Trade association code providing that members will not advertise sales below cost

No. 249. Trade association code providing that members will not advertise sales below cost.

The Commission rendered an advisory opinion informing a trade association that there eould be no objection to its proposed "Guide to Ethical Advertising Practices with the exception of one provision relating to advertising of sales belo,y cost. The Guide set forth a number of prohibitions of various advertising praetiees which the Commission deemed to be in aeeord with applieable a'" and the Commission also noted that the association did not eontemplate any efforts of its O\yn to enforce the Guide, but instead planned to publish it solely for the education and guidance of the members. The one provision questioned by the Commission provided that sinee below cost pricing is predicated on additional snles members shall not advertise merchandise. 01' services or a combination of both belO\y their total cost.

The opinion advised that ,yhile the mere adoption and dissemination of this Guide b~' the association ma~' not be, considered the eqni valent of an agreement not to ach-ertise belm" cost prices, shll if it had the eHE'd of persuading substantial numbers of the members of the assoeintioll to refrain from so advertising, it ,yould, the opinion stated raise a serious inference of such an agreement and hence ,yonld be of questionable propriety under the antitrust In ws. Since sales belo\\' cost ean be a legitimate method of eompetition, depencling' upon the cireumstances, an~' agreement among competitors to refrain from such advm'tising to that extent restricts competition. I-renee ~ it ,vas stated that any provisions ,yhieh ,yduld haTe a tendency to bring about that result eould not meet ,,"ith Commission approval. The Commission further advised that this conclusion ,,"auld not in any way be altered bv the existence, of the many State b,,"s on the subject. These 18.',"s vary greatly in their coverage and application and in any event ,,"auld not provide a legal basis for an agreement among the members of an industry to refrain from the prac6ce in question. (File Xo. 6Si3 7097, releasec1 :Jlay 21 , 19G5.