributor under order for having violated section 2(c) of the amended Clayton Act has been advised by the Federal Trade Commission that if he received or accepted a discount offered by one of his suppliers for rendering certain "special services," he would be in violation of order entered against him.

(b) The Commission noted that the 5 percent discount offered to the distributor was equal to commissions normally paid by the supplier to brokers; the services to be rendered by the distributor were services normally performed by brokers in connection with sales to other distributors; other circumstances and statements clearly indicated that both parties to the transaction considered the discount as compensation for elimination of brokerage expense, and the discount therefore amounted to an allowance in lieu of brokerage.

[33 F.R. 6860, May 7, 1968]

§ 15.244 Disclosure of foreign origin of nasal cannula required.

The Commission recently advised a requesting party that a medical device manufactured in a foreign country from domestic designs and made on domestic machinery furnished by the U.S. seller should be marked clearly and conspicuously with the name of the foreign country. The marking could be on the device itself or on the package but in any event the disclosure must be made or attached with such permanence to remain on the product or container until bought by the ultimate purchaser.

[33 F.R. 7111, May 14, 1968] § 15.245

Commission denies approval of proposed joint venture corporation composed of five competing manufacturers to bid on prime contract to furnish products of uniform specification.

(a) The Commission issued an advisory opinion denying approval of a proposed joint venture corporation to be composed of five manufacturers to bid on a large contract that would require more extensive facilities than possessed by any one of them. The actual

work on the contract would be performed by the five participating companies and by others on a subcontract basis. The five are now actual or potential competitors.

(b) In the opinion of the Commission, the proposed joint venture corporation composed of competing companies would appear to be illegal under Federal antitrust laws as a combination to fix prices in contract bids.

[33 F.R. 7111, May 14, 1968]

§ 15.246 Trade association publication recommending procedures for freight prepayment by manufactur

ers.

(a) The Commission rendered an advisory opinion informing a trade association of wholesalers that it could not give its approval to a proposal to conduct a study of various policies for prepaying freight being used by manufacturers and to publish the results as a recommended procedure for prepaying freight.

(b) The Association advised that a certain number of manufacturers who sell to its members have a "paid freight" policy whereby they will pay the freight, on one of a number of bases, on orders above a certain quantity which are shipped to the members. Many manufacturers do not have such a policy. Among those that do, there are 15 to 20 different procedures for handling payment, most of which involve a lapse of time of from 60 days to 6 months before the wholesaler can collect the allowance. The Association is interested in conducting a study of these practices with the ultimate view of reducing the 15 or 20 procedures now in effect to perhaps two or three and also to reduce the time period for the recovery of the funds to no more than 60 days, thus eliminating the long period in which capital of the members is tied up in what is supposedly prepaid freight.

(c) The Association stated that these efforts are not in any way intended to coerce manufacturers into giving freight allowances they do not care to give, but are solely to reduce the complexity and cost of doing business. It definitely plans to publish the results as a "recommended procedure for prepaying freight", but does not plan any efforts to enforce this recommendation or to put any pressure on the manufacturers to adopt the recommendation beyond the simple publication of the results of the study and the recommended procedure.

(d) The Commission advised that even though the study and published recommendation may be motivated by a purpose to remove evils affecting the industry, it appears to go further than is reasonably necessary to accomplish such result. Even if unaccompanied by any intent to force the manufacturers to adopt the policies set forth in the recommendation, there is implicit in such recommendation by the wholesalers too grave a danger that it will serve as a device whereby the concerted power of the members of the Association is brought to bear to coerce the manufacturers to conform their pricing policies to the restrictive standards of the recommendation, or at the very least as an invitation to enter into agreements among themselves to do so. The Commission would, however, have no objection to the preparation by the Association of an objective study of these practices for the members of the Association provided the study did not contain any recommendations.

[33 F.R. 7149, May 15, 1968]

§ 15.247 Disclosure of origin of crib mattresses, etc. made in this country using imported outside covers.

