Proposal for financing promotional campaign to increase onion consumption in the U.S. by soliciting…

ADVISORY OPINIONS 1157 Proposal for financing promotional campaign to increase onion consumption in the U.S. by soliciting contributions from companies supplying material for or manufacturing onion

containers, File 783 7003.
Opinion Letter
January 16, 1978
Dear Mr. Daniel:

This responds to your request, on behalf of the National Onion Association, for an advisory opinion concerning a proposed promotion plan.

It is the Commission’s understanding that the Association would contact companies that supply materials for or manufacture onion containers (“container companies”). These companies would be asked to contribute one cent per container to the Association, which would use these funds to advertise and promote onion consumption. In anticipation of the one cent contribution being passed on to the purchasers of the containers, the proposal also provides that those growers who do not wish to participate in the program may obtain refunds from the Association after presenting proof of purchase from participating container companies.

The Commission, in prior advisory opinions, has recognized the inherent prospect for coercion where a trade association contacts suppliers in order to have the suppliers follow a proposed course of action. For example, when the National Association of Sporting Goods Wholesalers requested advice on a proposal to recommend procedures for prepaid freight to the manufacturers who sold goods to the Association’s members, the Commission refused to approve the plan, stating:

“Even if unaccompanied by any intent to force the manufacturers to adopt the policies set forth in the recommendation, there is implicit in such recommendation by the wholesalers too grave « danger that it will serve as a device whereby the concerted power of the members of the Association is brought to bear to coerce the manufacturers to conform their pricing policies to the restrictive standards of the recommendation, or at the very least as an invitation to enter into agreements among themselves to do so.” (File No. 683 7106). [16 CFR 15.246, 73 F.T.C. 1333] See, also, Printing Industries Association, Inc. of Southern California,

File No. 683 7002 (Commission disapproved of plan to have Association discuss proposal for paper manufacturers to guarantee that a quoted price would remain firm for a definite time) [16 CFR 15.187, 72 F.T.C. 1042]; Automotive Wholesalers of Illinois, File No. 663 7036 (Commission disapproved of plan to adopt and transmit to suppliers recommendations concerning price changes and refund policies) [16 CFR 15.15, 69 F.T.C. 1203]. These opinions recognize the implied coercion where a trade association makes “suggestions” to the suppliers of its members. Accordingly, after careful consideration, the Commission has concluded that it cannot give its approval to the promotion plan. While the Association has represented that nothing would happen to those container companies that did not participate in the program, the common interest of the Association’s members in the program’s success carries with it implications of potential concert of action. There is, implicit in the program, a grave danger that it could serve as a device whereby the concerted power of the members of the Association might be brought to bear to coerce container companies into participation in the program. Accordingly, the Commission is unable, under the laws it administers, to sanction the Association’s program. By direction of the Commission.

Third Supplemental Letter Relative to Request May 9, 1977