Trade associations proposed compilation and publication of certain financial data

No. 359. Trade associations proposed compilation and publication of certain financial data. The Commission issued an advisory opinion in response to a request from a trade association concerning a proposed survey to be conducted among its members.

The proposed survey seeks industry data for 1966, 1967, and 1968 confined solely to the following items: (1) Percent return on total investment;

(2) Percent net profits (after taxes) to total sales; (3) Percent advertising cost to gross sales; (4) Percent direct labor cost to gross sales; (5) Ratio current assets to current liabilities; (6) Ratio net sales to inventory; and (7) Ratio net sales to net working capital. The association proposes to obtain the information from its members on a confidential basis, to tabulate the data without identifying any company, and then to publish the results. The Commission advised the applicant that it does not object to the proposed survey, compilation and publication of industry financial data as outlned above and on the basis stated that there wil be no disclosure of the name of any company participating. It is to be understood that this advisory opinion is necessarily limited to this particular program. However, the Commission invites submittal of any other proposed financial surveys in definite form for Commission advisory opinions. (File No. 693 7128 Released July 11, 1969) 1\0. 360. Use of descriptive phrase to describe furniture. The Commission issued an advisory opinion with respect to the use of a descriptive phrase such as " (Trade NameJ furniture combines modern production methods with hand-carving and finishing" to refer to certain furniture. The manufacturing procedure for the furniture cans for a prototype to be completely constructed and carved by hand. Then the prototype becomes a pattern for an intricate machine which rough cuts" the carvings on subsequent pieces for assembly production. Each piece so manufactured then has intricate hand detailing, carving, and finishing, to the extent that each piece is, in fact, different in artistic detail from the one which fol1ows it. Each piece is numbered and signed by the craftsman who com" pletes it.

The Commission expressed the view that using a descriptive phrase such as " (Trade NameJ furniture combines modern production methods with hand-carving and finishing" to refer to furniture manufactured in the manner described, probably would not violate the Federal Trade Commission Act, Section 5. (File No. 6937141 Released August 14 , 1969) 1\ o. 361. Credit reporting plan by trade association. In response to a request for an advisory opinion, the Commission ruled that it would interpose no objection to a credit reporting plan by a trade association, as long as five conditions are met. The proposed plan would cover only past due accounts in three ADVISORY OPINION DIGESTS 1101 categories: (1) Where legal suit has been filed, (2) those accounts which have been turned over to a bona fide co11ection agency, and (3) where the debtor has gone into bankruptcy. The secretary of the association would keep a list of such accounts reported to her by the active members. In response to an inquiry from an active member concerning a particular customer, the secretary would without disclosing the name of the reporting member, advise the inquiring member whether or not anyone of the three aforementioned adverse credit actions had been reported. Available only upon the specific request of an active member, the credit information would not be for broad publication to a11 members of the association. In addition, a reporting member would have to submit evidence in support of anyone of the three adverse credit actions being reported. Absent such evidence, the reporting member would have to refer the secretary of the association of a reliable source where this information could be confirmed. The purpose of this requirement is to prevent the reporting of any rumors with respect to a customer s credit rating.

The Commission advised that the exchange of credit information concerning delinquent debtors through a trade association is not unlawful under Section 5 of the FTC Act provided: (1) The members of the association are left free to determine on the basis of their individual judgment whether or not to se11 to delinquent debtors and on what terms;

(2) There is no agreement among members in regard to credit terms, prices, or any other joint action which illegal1y restrains trade;

(3) That the reporting member indicates that a debt turned over to a co11ection agency was treated by the debtor as offset or was otherwise disputed, where that is the case; (4) The association furnishes to the debtor the same credit information reported by a member at the time the request is answered; and (5) In order for the debtor to have the opportunity to correct this credit record, if he believes it needs correcting, the association must pass on to the inquiring member any explanatory statements which the debtor may submit; the identity of the inquiring member need not be revealed to the debtor. As Jong as the proposed plan meets these five requirements in actual operation, the Commission would interpose no objection with respect thereto. (FileNo. 693 7115 Released Augnst 14 1969) 1102 FEDERAL TRADE CO:viVIISSION DECISIONS