(g) The Commission further cautioned that a customer who is located on the periphery of a particular trading area and who competes in fact with a customer located within such trading area, should be offered the particular promotional plan available to the customer within the trading area so as to preclude discrimination between customers competing in the resale of the supplier's products.

[33 F.R. 9605, July 2, 1968]

§ 15.262

Use of manufacturers' suggested retail prices accompanied by a disclaimer.

(a) The Commission was recently requested to render an advisory opinion as to the propriety of an advertisement referring to a product as "$1.09 size, for 694" accompanied by a statement that "All regular prices are the manufacturers' suggested retail prices and are furnished here to help you identify the size being offered for sale."

(b) The opinion advised that the answer to this question depended wholly upon whether or not the prices used as the basis for comparison complied with Guide III of the Guides Against Deceptive Pricing, since, in the Commission's view, the use of the phrase "$1.09 size" in the body of the advertisement and the reference to "manufacturers' suggested retail prices" in the statement place the representation in the category of a trade area price comparison. Therefore, the opinion added, unless the higher prices used do in fact represent the prices at which substantial sales are made by the principal retail outlets in the area, their use would be deceptive.

(c) The Commission further stated that it was of the opinion that the capacity of such advertisements to deceive would not be relieved or removed by the statement or disclaimer proposed in situations where the prices used do not meet the test of the guides. At best, such a statement would simply render the advertisement ambiguous and leave it subject to two interpretations, one of which is false. It would still leave substantial numbers of consumers under the impression that the higher prices used were in fact the actual trade area prices within the meaning of the guides. [33 F.R. 9606, July 2, 1968]

§ 15.263 Lower price to "stocking" deal

ers.

(a) The Commission rendered an advisory opinion in which it said that it could not give its approval to a plan whereby manufacturers would give a lower price to "stocking" dealers who compete with "non-stocking" dealers. The opinion was given to a trade association which represents manufacturers of a household product.

(b) As justification for the variance in the proposed pricing schedules, the association pointed out that "stocking" dealers experience a higher cost of doing business and, therefore, must sell at higher prices than their competing "non-stocking" dealers. It was also contended that such a price differential would stimulate the purchase of the product in question for inventory.

(c) Expressing the view that it could not give its approval to such two price schedules if the "stocking" and "nonstocking" dealers compete and if the pricing differentials are of sufficient magnitude to adversely affect competition, the Commission concluded that the proposed plan could result in illegal price discrimination under section 2(a) of the Clayton Act, as amended. In its opinion, the Commission went on to point out that such price differences would be illegal unless they could be justified on the basis of one of the specific defenses provided in sections 2 (a) and (b) of the statute.

(d) "For example," the Commission said, "the law permits price differences which can be justified by provable cost differences in the manufacture, sale, or delivery of such products resulting from the differing methods or quantities in which the products are sold or delivered. Accordingly, section 2(a) does not preclude prices reflecting less costly and, therefore, more efficient methods of distribution provided that the standards inherent in the statute's cost justification proviso are met."

which this may be done, but if it is done, the manufacturer must comply with the requirements of section 2(d) of the Act. This requirement is simply that compensation for such services, if made by a manufacturer to one customer, must be made available on proportionally equal terms to other customers of that manufacturer who compete with the favored customer in the sale of the manufacturer's products. This means, among other things, that any plan or program, under which the payments are made must, if necessary, provide for alternative services or facilities which, as a practical matter, can be provided by all competing customers."

(f) Concluding its opinion, the Commission cautioned as follows: "It should be noted, however, that payments by manufacturers to their customers 'to stimulate the purchase of their goods for inventory,' are not payments of the type contemplated by section 2(d). Such a payment would merely be a reduction in price to induce the purchase of the manufacturer's goods and, if given to some but not all of the manufacturer's customers, might be unlawful price discrimination within the meaning of section 2(a)."

[33 F.R. 9815, July 9, 1968]

§ 15.264 Stocking, quantity, and cumulative discounts.

