be lessened by the proposed price discriminations, in violation of section 2(a). Although price discriminations otherwise unlawful under section 2(a) may be justified by cost savings on the part of the seller, the information which you have submitted does not indicate the presence of such "cost justification" in your plan. If the discounts granted to you by sellers should violate section 2(a), your knowing inducement or receipt of such discriminations would also violate section 2(f) of the Act.

(d) Continuing, the Commission said the problem would be somewhat different if the discounts granted to the requesting party were considered as promotional or advertising allowances for his listing of the publishers' books in his catalog.

(e) Granting or receiving such allowances would be unlawful "if they were not made available on proportionally equal terms to competing customers,” the Commission advised. "Thus, if your suppliers of paperback books granted proportional advertising or promotional allowances or facilities, such as cooperative advertising allowances, display racks, and the like, to their other purchasers, their granting to you of an allowance for the listing of their books in your catalog would not be unlawful." [31 F.R. 6866, May 10, 1966]

§ 15.42

Advertising service disclosing where manufacturers' products are sold.

(a) The Federal Trade Commission made public its advice that a plan to furnish manufacturers a new form of advertising service disclosing where their products are sold would not be illegal.

(b) Under this proposed plan, a manufacturer will publish an advertisement in a national magazine, and will furnish to the proposed corporation represented by the requesting party a complete listing of all retailers selling the advertised product, classified according to the major shopping areas throughout the country. The advertisement will contain a descriptive symbol for the proposed service, with a reference to the page in the same publication containing a telephone number list, also classified according to the major shopping areas throughout the country. Each answering service included in this list will be equipped by the proposed corporation with the manufacturer's list of his retailers in that trade area, which will be given to any consumer who reads the advertisement and calls the number

provided to learn where he can purchase the product. The cost of the entire service will be borne by the manufacturer.

(c) The FTC's advisory opinion said, "Since it appears that any potential customer calling will be furnished with the names and addresses of all dealers handling a particular product in a trade area, it is our opinion that the proposed plan described would not subject participating manufacturers or your client to a charge of violating the law. We should caution, however, that great care must be exercised in defining the boundaries of the various trade areas into which the country is to be divided so as not to discriminate against customers located on the fringes but outside the area served by the answering service, since they may be in actual competition with those who are within the area and thus receive the benefit of the service."

[31 F.R. 6866, May 10, 1966]

§ 15.43 Goods of like grade and quality.

The Federal Trade Commission advised a manufacturer producing iron castings to special order of its customers that such goods are not of like grade and quality within the meaning of that section of the amended Clayton Act prohibiting price discriminations. The Commission was informed by the manufacturer that:

(a) Its castings are produced in accordance with individual customer specifications;

(b) It submits samples to the customer for approval;

(c) The customer further processes the casting prior to use; and

(d) Castings are not shipped off the shelf but are produced to order with several weeks lead time.

[31 F.R. 6906, May 11, 1966]

§ 15.44 Agreement among retailers for uniform store hours.

(a) A retail dealers association of a certain city of substantial size has been advised that a proposed agreement among downtown retailers to establish uniform store hours would not, under the circumstances presented, be in violation of any laws administered by the Federal Trade Commission.

(b) The stated existing downtown shopping hours are 9 a.m. to 5:30 p.m. with Monday and some Thursday hours from 9 a.m. to 9 p.m. The proposed change would make the hours from 11 a.m. to 8 p.m. weekdays and 9 a.m. to 5:30 p.m. on Saturday.

(c) The basic reason advanced for the proposed change in hours is to place the downtown retailers in a more effective competitive position with suburban shopping centers by establishing more convenient shopping hours for office workers and by enabling spouses to meet for dinner and shop. Any business establishment will have the free choice as to whether or not to conform to the proposed change in shopping hours. [31 F.R. 6906, May 11, 1966]

§ 15.45 Merchandising by means of a chance or gaming device.

(a) The Commission was recently requested to furnish an advisory opinion with respect to a proposal to distribute prizes to users of trading stamp books. Under this proposal, distributors of trading stamps would receive from the stamp company not only the trading stamps that are to be pasted in the books but the books as well. The books would bear a seal which when broken after the book is completely filled and presented to the store manager would reveal a prize ranging from $1.50 to $100. Books carrying prizes larger than $1.50 would represent approximately 10 percent of the total books distributed. The stamp user would also have the option of not breaking the seal and receiving $2 in cash or $2.15 in merchandise.

