Promotional assistance based on percentage of purchases during a fixed time period

No. 261. Promotional assistance based on percentage of purchases during a fixed time period. The Commission was requested to render an advisory opinion with respect to the legality of a supplier s proposed promotional program under an outstanding Commission order which, in pertinent part, prohibits the supplier from making promotional payments to its customers in a discriminatory manner. According to information provided by the supplier, all its sales are made to retaHer customers-distributors or other intermediaries are not utiized in the distribution of the supplier s products. l.nder the proposed program as set forth and explained by the supplier, promotional allowances would be made available to all customers of the supplier and could be applied by the' customers to the costs incurred by them in three categories of advertising and promotional activity: Point-of-sale materials, cooperative advertising in daily and Sunday newspaper listed in Standard Rate and Data; and so-called other store promotions , inc1uding advert;sij,g in newspapers not listed in Standard Rate and Data catalog and local radio and T.V. advertising, envelope stuffers and sales incentive programs and contests. Further, the amounts of such allowances would be determined at the rate of 7 percent of each participating customer s net purchases from the supplier in a six-month period, although this figure could be adjusted within any given trading area (defined by Management Survey of Metropolitan County Areas) as operating experience requires. In the case of Standard Rate and Data newspapers, the allowances could be applied to two-thirds the cost of such advertising, and for all other forms of eligible advertising and promotional activity, allowances could be applied to the full cost of the activity. In all cases, and whether any customer chooses to participate in any or all of said categories of advertising and promotional activity, the supplier s total contribution to the customer s cost would be subject to the 7 percent of purchases limit. Allowances earned but not used by any customer in a . In conformity with policy of the Commission, advisory opinimu\ lue confidential and are not available to the public , only digests of advisory opiniuns arc of public recanL Digests of advisory opinions are cUlTently published in the Federal Register.

six-month period could not be carried forward to the following such period.

Regarding the poing of-sale materials, the supplier would mail or deliver quantities of these materials to all customers, and each customer would be advised in advance that such point-of-sale materials would be charged against his available promotional and advertising allowances, unless returned to the supplier within 10 (ten) days of receipt, by mail or delivery to the supplier s salesman. The supplier was advised that the proposed promotional program, if implemented in a nondiscriminatory manner, would not be in violation of the Commission s order or Section 2 (d) of the Clayton Act.

The Commission cautioned that its opinion was predicated upon the supplier s assurance that all provisions of the proposed program, particularly that concerning the avaiJability of cooperative advertising allowances for advertising in non-Standard Rate and Data newspapers, providing only that such newspapers have verifiable costs and circulation , and that concerning the return privilege regarding point-of-sale materials which would be maiJed or delivered to the supplier s customers, would be effectively communicated to all customers of the supplier. The Commission further cautioned that a customer who is located on the periphery of a particular trading area and who competes in fact with a customer located within such trading area, should be offered the particular promotional plan available to the customer within the trading area so as to preclude discrimination between customers competing in the resale of the supplier s products. (File No. C-ll78, released July 2 1968. ) Issued under authority of Section 3.61 (c) of the Commission s Rules of Practice (I967).