(a) The Commission rendered an advisory opinion to a manufacturer of food serving equipment which involved a proposal to use stocking, quantity, and cumulative price discounts.

(b) Under the first category, a discount of 50 percent and 15 percent would be given to stocking dealers who continually order in large quantities and maintain a regular stock of the product in question for local delivery to restaurants, hospitals, etc.

(c) The second category involves the following quantity discount schedule to dealers based upon each order:

(e) Stocking dealers will be in competition with nonstocking dealers and nonstocking dealers will also compete with each other. Under the terms of the proposed pricing schedules, stocking dealers could get a price advantage of as much as 15 percent over nonstocking dealers, and nonstocking dealers could also receive up to 15 percent price advantage over their nonstocking competitors.

(f) After making a brief explanation of the requirements of section 2(a) of the amended Clayton Act, the Commission advised the requesting party as follows: "It is, of course, impossible to reach a definitive conclusion as to the economic impact of such a pricing proposal without an investigation. However the Commission has given your request careful consideration, and it has concluded that it cannot give its approval to the proposal because it believes that the necessary ingredients are present from which it can reasonably infer that such a proposal would likely result in the anticompetitive effects proscribed by the statute. A pricing schedule which results in a price advantage of as much as 15 percent under the facts outlined in this case would therefore probably be illegal, unless it can be justified by provable cost differences in the manufacture, sale, or delivery of such products or unless the lower price is made in good faith to meet an equally low price of a competitor." [33 F.R. 9815, July 9, 1968]

§ 15.265 Personal deodorant spray.

(a) The Commission rendered an advisory opinion to a manufacturer of a personal deodorant spray concerning the legality of some proposed advertising.

(b) Specifically, the Commission advised the requesting party that the product was not a drug but a cosmetic, nor had it been cleared, approved, or endorsed by the Food and Drug Administration. Therefore, any claims which represent the product as a drug, or that it has been cleared, approved, or endorsed by the Government agency in question would be improper.

(c) Based upon all the facts and scientific information available to it, the Commission also advised the requesting party that any advertising representations which go beyond the claim that the product inhibits the growth of body odor causing bacteria would violate sections 5 and 12 of the FTC Act.

(d) Finally, the Commission stated that, as a general rule, it would be inclined to question the use of any claim that a product is "new" for a period of time longer than 6 months.

[33 F.R. 9816, July 9, 1968]

§ 15.266 Magazine sponsored contest to win a house.

(a) The Commission rendered an advisory opinion advising a magazine publisher that there would be no objection to a proposal to give purchasers or readers the opportunity to participate in a contest to win a house if implemented in the manner outlined below.

(b) The plan as presented was to give the reader, whether a purchaser or not, the opportunity to participate in a competitive contest to win a house. The contestant was to send in a numbered coupon clipped from the magazine with a written answer of 50 words or less to a question as, for example, "Why do I believe in democracy?" The answer was to be judged by an independent panel, with the best essay being declared the winner. The contest was to take place every 3 months, at a prefixed date, in a public community event. The purpose of the number was to identify the contestant, with the judges knowing only the numbers of the participants and not their names.

[33 F.R. 10205, July 17, 1968]

§ 15.267 Legality of describing green tourmaline as "Emerald Green Tourmaline" or "Precious Tourmaline". (a) The Commission was requested to render an advisory opinion as to the legality of describing green tourmaline as "Emerald Green Tourmaline" or as "Precious Tourmaline". The stone involved in the request was said to contain chromium, the same coloring agent which produces emerald when it occurs in beryl, and the stone resembled emerald in appearance.

(b) The Commission advised that it was of the opinion that the words "emerald" and "precious" may not be

(a) The Commission rendered an advisory opinion in which it stated that a joint agreement among competitors to refrain from price advertising would constitute a violation of section 5 of the Federal Trade Commission Act.