(b) It was contended that of the three essential elements of a lottery, namely, consideration, chance and prize, the first would be missing since merchants would distribute the stamps not only to their customers in proportion to purchases made, as is normal for trading stamp operations, but also to anyone who would register in the merchant's store whether a purchase was made or not. Extensive advertising would inform the general public that they may receive 80 stamps per week by just registering with the merchants without the necessity of making a purchase.

(c) The Commission advised that it did not need to decide the question of whether or not consideration would exist, so that the proposal could be held to constitute a technical lottery, for it was still of the view that the plan would involve an illegal effort to sell or dispose of merchandise by means of a chance or gaming device. In the Commission's view, lotteries are not the only method by which the public gambling instinct may be aroused, for other methods are

comprehended within the general concept of merchandising by gambling. This proposal appeared to fall into that category, for even though each participant would always receive something of value if he persisted long enough to fill the book with stamps, the amount of his return would vary greatly with his willingness to "take a chance." Consequently, the Commission declined to give its approval to the proposed plan. [31 F.R. 7225, May 18, 1966]

§ 15.46 Common sales agency.

(a) The Commission has advised a manufacturers' agent that its proposed plan to be the sales agent for a number of producers of the same product involves grave risk of illegality because one of its stated objectives is market stabilization.

(b) "The mere use of a common sales agency will not, in and of itself, result in a violation of law," the FTC's advisory opinion stated. However, it continued, in view of the requesting party's statement that one of the plan's purposes is to stabilize the market, "it is reasonable to conclude that the use of a common marketing agency by a number of different producers of the same product would inevitably lead to a violation of the Federal Trade Commission Act as well as the Sherman Act. This is especially true when the common agent would be quoting a common price for all the producers he represents."

(c) The Commission pointed out it is common experience that any arrangement aimed at stabilizing the market, “even if not initially so designed, has within it the seeds of price fixing, allocation of markets, or restriction of production, all of which are classic antitrust violations."

[31 F.R. 7225, May 18, 1966]

§ 15.47 Leather terms may not be used for nonleather gloves even if true composition is disclosed-manner and place of disclosing foreign origin.

(a) The Federal Trade Commission has made public its advice to a marketer of gloves that it would be improper to use a leather-connoting description for gloves which in fact contain no leather, even though qualifying language is used to describe their true composition.

(b) Noting that the gloves are to be imported from Japan and the requesting

party intends to disclose their origin on the paper bands and box labels, the Commission further advised that to avoid possible deception, disclosure of the Japanese origin must also be made on each pair of gloves by marking or stamping or on a label or tag affixed thereto. This disclosure must be readily visible upon casual inspection of the gloves and of such permanence as to remain on them until consummation of sale to the ultimate purchaser.

[31 F.R. 7281, May 19, 1966]

§ 15.48 Legality of licensee and sublicensee selling to competing jobbers.

(a) An exclusive licensee of a patented article has requested advice from the Federal Trade Commission concerning the legality of his sales and those of a manufacturing sublicensee to competing jobbers.

(b) The licensee proposed to sublicense a manufacturer to produce the article and sell it to its own jobbers. At the same time, the licensee, on his own account, would sell the same article under a different name to his own jobbers. The sublicensee manufacturer would ship direct to customers of the licensee, some of which may be in competition with its own jobbers, and bill the licensee at an agreed price.

(c) The Commission advised that in general, the Robinson-Patman Act "does not apply unless there is a discrimination attributable to the same seller in dealing with different purchasers."

(d) Consequently, it said, if the manufacturer, a separate business entity, has and exercises sole and independent control over the prices at which it sells and the licensee has and exercises sole and independent control over the prices at which he sells, "questions cannot well arise under section 2(a) of the RobinsonPatman Act."

(e) However, the Commission pointed out that on the basis of the facts available it is unable to say that the plan "would not violate any of the trade regulation laws. For example, we do not know what, if any, price agreements are contemplated between * [the licensee] and the manufacturer or the nature thereof or whether such agreements may hereafter come into being." [31 F.R. 7281, May 19, 1966]

*

§ 15.49 Cooperative advertising plan with no ceiling on suppliers' pay.

ments.

