Guides Against Deceptive Advertising of Guarantees, The following guides were adopted by I; the Federal Trade Commission…

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I PART 239— GUIDES AGAINST DECEP­ TIVE ADVERTISING OF GUARAN­ TEES | The following guides were adopted by I; the Federal Trade Commission “April 26, 1 1960 for the use of its staff in evaluation I of the advertising of guarantees. They Iwere released to the public in the in- Iterest of education of the businessman I and the consumer and to obtain volun­ tary, simultaneous, and prompt coopera­ tion by those whose practices are subject I to the jurisdiction of the Federal Trade ■ Commission.

I The guides enumerate the major prin­ ciples applicable to the advertising of I guarantees although they do not purport I to be all-inclusive and do not attempt Ito define the exact border lines between »compliance with and violation of the ■law.

| The Federal Trade Commission Deci- I sions, upon which these guides are based, ■Indicate that the major difficulty with plus type of advertising has been the failure to state adequately what the [guarantee is. Concerning this, an appel­ late court stated: “Ordinarily the word, guarantee, or warrantee, is incomplete Pnless it is used in connection with other j explanatory words. To say a * * * | [product] or other subject is guaranteed ps meaningless. What is the guarantee? I ne answer to this question gives mean- ■ t *10 the word, ‘guaranteed’.” L „ e guides have application not only L guarantees” but also to “warranties”, g W ig*** “guarantees” and “war- * and to any promise or repre- L ,,a“on ln the nature of a “guarantee” or warranty”.

LntfVer-sary actions against those who deceptive advertising of guarlrnm^-ar^d Wi10se Practices are subject to riAr ??lss2?n, jurisdiction are brought unhir TT ® federal Trade Commission Act I- u s c - secs. 41-58). Section 5 of the Act declares unlawful “unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce”.

Sec.

239.0 Determining violations. 239.1 Guarantees in general. 239.2 Prorata adjustment of guarantees. 239.3 “Satisfaction or Your Money Back” representations.

239.4 Lifetime guarantees. 239.5 Savings guarantees. 239.6 Guarantees under which the guar­ antor does not or cannot perform. 239.7 Guarantee as a misrepresentation. Authority: The provisions of this Part 239 issued under secs. 5, 6, 38 Stat. 719, as amended, 721; 15 U.S.C. 45, 46. § 239.0 D eterm ining violations. In determining whether terminology and direct or implied representations concerning guarantees, however made, i.er, in advertising or otherwise, in con­ nection with the sale or offering for sale of a product, may be in violation of the Federal Trade Commission Act, the fol­ lowing general principles will be used: § 2 3 9 .1 Guarantees in general.

In general, any guarantee in advertis­ ing shall clearly and conspicuously dis­ close— (a) The nature and extent of the guarantee. This includes disclosure of— product is guaranteed, (1) What product or part of the iv-ht iS;giffiranteed.

(2) What ch a i^ ^ r:.^ ^ ^ p ro p erty of the designated product or part thereof are covered by, or excluded .from, the guarantee, (3) What is the duration of the guarantee, (4) What, if anything, any one claim­ ing under the guarantee must do before the guarantor will fulfill his obligation under the guarantee, such as return of the product and payment of service or labor charges; and .(b) The manner in which the guarantor will perform. This consists primarily of a statement of exactly what the guarantor undertakes to do under the guarantee. Examples of this would be repair, replacement, refund.

If the guarantor or the persoh receiving the guarantee has an option as to what may satisfy the guarantee this should be set out; and (c) The identity of the guarantor. The identity of the guarantor should be clearly revealed in all advertising, as well as in any documents evidencing the guar­ antee. Confusion of purchasers often occurs when it is not clear whether the manufacturer or the retailer is the guarantor. (Guide 1.) § 239.2 Prorata adjustm ent o f guaran­ tees.

(a) Many guarantees are adjusted by the guarantor on a prorata basis. The advertising of these guarantees should clearly disclose this fact, the basis on which they will be prorated, e.g., the time for which the guaranteed product has been used, and the manner in which the guarantor will perform. (b) If these guarantees are to be ad­ justed on the basis of a price other than that paid by the purchaser, this price should be clearly and conspicuously disclosed.

