"Free" offer of merchandise

No. 21. "Free" offer of merchandise.

The Federa1 Trade Commission recently rendered an advisory opinion on a retailer s proposal to offer a stereo record player for "absolutely nothing" with the purchase of one stereo record a week for fifty weeks.

The concern had asserted that it does not retail the record , ,

player by itself for less than $249 and that the records are high quality stereo records which it retal1s for $4.98 and it does not know of anyone e1se selling them for less. Thus, it stated, the customer would pay $249 for the record p1ayer and the records which is the price normally paid for the set alone. The Commission informed the retailer Since the matter you have presented is wholly dependent upon the facts , it is diffcu1t to render a categorica1 opinion. When a seller offers to supp1y one article 'free ' or ' at no extra cost ' or for ' absolutely nothing in conj unction with the purchase of another article, he is thereby representing to prospective customers that the article required to be purchased is being sold at no more than the price at which it is usually sold in substantial quantities. You wi1 note that we are not dea1ing here with abstract evaluations, but rather with concrete sel1ng prices.

Thus, if the records which are to be offered those who accept this offer are current1y being sold in substantial quantities for $4. , there could be no objection to the offer on that score. On the other hand, if such records are what is known in the trade as 'low cost cut-outs,' ' budget lines ' etc. , which normally command a much lower selling price, the offer would be deceptive even though the records may be 1isted at $4. 98 for advertising or preticketing purposes. In that event, instead of purchasing current records at the prevailing market price and receiving a record player at no extra cost, the purchaser would be paying a high, nationally advertised, price for records worth a fraction of that va1ue, the substantial markup thereby defraying the cost of the record p1ayer.

Aithough the sample of the promotion letter you furnished eontains no representation of the va1ue of the record player, the same genera1 principles would apply if such representations are made. Thus, to avoid any basis for deception, representations of price or va1ue of the record player must reflect the actua1 or prevai1ing market price at which sales of that product are currently being made in substantia1 quantities. The Commission also noted that the promotion letter states Have you ever been called 'Lucky ? Well Congratu1ations and urges the customer to "come in before the expiration date. , in fact/' the advisory opinion commented the offer is avaiJable to more than a few selected persons , or continues for an extended or indefinite period of time, then the representations in the promotion letter would be false and deceptive. " (File No. 6637008, released Mar. 29, 1966.

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ADVISORY OPINION DIGESTS 1209