(a) A retail merchant has been advised by the Federal Trade Commission that its proposed standard cooperative advertising agreement with its suppliers is not objectionable.

(b) The contemplated agreement states that the supplier (1) agrees to pay a fixed percentage of the requesting retailer's cost of advertising and (2) is offering proportionally equal allowances to the retailer's competitors.

(c) The Commission noted that the plan provides for promotional payments without limitation as to amount and that it is more customary for suppliers to limit their obligation by a percentage of a dealer's purchases.

(d) "However this might be,” the advisory opinion said, "the Commission has concluded that no objection will be raised if suppliers decide to eliminate * [this] limitation and undertake to pay a stated percentage of all the advertising conducted by their dealers. This presupposes, of course, that the suppliers will make the same offer available to all competing customers and that the offer is functionally usable by all competing customers."

(e) The plan, the advisory opinion added, "does contain features which might conceivably be used to greater advantage by larger retailers. But these prospects appear so remote, the Commission is not inclined to object unless and until future experience should produce presently unexpected evidence that some customers actually received favored treatment. Objection then would be taken only after proper and adequate notice that the plan had not developed as anticipated."

[31 F.R. 7349, May 20, 1966]

§ 15.50 Furnishing and servicing pro

jection equipment in grocery outlets. (a) A marketer of projection equipment has been advised by the Federal Trade Commission that his proposed plan to lease equipment and furnish associated services to suppliers of grocery products for advertising purposes in grocery outlets would not subject him to a charge of violation of law.

(b) Suppliers would lease space from grocery store operator-customers they select. The marketer would prepare advertising of the supplier's product and install and maintain the equipment in

the selected stores. He would take no 'part in the selection of retail stores and would not act as agent or intermediary for the suppliers in making the necessary contracts or agreements for the placement of leased projection equipment in the stores.

(c) The Commission advised the marketer that his leasing of the projection equipment plus the preparation of advertising material and performance of installation and maintenance services would not subject him "to a charge of violation of sections 2 (d) or (e) of the Robinson-Patman Amendment to the Clayton Act, which sections are set forth in the Commission's Guides for Advertising Allowances."

(d) However, the Commission said that it "should be clearly under

stood *** that participation in this plan by suppliers may involve a violation of Law on their part unless the payments made and the services or facilities furnished, are made available to all competing purchasers in a nondiscriminatory manner."

[31 F.R. 7349, May 20, 1966]

15.51 Discount stamp advertising plan.

(a) The Federal Trade Commission has advised that a proposed promotional plan involving the use of discount stamps would not be illegal if properly implemented.

The

(b) The requesting party proposes to issue a set of stamps to customers in grocery stores and other types of retail outlets in certain trading areas. stamps will feature particular brands of products. When forwarded affixed to labels, wrappers or boxtops of the products featured, the requester will send a check to the customer in an amount equal to 10 cents for each stamp plus 10 cents additional if an entire set has been forwarded.

(c) Suppliers of products featured would pay the requester for managing the promotion. Grocery store and other operators of retail outlets competing in and on the fringes of the trading areas in which the plan is attempted would be offered the opportunity to participate. To this end, such retail outlet operators would be furnished the stamps, promotional kits and money allowances on the basis of their annual dollar volume of sales.

(d) The advisory opinion said it is the Commission's understanding that al

though the requesting party would concentrate its promotional efforts on operators of grocery stores it would also offer the plan to operators of other types of retail outlets competing in the sale of the products of supplier-advertiserparticipants in the promotion and would admonish all such supplier-advertiserparticipants of their responsibility to accord proportionally equal treatment to all of their competing customers, whether engaged in grocery retailing or other fields. The Commission further assumed that the proposed notices would adequately inform all prospective participants of all details of the offer.

(e) The Commission advised that its opinion is that "implementation of the plan as outlined would not be violative of sections 2 (d) or (e) of the RobinsonPatman Amendment to the Clayton Act." [31 F.R. 7737, June 1, 1966]

§ 15.52 Food manufacturer, retailer promotion program.

(a) In an advisory opinion the Federal Trade Commission informed a promotional concern that its proposed advertising program to be utilized by food manufacturers and retailers would not be in violation of existing law if the program is modified to take into account "exceptions and caveats" pointed out the Commission.

