Bargain offers based upon purchase other merchandise

No. 70. Bargain offers based upon purchase other merchandise.

The Commission announced today it had rendered an advisory opinion disapproving a retailer s proposal to offer a free sewing machine with the purchase of a cabinet.

Under the terms of the proposed plan , the retailer intends to place one sewing TI1achine on display in various locations, such as bowling alleys, supermarkets, shopping centers, etc. A nearby sign wi1 jnvite one to fill out a registration card and deposit same in a box. Each month one name wi1 be drawn from the box in each location where the machine is on display and the winner will receive a free sewing machine with cabinet. addition, 50 names wi1 be drawn from each box and these persons wi1 be sent a letter informing them they can obtain a free sewing machine head simpJy by purchasing the cabinet. According to

.1n conformity with poJicy of the Commission. advisory Dpinions are confidential and are not availabJe to the public , only digests of advisory opinions are of public record. Digests of advisory opinions an- currently published in the Federal Re ist€r.

the letter to be sent to the 50 winners, the cabinets range in price "from $39.95.

In its opinion, the Commission concluded as fol1ows: * '" * that part of your plan which provides for prospective customers to win a free sewing machine with cabinet is unobjectionable. However the Commission is of the opinion that that part of the proposed plan which offers to 50 persons a "free" sewing machine head for the price of the cabinet involves the sale of merchandise by means of a lottery or means of a chance or gaining device and therefore would be iHegal as an unfair trade practice under Section 1) of the Federal Trade Commission Act. As a result, the Commission cannot give its approval to this aspect of your proposed plan in its present form. Commenting upon other features of the proposed plan, the Commission said:

When a seller offers to supply one article "free" or " at no extra cost" in conjunction with the purchase of another article , he is thereby representing to prospective customers that the article which is to be purchased is being sold at no more than the price at which it is usually sold in substantial quantities. Accordingly, if you should eliminate that aspect of your proposed plan appealing to the pub1ic s gambling instinct , then the price of the cabinets which the consumer is to purchase in order to obtain a "free" se'\ving-machine head must meet this standard. Finally, the Commission s opinion concluded , there must be a bona fide effort to sell the merchandise offered and a plan of this nature may not be used simply as a means to obtain leads which wil be used to sell more expensive cabinets and/or sewing machines. Commissioner Elman, dissenting: The Commission holds that that part of (the) plan which provides for prospective customers to win a free sewing maehine with eabinet is unobjectionable. This holding in which I concur-seems to me to be inconsistent with the Commission s other holding that "that part of the proposed paln which offers to 50 persons a ' free' sewing machine head for the price of the cabinet involves the sale of merchandise by means of a lottery or by means of a chance or gaming device and therefore would be i1egal as an unfair trade practice under Section 5 of the Federal Trade Commission Act." There is no essential difference between the first-prize part of the plan which gives prospective customers the opportunity to win a free sewing machine and eabinet, and the second-prize part, which gives prospective customers the opportunity to win a free sewing machine if they buy a cabinet. The only difference I can see is in the value of the prize.

A lottery embraces three elements; chance, prize, and consideration. C. v. R. F. Keppel Bro. 291 U. S. 304; J. C. Mar- ,

ADVISORY OPINION DIGEST 1857 tin Corp. v. 242 F. 2d 530 (7th Cir. 1957). If one of these is absent, it is not a 1ottery. The plan here does not contain the element of consideration. Anyone may enter and beeome eligible for the drawing by merely fil1ng out a registration card. No payment or purchase is necessary. The requirement that the 50 second-prize winners must purchase a cabinet in order to obtain a free sewing machine does not make this plan a lottery. The Supreme Court has defined a lottery as "a deviee whereby the amount of the return (the entrants) receive from the expenditure of money is made to depend upon chance. C. v. R. F. Keppel Bro. , supra 313. In the plan here the second prize is simply the opportunity to buy a sewing machine and eabinet for the price of the cabinet alone. A winner is not obligated to buy the cabinet. If he chooses to buy the cabinet, at the time he pays for it there is no longer any element of ehance or the receipt of a prize which depends on chance. He knows exactly what he wi1 get for his money, viz. a cabinet plus a free sewing machine; his expenditure of money is for making a purchase, and not for receiving a prize depending on chance. (File 1\0. 663 7050 , released July 6. 1966.