School Supplies And Equipment Distributing Industry

16 CFR Part 117 · Trade practice rules · in the Code of Federal Regulations 1938-1949 (3 annual editions)

Scanned CFR pages, OCR text may contain errors; the linked Library of Congress PDF is the authority. Not legal advice; not affiliated with the FTC. These rules and guides are historical: most were rescinded or replaced, so do not assume any is in force.

Latest edition: Library of Congress, 1949 CFR · Earliest edition: 1938 CFR

Text (1949 edition, OCR)

§ 116.104

number and character of lesson assign-
ments and the terms upon which such
course of study or service is sold.

§ 116.104 Precautions in avoidance of
deceptive statements by sales representa-
tives. It is the judgment of the indus-
try that the members thereof should ex-
ercise careful supervision over their sales
representatives so as to guard against
any misrepresentations by such repre-
sentatives regarding advantages or op-
portunities or other matters pertinent to
enrolling students or prospective stu-
dents, whether or not the same be set
forth in the contract between school and
student.

Part 117—School Supplies and
Equipment Distributing Indus-

try

Sec.
117.1
117.2
117.3
117.4
117.5
117.6
117.7
117.8
117.9
117.10
117.11
117.12
117.13
117.14
117.15

GROUP I

Inducing breach of contract.

Defamation of competitors.

Misrepresentation in general.

Enticing employees.

Discrimination.

Sales beiow cost.

Commercial bribery.

Threats of suit.

Coercing purchases,

Fictitious prices.

Misuse of word “free”,

Misieading containers.

Substitution.

Commercial bribery.

Imitation of trade-marks,
names, etc.

Espionage.

Misrepresenting products as con-
forming to standard.

Consignment selling.

Faise invoicing.

Loss leaders.

Misrepresenting character of busi-
ness.

trade

117.16
117.17

117.18
117.19
117.20
117.21

GROUP II

Dissemination of credit information.

Pubiication of price lists and terms
of sale.

Cost accounting.

Arbitration.

Consumer protection.

117.106 Fictitious bids.

117.107 “Biind bids.”

AUTHORITY: §§ 117.1 to 117.107 issued under
sec. 6 (g), 38 Stat. 722; 15 U. S. C. 46 (g).
Interpret or apply sec. 5, 38 Stat. 719, as
amended; 15 U. S. C. 45. Other statutory
provisions interpreted or appled are cited to
text in parentheses.

Source: §§ 117.1 to 117.107 contained in
trade practice rules, School Supplies and
Equipment Distributing Industry, FTC, Nov.
12, 1936.

117.101
117,102

117.103

117.104
117.105

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Title 16—Commercial Practices

GROUP I

§ 117.1 Inducing breach of contract.
Willfully inducing or attempting to in-
duce, by any false or deceptive Means
whatsoever the breach of any lawful
contract or contracts existing between
competitors and their customers or their
suppliers, or willfully interfering with or
obstructing the performance of any such
contractual duties or services, with the
purpose and effect of unduly hampering,
injuring or embarrassing competitors in
their businesses, is an unfair trade prac-
tice.

§ 117.2 Defamation of competitors.
Defamation of competitors by falsely
imputing to them dishonorable conduct,
inability to perform contracts, question-
able credit standing, or by other false
representations, or the false disparage-
ment of the grade, quality or manufac-
ture of the products of competitors, or of
their business methods, selling prices,
values, credit terms, policies or services,
with the tendency, capacity or effect of
misleading or deceiving purchasers, pro-
spective purchasers or the consuming
public, is an unfair trade practice.

§117.3 Misrepresentation in general.
The making, or causing or permitting to
be made or published, any false, untrue,
or deceptive statement or representation,
by way of advertisement or otherwise,
concerning the grade, quality, quantity,
substance, character, nature, origin, size,
or preparation of any product of the in-
dustry, or in any other material respect
with the tendency, capacity or effect of
misleading or deceiving purchasers, pro-
spective purchasers or the ‘consuming
public, is an unfair trade practice.

§ 117.4 Enticing employees. Willfully
enticing away the employees of competi-
tors, with the purpose and effect of un-
duly hampering, injuring or embarrass-
ing competitors in their businesses, is an
unfair trade practice.

§ 117.5 Discrimination—(a) Prohib-
ited discriminatory differentials, rebates,
refunds, discounts, credits and other al-
lowances. It is an unfair trade practice
for any member of the industry engaged
in commerce, in the course of such com-
merce, to grant or allow, secretly or
openly, directly or indirectly, any price
differentials, rebates, refunds, discounts,
credits or other allowances which effec-
tuate a discrimination in price between
different purchasers of goods of like grade
and quality where either or any of the


Chapter |—Federal Trade Commission

purchases involved therein are in com-
merce and where the effect thereof may
be substantially to lessen competition or
tend to create a monopoly in any line of
commerce or to injure, destroy or pre-
vent competition with any person who
either grants or knowingly receives the
benefit of such discrimination or with
customers of either of them: Provided,
however, (1) That the goods involved in
any such transaction are. sold for use,
consumption or resale within any place
under the jurisdiction of the United
States; :

(2) That nothing contained in this
section shall prevent differentials which
make only due allowance for differences
in the cost of manufacture, sale or deliv-
ery resulting from the differing methods
or quantities in which such commodities
are to such purchasers sold or delivered;

(3) That nothing contained in this
section shall prevent persons engaged in
selling goods, ware or merchandise in
commerce from selecting their own cus-
tomers in bona fide transactions and not
in restraint of trade;

(4) That nothing contained in this
section shall prevent price changes from
time to time where made in response to
changing conditions affecting either (i)
the market for the goods concerned, or
(ii) the marketability of the goods, such
as, but not limited to, actual or imminent
deterioration of perishable goods, obso-
lescence of seasonal goods, distress sales
’ under court process, or sales in good
faith in discontinuance of business in
the goods concerned.