(b) The promoter proposed to design a number of aisle-end displays, each promoting the name of a food manufacturer and a seasonal recipe incorporating a product of that manufacturer. Displays for twelve participating manufacturers and decorative material would be packaged in a kit (which may be divided into 12 segments) for distribution to retail stores taking part in the program.

(c) According to the plan, each manufacturer would pay a proportionate share of the cost of the program, retailers would bear none of the cost but must agree to provide aisle ends for displays and stack the manufacturers' products, and the number of kits each retailer would receive would be determined by the number of retail stores each owns.

(d) The Commission advised the promoter, among other things, that if all retailers sell the products of all the manufacturers and all can use the entire kit, he would not be required to break down the kit just because a particular retailer so desired. However, the Commission said, if there are certain customers who do not sell the products of all the manu

facturers or who cannot, because of space limitations, use the entire kit, then the law would be violated if the promoter insists the retailer take the entire kit or nothing.

(e) After pointing out the requirements concerning notice to all competing customers that the plan is available, the Commission said participating manufacturers would not be obligated to meet the demands for cash by retailers, who could utilize the program, simply because they refuse the kit or sell products of only one manufacturer.

(f) As to manufacturers requiring signed agreements from retailers who wish to receive the kits, the Commission advised that the law permits manufacturers to require that dealers who are to receive the benefit of such promotions must agree to reasonable display requirements so that the purposes of the promotion may be carried out. However, it noted, retailers desiring less than the full kit could not be expected to sign an agreement which would require them to accept the full display kits.

(g) Concerning a manufacturer limiting the program to only one of his products and his responsibility to retailers who handle his products only on a "sporadic basis," the Commission said the law imposes no requirement that a seller must give advertising allowances or services on all his products if he elects to accord them on one or more articles. Problems concerning products of like grade and quality which differ in only minor respects or trade names can be avoided if the suppliers include entire product lines and thus avoid fine distinctions between products. As to the second query, the Commission stated that it would not be safe to exclude any retailer who was in fact a customer of one or more of the manufacturers during the course of this promotion.

(h) The Commission pointed out that if there are some grocery outlets which are too small to use the entire kit-or that part of it which represents all the manufacturers with whom they do business-because of actual space limitations, then some alternative must be provided to keep the plan from being one which is tailored primarily for larger retailers. If the plan results in any of the manufacturers furnishing facilities to some customers which are not readily usable by others, the suppliers are likely to find themselves in violation of the law. By furnishing an alterna

tive method of participation to the smaller customers, such as posters and counter displays, this result can be avoided, the Commission advised.

[31 F.R. 7737, June 1, 1966]

§ 15.53

Self-locating shopping guide promotional program.

(a) The Federal Trade Commission has advised a sales promotion company that its proposed plan, to furnish self-locating shopping guides to wholesalers for redistribution to their competing retail customers, would not be objectionable provided that smaller retailers are able to obtain proportionally equal treatment.

(b) The Commission noted that some of the aspects of the plan are of interest only to relatively large retailers, and that it appears likely that some, at least, of a participating wholesaler's competing customers may be quite small retailers for whom the proposed plan would have little practical value.

(c) The Commission advised that the "statute requires that any services or facilities made available to the larger of two competing customers must be made proportionally available to the smaller."

(d) Assuming the existence of small competing customers, the Commission said, "it appears clear that if [the] plan is to conform to statutory requirements some provisions should be included therein which would provide for the needs of the smaller customers." [31 F.R. 7806, June 2, 1966] § 15.54

Promotional assistance; Newsstand display.

(a) The Federal Trade Commission rendered to the publisher of a magazine a favorable advisory opinion regarding his promotional assistance plan providing basically for payments of 99 cents per issue, per newsstand and alternatively, at the newsstand operator's option, payment at a rate of one-half cent per copy sold, per issue. Payments would be subject to a $75 maximum per issue to any single newsstand operator. Payments would be made quarterly provided the operator had reported daily sales and permanently displayed the magazine in a high traffic location full cover exposed within easy reach of customers. The plan would be offered each calendar quarter by a notice on the magazine's cover with details printed on an inside page.

(b) Plans such as this come within the purview of section 2(d) of the Robinson