Promotional allowances by fabric supplier In an advisory opinion the Commission ruled that a fabric supplier…

No. 143. Promotional allowances by fabric supplier In an advisory opinion the Commission ruled that a fabric supplier who makes advertising allowances available to one or more resellers of a finished product, irrespective of the fact that intermediary performs work on the raw material which transforms it into the finished product, thereby adopts those resellers of the finished product as his customers and must comply with Sec. 2 (d) of the Robinson-Patman Act.

Commenting further upon the customer relationship, the Commission said: We think Congress clearly intended to ban discriminations in the form of advertj,:ing allo\vances , regardless of the fact that intermediaries might be interposed, \vhere the grantor de1iberate1y contacts hundreds of retailers directly with the pUrpos( of expending thousands of dollars for advertising purposes. Thus where a supp1icr initiates such a promotional program with retailers and has primary, if not the sole, responsibility over the control and administration of the plan, we think the customer relationship has been ADVISORY OPINION DIGESTS 1047

established and the plan must be tested in the light of the requirements of Sec. 2 (d) of the Act.

Under the terms of the proposed plan, the fabric supplier would pay 50 percent of retailers' advertising costs if the retailer sells and advertises wearing apparel manufactured from a certain line of fabric, up to a total cost of 1 200 lines published in Advertising Checking Bureau (ACB) newspapers. Retailers who use non-ACB rated newspapers, radio, television, handbils or mail stuffers wil be paid an equivalent measurable cost. The plan wil be made available to all retailers located in selected trading areas of all wearing apparel manufacturers who purchase and produce the finished product from the fabric in question. Only dealers who purchase apparel at regular wholesale prices wil be eligible to participate.

In its opinion, the Commission concluded that the plan complies with Sec. 2 (d) of the Robinson-Patman Act with two reservations. In commenting upon the first reservation, the Commission said: The statute requires onc who gives advertising allowances to make those payments available to al1 competing customers. Availability means that the grantor of the allowance must notify all competing customers of their right to participate in the plan. Thus the provision of the plan which requires a retailer located just outside one of the selected areas to show that he competes with onc or more of the favored retailers in order to have the offer made available to him ,vQuld appear to shift the responsibility of notification required under the statute. For this reason , the Commission cannot approve this particular provision of the plan should it result in discrimination against retailers located on the periphery of the selected trading areas. With respect to its second reservation, the Commission said that its opinion should not be construed as implying approval of the phrase "at regular wholesale prices" if the practical effect of that language is to procure resale price maintenance. (File No. 673 7103 , released Sept. 12, 1967.