Promotional plan involving "cents off" coupons and demonstrators

No. 302. Promotional plan involving "cents off" coupons and demonstrators.

The Commission rendered an advisory opinion to the promoter of a promotional plan involving the use of "cents-off" coupons which are to be given out by girl demonstrators in connection with the sale of items sold only in grocery stores. Offered to all competing retailers in a selected trading area irrespective of whether they buy directly or through wholesalers the coupons wil be valid only for the week that the promotion is in effect. Supplying as many demonstrators and coupons as may be necessary to meet the demand therefor, larger stores will have as many as 3 girl demonstrators giving out coupons in attendance for 3 days and smaller stores wil have 1 or 2 girls in attendance for 1 or 2 days. Participating manufacturers wil pay the promoter a certain sum per each demonstrator, plus the amount of the value of the redeemed coupons. Participating retailers will receive nothing of value other than demonstrator services, except reimbursement for the exact value of the coupons which they have redeemed. In addition to being given out by the demonstrators the "cents-off" coupons wil also be attached to the shelf in front of the product that is bcing promoted.

For those stores which find the basic plan is not suitable or usable in a practical business sense, the promoter will furnish without charge an alternate plan consisting of a prominent bulletin board announcing the plan to consumers. Placed in the most advantageous position in the store by the owner, the bulletin board will also have an adequate supply of "cents-off" coupons ADVISORY OPINION DIGESTS 1677

attached thereto. In addition, coupons will also be attached to the shelf in front of each product being promoted , as .in the case of the basic plan involving the use of demonstrators. If the retailer does not wish to use the bulletin board, he wil be permitted to hand out the coupons as the customer passes by the cash register. ;ootice of the availabiEty of the basic and alternative plans wil be made by (I) Jetter every six months to all wholesalers requesting them to notify their retail customers, (2) working with various trade associations on a continuous basis so that the associations wi1 inform their members, (3) publishing ads every three months in two newspapers widely circulated among the trade, (4) letters sent to the buying offces of cooperatives and chain stores, and (5) use of the following statement printed on the back of each coupon: "For detailed information about this coupon call (promoter s name and telephone number). In the opinion, the Commission stated that the proposed promotional plan would not bc in conformity with the law for the following two reasons: First, Section 2 (e) of the amended Clayton Act requires that promotional services be furnished to all competing purchasers on proportionally equal terms , if a promotional service is furnished to one purchaser. If the length of time for which the service is being furnished varies as between competing customers, the end result wil be that some customers will be furnished services in a greater proportion than others. In essence, the law requires that the services which are being furnished must be offered for a specified period of time which is uniformly applicable to a11 competing customers. "Cnder your proposed plan, some stores may be furnished the services of demonstrators for up to three days, whereas some competing stores wil be supplied with such services for only one or t\VO days. Because of this disparity in the amount of time during which demonstrators services wil be furnished, the Commission believes that the plan does not comply with the required statutory proportionally equal treatment.

The second defect in the proposed plan relates to the following statement which appears on the face of the " cents-off" coupon: " Good Today OnlyDuring Demonstration." According to the terms of the proposed plan , each coupon wil be valid for one week. Therefore, the aforementioned statement which appears on the face of the coupon is misleading because it misrepresents the period of time during which one may take advantage of the alleged savings.

The opinion then pointed out that if the promoter decided to correct the two above-mentioned deficiencies, the Commission would withdraw its objection to the plan, provided the fol1owing two conditions are met.

First , as the promoter of this plan, you must make it clear to each supplier and each retailer that even though an intermediary is employed, it remains the supplier s responsibility to take all reasonable steps so that each

of the supplier s customers who compete with one another in rese1lng his products is offered either an opportunity to participate in the promotional assistance plan on proportionally equal terms or a suitable alternative if the customer is unable as a practical matter to participate in the plan; if not the supplier, the retailer and the promoter participating in the plan may be acting in violation of Section 2 (d) or (e) of the Clayton Act and/or Section 5 of the Federal Trade Commission Act. Second, with respect to this matter of notification, you have outlined five methods which you expect to utilize. The Commission is withholding judgment as to the adequacy of the fifth method, namely, the use of a statement printed on the back of each coupon. It is doing so because it does not know how the retailer will get possession of this coupon and it believes that the statement itseJf is not suffciently informative to apprise prospective retailers about the plan. But regardless of whether , the stated methods of notification or other are used, the ultimate test is whether the plan has been effectively communicated to all competing customers at or about the same time within the selected marketing area and to those who , geographically, are located on the periphery of that area and in fact compete \vith the favored retailers.

(File No. 693 7018, released Oct. 22, 1968. :'0. 303. Commission does not object to program employing data processing equipment to collect and disseminate actual production and sales information. * The Commission issued an advisory opinion telling an applicant it does not object to a proposed program to employ data processing equipment for the rapid collection and dissemination of actual prodution and sales information.

The program is to be made available to poultry processors. Individual identity of participants wil not be revealed to others except in 10ng-and-short emergenices. It is understood that such a situation exists when a processor finds he has insuffcient supply

of chickens (i. he is "short") to fill the contractual obligation under a sales contract he has made; another supplier may have a surplus (i. he is "Iong ); the proposed program, in these emergencies, would permit the short and long suppliers to communicate with each other through the data processing equipment. Only in such a situation would any participants learn each other s identity.

The proposal involves the collection and reporting of actual production and sales data rapidly; it wil not deal with predictions by participants nor with asking, suggested or "future" prices. 'Jhe service is to be made available solely to poultry processors on a daily basis; poultry distributors, applicant says, are not in.. The Commission reconsidered this matter in light of United States v. Container CorjJoration 39, S. 333 (1969), withdrawn by the Commission on January 22, H170. ADVISORY OPINION DIGESTS 1679 terested in participating. Other subscribers may receive weekly or monthly information summaries but not daily reports. The Commission advised that it would have no objection to the proposal if implemented in the manner outlined in applicant's letter, but that this opinion is conditioned upon the submission within nine months, of a fuJ1 report indicating the manner in which the plan has worked in actual practice. (File No. 693 7042 released Oct. 22, 1968.