(b) The request which prompted the Commission's opinion stemmed from a proposal to use the following language in an association's standards of ethics:"Advertising of rates or comparison of competitor's rates or charges, is prohibited on the basis that such advertising demeans the profession."

(c) The present code now in effect uses the word "discouraged" in lieu of the word "prohibited."

(d) In ruling that such a provision would be illegal, the Commission said: * since price difference and price comparison may be valuable stimulants to competition, any agreement to suppress the advertising of the two would constitute an agreement in restraint of trade violative of section 5 of the Federal Trade Commission Act."

(e) "Moreover, as to the present use of the word 'discouraged' in the code now in effect, you are informed that any agreement to 'discourage' advertising of rates or rate comparison would also be in restraint of trade and violative of section 5 of the Federal Trade Commission Act. The Commission is aware that you have not requested this advice, and indeed under the Commission's rules an advisory opinion is usually considered inappropriate because the practice is one which is already engaged in; however, since your adoption of this rule has come to the attention of the Commission, the Commission would be remiss in not suggesting its discontinuance."

[33 F.R. 10206, July 17, 1968]

§ 15.269 Pooling of allowances for purposes of joint advertising.

(a) The Commission was requested to render an advisory opinion concerning the legality of a proposal by a group of independent retailers to pool the advertising allowances due the members for purposes of joint advertising.

(b) Under the proposal, all money earned by the members under the suppliers' cooperative advertising programs would be assigned to the group in a collective advertising effort for the suppliers. Each supplier would receive, on the basis of the amount of money earned from him by all members of the group, radio advertising through the medium of 3 minute programs, each of which would have 1 minute of time available for the suppliers' commercial messages. The content of the 1 minute commercial would be governed by the suppliers themselves and would not be connected in any way with the retailers' advertising.

(c) As part of the proposal, for each program a supplier receives the retailers would receive broadcast time on the same stations for their message, which would be institutional in nature and would extol the advantages of dealing with independent retailers. Under this type of advertising program, it would not be possible to mention individual dealers nor will prices be mentioned in such advertising.

(d) The opinion advised that the Commission could see no objection to the proposal on the understanding that the fund used by or on behalf of the participating group to purchase advertising space will consist only of the aggregate of advertising allowances properly available to the members individually under the terms of section 2(d) of the Clayton Act, as amended by the Robinson-Patman Act. In brief, that section prohibits the payment by sellers of allowances to some customers which are not made available on proportionally equal terms to all competing customers. In this connection, the opinion further advised that it would be unlawful if the combined power of the group was used to induce from the suppliers allowances greater than those to which the individual members were entitled under such section. [33 F.R. 10206, July 17, 1968]

§ 15.270 Necessity for disclosing country of origin of imported ski.

(a) The Commission was requested to render an advisory opinion as to the marking requirements applicable to a ski which is imported from abroad in an unfinished state and which would have to have the decal and the top finish applied in this country, as well as the final process for finishing the bottom or the running surface.

(b) The opinion advised that in the Commission's view it will be necessary to disclose the country of origin of this ski in a clear and conspicuous manner to prospective purchasers at the point of sale.

[33 F.R. 10206, July 17, 1968]

§ 15.271

Adoption of penalty clause which inhibits competitors.

(a) The Commission advised a requesting party that his proposal, if adopted, would violate section 5 of the Federal Trade Commission Act.

(b) The plan and its background were described as follows:

(1) It is customary in the specified market for sellers of components furnished by a single supplier to offer free design services to architects and engineers engaged in planning new construction.

(2) When the contracts are let, however, that seller of components who has provided the free design services is not always the successful bidder.

(3) It was proposed, therefore, that the supplier contract and agree with all whom he supplies that a money penalty be imposed on any successful bidder who had not provided the free design services. The prescribed penalty would be paid over to that unsuccessful bidder who in fact provided free design services, failing which the supplier might at his option, cut the offending bidder off.

(c) The Commission noted that any direct, or indirect, agreement between competitors which interferes with the free establishment of a market price whether that price be expressed in money, service, or in any other manner, is unlawful.