Example: “A” sells a tire with list price of $48 to “B” for $24, with a 12 months guar­ antee. After 6 months use the tire proves defective. If “A” adjusts on the basis of the price “B” paid, $24, “B” will only have to pay one-half of $24, or $12, for a new tire. If “A” instead adjusts on the basis of list price, “B” will owe one-half of $48, of $24, for a new tire. The guarantor would be required to disclose here the following: That this was a 12 months guarantee, that a list price of $48 would be used in the adjustment, that there would be an adjustment on the basis of the time that the tire was used, and that he would not pay the adjusted amount in cash, but would make an adjustment on a new tire.

Note: Guarantees which provide for an adjustment based on a fictitious list price should not be used even where adequate dis­ closure of the price used is made. (Guide 2.) § 239.3 “Satisfaction or Your M oney Back” representations.

(a) “Satisfaction or Your Money Back”, “10 Day Free Trial”, or similar representations will be construed as a guarantee that the full purchase price will be refunded at the option of the purchaser.

(b) If this guarantee is subject to any conditions or limitations whatsoever, they shall be set forth as provided for in § 239.1.

‘ Zz'jmple: A rose bush is advertised under the representation “Satisfaction or Your Money Back”. The guarantor requires return of the product within 1 year oi date before he will make refund. These limita tions, i.e., “return” and “time” shall be clearly and conspicuously disclosed in the ad. (Guide 3.) § 239.4 Lifetim e guarantees.

If the words “Life”, “Lifetime”, or the like, are used in advertising to show the duration of a guarantee, and they relate to any life other than that of the pur­ chaser or original user, the life referred to shall be clearly and conspicuously disclosed.

Example: “A” advertised that his carburetor was guaranteed for life, whereas his guar­ antee ran for the life of the car in which the carburetor was originally installed. The ad­ vertisement is ambiguous and deceptive and should be modified to disclose the “life” re­ ferred to. (Guide 4.) § 239.5 Savings guarantees.

(a) Advertisements frequently con­ tain representations of guarantees that assure prospective purchasers that sav­ ings may be realized in the purchase of the advertiser’s products. (b) Some typical advertisements of this type are “Guaranteed to save you 50%”, “Guaranteed never to be under­ sold”, “Guaranteed lowest price in town”. (c) These advertisements should in-, elude a clear and conspicuous disclosure of what the guarantor will do if the sav­ ings are not realized, together with any time or other limitations that he may impose.

FEDERAL REGISTER, VOL. 32, NO. 217— WEDNESDAY, NOVEMBER 8, 1967

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15542 RULES AND REGULATIONS Example: “Guaranteed lowest price in town” might be accompanied by the follow­ ing disclosure: “If within 30 days from the date that you buy a sewing machine from me, you purchase the identical machine in town for less and present a receipt therefor to me, I will refund your money”. Note: The above guarantees may con­ stitute affirmative representations of fact and, in this respect, are governed by § 239.7. (Guide 5.) § 239.6 Guarantees under which the guarantor does not or cannot per­ form .

(a) A seller or manufacturer should not advertise or represent that a product is guaranteed when he cannot or does not promptly and scrupulously fulfill his ob­ ligations under the guarantee. (b) A specific example of refusal to perform obligations under the guarantee ~is use of “Satisfaction or your money back” when the guarantor cannot or does not intend promptly to make full refund upon request. (Guide 6.) § 239.7 Guarantee as a m isrepresenta­ tion.

Guarantees are often employed in such a manner as to constitute representa­ tions of material facts. If such is the case, the guarantor not only undertakes to per­ form under the terms of the guarantee, but also assumes responsibility under the law for the truth of the representations made.

Example 1: “Guaranteed fqj^SS months” applied to a battery i® a representation that the battery normally be expected to last f°r So months and should not be used in con­ nection with a battery which can normally be expected to last for only 18 months. Example 2: “Guaranteed to grow hair or money back” is a representation that the product will grow hair and should not be used when in fact such product is incapable of growing hair.

Example 3: “Guaranteed lowest prices in town" is a representation that the adver­ tiser’s prices are lower than the prices charged by all others for the Same products in the same town and should not be used when such is not the fact. Example 4: “We guarantee you will earn $500 a month” is a representation that prospective employees will earn a minimum of $500 each month and should not be used unless such is the fact. (Guide 7.) Nothing contained in these Guides re­ lieves any party subject to a Commission cease and desist order or stipulation from complying with the provisions of such order or stipulation. The guides do not constitute a finding in and will not affect the disposition of any formal or informal matter before the Commission. Adopted: April 26, 1960.

By direction of the Commission. [seal] J oseph W . Shea, Secretary.

[F.R. Doc. 67-13200; Filed, Nov. 7, 1967; 8:48 a.m.]