(a) The Commission was requested to render an advisory opinion concerning the proper labeling as to origin of crib mattresses, play pen pads and bumpers which will be manufactured in this country using imported outside covers. The manufacturer advised that the relative manufacturing cost of the imported part to the American parts will be from one-fifth to one-seventh and that a comparison of the cost of the imported sheeting to the selling price will run about one-seventh to one-twelfth.

(b) The opinion advised that in the absence of any affirmative representation that these products are made in the United States, or any other representation that might mislead the public as to the country of origin, the Commission is of the opinion that, under the facts as presented, the failure to mark the origin of these goods will not be regarded by the Commission as deceptive.

[33 F.R. 7149, May 15, 1968]

§ 15.248 Validation of guarantee-time requirement.

(a) The Commission interpreted for a requesting party one aspect of the Commission's Guides Against Deceptive Advertising of Guarantees. These guides, in

general, provide that any guarantee used in advertising shall clearly and conspicuously disclose (1) the nature and extent of the guarantee; (2) the manner in which the guarantor will perform; and (3) the identity of the guarantor.

(b) The language proposed for the guarantee of a product sold by mail was: "If for any reason you are not satisfied with your purchase, return it to us at once **." In the Commission's view the expression "at once" was too vague and accordingly the proposed guarantee did not conform to the guides.

(c) The Commission approved the proposed guarantee when it was modified to read: "If for any reason you are not satisfied with your purchase, return it to us within x days”, “x” being a number of days certain.

[33 F.R. 7149, May 15, 1968]

§ 15.249 Trade association code providing that members will not advertise sales below cost.

(a) The Commission rendered an advisory opinion informing a trade association that there could be no objection to its proposed "Guide To Ethical Advertising Practices", with the exception of one provision relating to advertising of sales below cost.

(b) The Guide set forth a number of prohibitions of various advertising practices which the Commission deemed to be in accord with applicable law and the Commission also noted that the association did not contemplate any efforts of its own to enforce the Guide, but instead planned to publish it solely for the education and guidance of the members. The one provision questioned by the Commission provided that since below cost pricing is predicated on additional sales, members shall not advertise merchandise or services or a combination of both below their total cost.

(c) The opinion advised that while the mere adoption and dissemination of this Guide by the association may not be considered the equivalent of an agreement not to advertise below cost prices, still if it had the effect of persuading substantial numbers of the members of the association to refrain from so advertising, it would, the opinion stated, raise a serious inference of such an agreement and hence would be of questionable propriety under the antitrust laws. Since sales below cost can be a legitimate method of competition, depending upon the circumstances, any agreement among

competitors to refrain from such advertising to that extent restricts competition. Hence, it was stated that any provisions which would have a tendency to bring about that result could not meet with Commission approval.

(d) The Commission further advised that this conclusion would not in any way be altered by the existence of the many State laws on the subject. These laws vary greatly in their coverage and application and, in any event, would not provide a legal basis for an agreement among the members of an industry to refrain from the practice in question. [33 F.R. 7489, May 21, 1968]

§ 15.250 Formation of local trade associations by statewide trade association.

(a) In an advisory opinion disapproving a proposal by a State trade association desiring to establish a statewide network of local clubs or trade associations in the same industry the Commission advised that, on the basis of presented facts, it was unable to determine with any degree of accuracy their precise purpose and objectives.

(b) The advisory opinion pointed out that the Commission does not generally disapprove the proposed formation of industry groups or trade associations for purposes which are not anticompetitive. If the purpose for such formation is the dissemination of information on local or State legislation, the improvement of individual businesses, or the establishment of sound accounting principles and bookkeeping practices or similar activity, the Commission would voice no objection.

(c) If, however, the purpose or effect of such groups and their policies is the unlawful suppression of competition, the promotion of unlawful price stability or so-called orderly marketing practices, their formation could not be approved under any circumstances.

(d) Since these latter effects would not be inconsistent with the general statement of purpose submitted with the factual presentation, the Commission disapproved the proposal in its present form.

[33 F.R. 7489, May 21, 1968]

§ 15.251 Disclosure of country of origin of imported fasteners.

(a) The Commission was requested to render an advisory opinion with respect to the necessity for disclosing the country of origin of metal fasteners which