Use of manufacturer s list prices to denote vaJue A concern engaged in the distribution of premiums for…

No. 109. Use of manufacturer s list prices to denote vaJue A concern engaged in the distribution of premiums for se1lers who make premium offers on the labels of their merchandise recently requested an advisory opinion concerning the legaJity of using manufacturers' list prices as the value of the items so offered.

After advising that it is impossible to give a categoricaJ answer to such a question since the answer is wholly dependent upon facts which are unknown to the Commission, the Commission advised that in no case could the company or its accounts rely completely upon manufacturcrs' Jist prices as an absolute indication of the value of the products offered as premiums. Instead, since these prices wi1l be described as the value of the premiums on labels and in advertising, they must meet the test of Guide II of the Commission s Guides Against Deceptive Pricing, ,,,hieh provides that whenever an advertiser represents that he is seJling below the prices bcing charged in his area for a particular article, he should be reasonabJy certain that the higher price he advertises does not appreciably exceed the price at which substantial sales of the article are being made in the area. The Commission advised that if the sales history of any particular product can meet this test then the list price can be usee! as the vaJuc of the product on labeling and in advertising. If it does not meet this test, then the list price cannot be used. The important point to remember here is tbat the mere fact that a manufacturer has assel'ted that a given amount is his list price does not constitute a license to others to use that price as a representation of value. The concept of vaJue is not abstract, but must instead be based upon concrete se11ing prices. Certainly, the Commission stated, if the list price for any particular product can meet the test of substantial sales in the se11er , trade m' , it can be used as a representation of value even though substantial sales are also made at less than that price by other dealers in the same area.

ADVIOSRY OPINION DIGESTS 1723 Additionally, the opinion pointed out that since the company was handling what was described as self-liquidating premiums there was also the possibility that some of the list prices being employed were old in point of time and did not represent current values. In such a situation, it would not be permissible to use the list price as a basis for a representation of current value. Finally, the Commission noted that the company was not itself engaged in advertising these prices, but was instead expected to furnish values for the products to the accounts which they could use in their own advertising and labeling. The responsibility for the truthfulness of the price representations made under these circumstances was held to be twofold, being shared by the sellers which actually use the prices in their advertising and labeling and by the distribution company as well under the principle that one who places in the hands of others the means and instrumentality of deception is himself guilty of deceit. Thus it was stated to be important for both to make certain that the prices used to represent the values of these premiums comply with the criteria of the Guides. (File No. 673 7044 , released Jan. 24 1967.