[33 F.R. 11701, Aug. 17, 1968]

§ 15.272 Sales promotion plan—opportunity to buy at a savings.

(a) The Commission approved a proposed sales promotion plan described as follows:

(1) The requesting party proposes to offer major oil companies its services in the promotion of the retail sale of gasoline. Participating gasoline stations will be provided with 3 x 4 cards picturing some product, most probably a nationally advertised appliance. These cards will be distributed gratis to those who wish to have them. No purchase of any kind will be required.

(2) The appliance pictured on the card will be offered for sale at a price substantially less than the price at which it is ordinarily available through customary retail outlets. The holder of the card may obtain the appliance by sending the card with remittance to a designated post office box. His purchase will be mailed to him. A purchase may be made without a card if remittance is accompanied either by a facsimile of the appliance or a word description thereof.

(b) The plan was approved on the assumption that the offered savings would in fact be available as prescribed in the Commission's Guides Against Deceptive Pricing.

[33 F.R. 11701, Aug. 17, 1968]

rendered

an

(a) The Commission advisory opinion advising a trade association of independent shops engaged in rendering repair service that its proposal to disseminate a suggested resale price schedule for materials used would be likely to result in a violation of law.

(b) The schedule in question consisted of two tables, one of which gave the shopowner a quick reference to suggested resale prices for materials and the other of which gave him an explanation of the total by itemization of each resalable product. The schedule explained that after hours of study it was found that computing labor and materials charges by allowing a price for each hour of labor was very unfair to the shops and far below their cost of materials. Hence the schedule gave the shop a quick method of computing the price of materials to which would be added the cost of labor.

(c) The Commission advised that implementation of this proposal by the association would be likely to result in a violation of law. Even though couched in the form of a suggestion, the natural and probable result of such an action by the association would be to persuade substantial numbers of the members to charge the prices suggested, thus leaving an almost inescapable inference of an agreement among competitors to charge a uniform price for materials. Such an agreement, the Commission stated, would be a clear restraint of trade under existing law.

(d) It was the opinion of the Commission that the prices charged by the members for materials should be deter

99-134-69—12

mined by the natural forces of competition, not by concerted activity on the part of the members acting through their trade association or otherwise.

[33 F.R. 11701, Aug. 17, 1968]

§ 15.274 Proposal to reduce discounts granted small volume purchasers.

(a) The Commission rendered an advisory opinion in which a distributor of leather specialty goods was informed that a proposed merchandising plan under which those customers whose annual purchase volume is less than an arbitrary and fixed amount would be granted a smaller discount than would be granted those whose purchases exceed such amount cannot be approved because it appears on its face to violate section 2(a) of the amended Clayton Act if it were put into operation.

(b) The proposed merchandising pro-gram will continue the current discount, of 50 percent off list to those whose annual purchase volume exceeds $250. All other accounts will be granted 40 percent. discount on orders of less than $200 list. and 50 percent discount on orders over this amount until their cumulative purchase volume reaches $500 list at which time each will receive a retroactive rebate adjustment on past purchases and the current discount on subsequent purchases. A service charge of $2 is to be charged on orders of less than $20 net.

(c) The Commission further pointed out that price discriminations to customers who in fact compete with each other in the resale of commodities of like grade and quality would violate section 2(a) of the amended Clayton Act unless cost justified or unless the lower price is a good faith meeting of a competitor's equally low price.

[33 F.R. 11701, Aug. 17, 1968]

§ 15.275 Necessity for disclosing country of origin of imported watch bands.

(a) The Commission was requested to furnish an advisory opinion as to the necessity for disclosing the country of origin of watch bands which will be assembled in the Virgin Islands wholly from parts imported from Hong Kong.

(b) The opinion advised that in the Commission's view the country of origin of these watch bands must be disclosed in a clear and conspicuous manner either on the bands themselves or on the packages in which they are sold. [33 F.R. 11702, Aug. 17, 1968]