Franchise agreement with fair trade price schedule

No. 382. Franchise agreement with fair trade price schedule. The Commission issued an advisory opinion with respect to a franchise agreement in the recreational equipment industry. A significant provision of the proposed agreement related to fair trade prices. A Schedule of Fair Trade Prices was to be attached to and made a part of the agreement and the dealer must agree that he wi1l not advertise , offer for sale, or se1l any products at less than the fair trade prices, nor make any refunds, discounts, al1owances, or concessions which wil have the effect of decreasing those prices, nor offer any of the fair traded items in combination with other merchandise at a single, combination or joint price. The agreement further provided that this provision should be applicable only in those States where agreements of this character are lawful.

The Commission advised that in view of the McGuire Act amendment to Section 5 of the Federal Trade Commission Act it could see no objection to inclusion of the provision in the agreement as long as the sel1er does not fix dcaler prices outside of fair trade States.

The Commission further advised that, subject to the caveat above stated , it would not initiate action were the proposed course of action implemented in the manner described. (File No. (;937151 Released October 29 1969) :\o. 383. Labeling of leather gloves partly domestic and partly of foreign origin.

The Commission adviscd a manufactmer of industrial work gloves, which are partly domestic and partly of foreign origin that it could not use representations which implied that the gloves were entirely of domestic origin. Specifically, permission was requested to use one of the following three representations

on the plastic containers of the gloves:
Made from American Split Cowhide
l'ade from American Split Leather
American Leather Exclusively Used

According to the Commission s understanding of the facts, the company purchases semiprocessed split cowhide leather in America which is shipped to Taiwan ,vhere it is further processed, cut and sewn into industrial ,vark gloves. Foreign production costs represent approximately 37% percent of the finished gloves, with the remaining 62% percent representing the cost of the American-made leather. One dozen gloves wilJ be packaged in each plastic container and each pair of gloves wilJ be labeled as having been "Made in Taiwan. " However, this label wilJ appear on the inside wrist of the gloves and wilJ not be seen through the plastic ADVISORY OPINION DIGESTS 1115 container. Moreover, the container wil not be opened until the sale has been consummated.

The Commission said that it would not object to the use of the first two representations, provided they were qualifieid by a disclosure of equal prominence indicating the gloves were made in Taiwan. As qualified, the two representations would read: Made in Taiwan from American Split Co\vhide Made in Taiwan from American Split Leather Without the qualification, the Commission believes that a substantial number of prospective purchasers would misinterpret the two proposed statements to mean that the gloves were made in America from American-made split cowhide. Similar qualification would be required to the third proposed representation. In addition, it would also be necessary to qualify the word "leather" because that word standing alone means top grain leather. Since the leather in question is not top grain but split, it would be deceptive to make unqualified use of the word leather " under these circumstances. Therefore, the Commission concluded that it would not object to the use of the tbird representation if it were revised to read as follows: ::larle in Taiwan-American Split Leather Exclusively Used (File No. 703 7035 Released October 29 1969)

No. :384. Special discount package price to new dealers. The Commission issued an advisory opinion with respect to a proposed special discount package price to new dealers in the building materials industry.

The applicant proposed to offer to new retail dealers a special discount package on certain building materials plus an in-store display. In addition to the in-store display facility the new dealer would be offered a price approximately one-third below the price at which the merchandise is offered to existing dealers. The proposal would be a one-time promotion. The Commission expressed the opinion that "it is unlikely that injury could result from this one shot offer in view of its nature and the start up costs which new dealers are apt to experience. Therefore, the Commission would not obj ect to the plan if implemented as described in the preceding paragraph. (File No. 703 7005 Released October 29 1969)