Sales promotion plan disapproved-Lottery

No. 57. Sales promotion plan disapproved-Lottery. An advertising company has been informed by the Federa1 Trade Commission that imp1ementation of its proposed sales promotion plan would result in several1aw violations. The requesting party explained it would sell paper bags to retail grocery outlets for use in bagging customers' purchases. There wou1d be no variation in price between customers purchasing the same quantity; however, purchase of different quantities wou1d result in different prices. The bags wou1d have advertising of products sold in the store, p1us a seria1 number printed on them. A drawing would be held periodically and the h01der of the "lucky number" would win a prize. Advertisersuppliers wou1d pay the requesting company for the advertising and it would make the bags available to any grocery operator wishing to purchase them. Grocery store operators wou1d provide the bags free to customers. In its advisory opinion the Commission raised the following objections to the plan:

The fact is that competing purchasers of different quantities of the bags wou1d be paying varying prices apparently arrived at on the sole basis of the quantity purchased rather than differences in the cost of manufacture, sale or delivery of the bags. Un1ess the differences were cost or otherwise justified it likely that imp1ementation of the plan wou1d be vi01ative of Section 2(a) of the amended Clayton Act. Advertiser-suppliers would be furnishing a service or faci1ty within the meaning of Section 2 (e) of the same statute to those of their customers purchasing bags from the requesting party, and thus would be under an obligation to provide customers which compete with those buying the bags with a realistically availab1e alternative. "The feasibi1ty of participating advertisersuppliers fu1filling this requirement is believed remote. The "lucky number" feature of the pJan wou1d constitute a lottery, since consideration (the customer s patronage), chance (the periodic drawing) and prize (the reward to the "lucky number" holder), make up all the essential elements of a lottery; hence an unfair trade practice vio1ating Section 5 of the FTC Act. (File No. 643 7006 , released June 16, 1966.