Stocking, quantity, and cumulative discounts

No. 264. Stocking, quantity, and cumulative discounts. The Commission rendered an advisory opinion to a manufacturer of food serving equipment which involved a proposal to use stocking, quantity and cumulative price discounts. Under the first category, a discount of 50 percent and 15 percent would be given to stocking dealers who continually order in large quantities and maintain a regular stock of the product in question for local delivery to restaurants, hospitals, etc. The second category involves the following quantity discount schedule to dealers based upon each order:

Amount pw'chased: Discount, pe1'cent 11 dozen -- - 50 11-24 dozen - and 5 25 and more dozen -- - 50 an-d 10 Each dealer will receive the following additional cumulative volume discount at the end of each year based upon the total dollar volume of purchases for that year:

, pel'centAmount p1.tTChased: Discount $1- 499 . - n ' -- nn 500-$5,999 n $6,000- 499 -500-$10,499 $11 000-$14999 n $15, OOO-Up - - n Stocking dealers wil be in competition with nonstocking dealers and nonstocking dealers wil also compete with each other. Under the terms of the proposed pricing schedules, stocking dealers could get a price advantage of as much as 15 percent over nonstocking dealers, and nonstocking dealers could also receive up to a 15 percent price advantage over their nonstocking competitors. After making a brief explanation of the requirements of Sec. j H. R. Rep. No. 2287 , 74th Cong.. 2d Sess. 3 (1936). 1654 FEDERAL TRADE COMMISSION DECISIO

2 (a) of the amended Clayton Act, the Commission advised the requesting party as follows:

It is, of course , impossible to reach a definitive conclusion as to the economic impact of such a pricing proposal without an investigation. However , the Commission has given your request careful consideration , and it has concluded that it cannot give its approval to the proposal because it believes that the necessary ingredients arc present from which it can reasonably infer that such a proposal would likely result in the anti competitive effects proscribed by the statute. A pricing schedule which results in a price advantage of as much as 15 percent under the facts outlined in this case would therefore probably be illegal , unless it can be justified by provable cost differences in the manufacture, sale or delivery of such products or unless the lower price is made in good faith to meet an equally low price of a competitor. Commissioners EL'\AK and ;oICHOLSO dissent from that part of the advisory opinion relating to discounts for stocking dealers. (File "0. 683 7Il9, released July 9, 1968.

1'0. 265. Personal deodorant spray.

The Commission rendered an advisory opinion to a manufacturer of a personal deodorant spray concerning thc legality of some proposcd advertising.

Specifically, the Commission advised the requesting party that the product was not a drug but a cosmetic, nor had it been cleared, approved or endorsed by the Food and Drug Administration. Therefore, any claims which represent the product as a drug, or that it has been c1em' , approved or endorsed by the government agency in question would be improper. Based upon all the facts and scicntific information available to , the Commission also advised the requesting party that any advertising representations which go beyond the c1aim that the product inhibits the growth of body odor causing bacteria would violate Sections 5 and 12 of the FTC Act.

Finally, the Commission stated that, as a general rule, it would be inc1ined to question the use of any c1aim that a product is new" for a period of time longer than six months. (File ;00. 683 7004, released July 9 1968.