(b) Prohibited brokerages and com-
missions. It is an unfair trade practice
for any member of the industry engaged
in commerce, in the course of such com-
merce, to pay or grant, or to receive or
accept, anything of value as a commis-
slon, brokerage, or other compensation,
or any allowance or discount in lieu
thereof, except for services rendered in
connection with the sale or purchase of
goods, wares, or merchandise, either to
the other party to such transaction or
to an agent, representative, or other in-
termediary therein where such interme-
diary is acting in fact for or in behalf, or
is subjeet to the direct or indireet con-
trol, of any party to such transaction
other than the person by whom such
compensation is so granted or paid.

(c) Prohibited advertising or promo-
tional allowances, etc. It is an unfair

§ 117.7

trade praetiee for any member of the
industry engaged in commerce, to pay or
contract for the payment of advertising
or promotional allowances or any other
thing of value to or for the benefit of a
customer of such member in the course
of such commerce as compensation or in
consideration for any services or facili-
ties furnished by or through such cus-
tomer in connection with the processing,
handling, sale, or offering for sale of any
products or commodities manufactured,
sold, or offered for sale by such member,
unless such payment or consideration is
available on proportionally equal terms
to all other customers competing in the
distribution of such products or com-
modities.

(da) Prohibited discriminatory services
or facilities. It is an unfair trade prac-
tice for any member of the industry en-
gaged in commerce to discriminate in
favor of one purchaser against another
purchaser or purchasers of a commodity
bought for resale, with or without proc-
essing, by contracting to furnish or by
furnishing, or by contributing to the
furnishing of, any services or facilities
connected with the processing, handling,
sale, or offering for sale of such com-
modity so purchased upon terms not ac-
corded to all purchasers on proportionally
equal terms.

(e) Illegal price discrimination. It is
an unfair trade practice for any member
of the industry or other person engaged
in commerce, in the course of such com-
merce to discriminate in price in any
other respect contrary to section 2 of the
Clayton Act aS amended by the act of
Congress approved June 19, 1936, or
knowingly to induce or receive a discrim-
ination in price which is prohibited by
such section as amended. .
(Sec. 2, 38 Stat. 730, as amended, sec. 2, 8, 4,

49 Stat. 1527, 1528; 15 U. S. C. 13, 13a, 18b,
21a)

§117.6 Sales below cost. The prac-
tice of selling industry products below
the seller’s cost, with the intent and with
the effect of injuring a competitor and
where the effect may be substantially to
lessen competition or tend to create a
monopoly or unreasonably restrain trade,
is an unfair trade practice; all elements
recognized by good accounting practice
as proper elements of such cost shall be
included in determining cost under this
section.

§ 117.7 Commercial bribery. Directly
or indirectly to give or permit to be given

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§ 117.8

or offer to give money or anything of
value to agents, employees, or represen-
tatives of customers or prospective cus-
tomers, or to agents, employees, or repre-
sentatives of competitors’ customers or
prospective customers, without the
knowledge of their employers or princi-
pals, as an inducement to influence their
employers or principals to purchase or
contract to purchase industry products
from the maker of such gift or offer, or to
influence such employers or principals to
refrain from dealing or contracting to
deal with competitors, is an unfair trade
practice.

§117.8 Threats of suit. The circula-
tion of threats of suit for infringement
of patents or trade-marks among cus-
tomers or prospective customers of a
competitor, not made in good faith but
for the purpose of harassing or intimi-
dating such customers or prospective cus-
tomers or otherwise prejudicing or injur-
ing competitors in their businesses, is an
unfair trade practice.

§117.9 Coercing purchases. The
practice of coercing the purchase of one
or more products as a prerequisite to the
purchase of one or more other products,
where the effect may be to substantially
lessen competition or tend to create a
monopoly or to unreasonably restrain
trade, is an unfair trade practice.

$117.10 Fictitious prices. Offering
for saie merchandise at prices purported
to be reduced from what are in fact
marked-up fictitious prices, with the
tendency or capacity to mislead or de-
ceive purchasers, prospective purchasers
or the consuming public, is an unfair
trade practice.

§ 117.11 Misuse of word “free.” The
use of the word “free” where not prop-
erly or fairly qualifled when the article
is in fact not free, with the tendency or
capacity to mislead or deceive purchasers,
prospective purchasers or the consuming
public, is an unfair trade practice.

§ 117.12 Misleading containers. The
selling or offering for sale of merchan-
dise packed in odd-sized or odd-shaped
containers or packages, simulating in
size or shape standard size or shaped
containers or packages, designed to hold
and known to the purchasing public as
standard containers or packages, with
the tendency, capacity or effect of mis-
leading or deceiving purchasers, pros-

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Title 16—Commercial Practices

pective purchasers or the consuming pub-
lic as to the contents of such containers
or packages, and with the tendency to
injuriously affect the business of com-
petitors, is an unfair trade practice.

$117.13 Substitution. The practice
of shipping or delivering products which
do not conform to the samples submitted
or representations made prior to secur-
ing the orders, without the consent of
the purchasers to such substitutions, and
having the tendency, capacity or effect
of, deceiving or misleading purchasers,
prospective purchasers or the consuming
public, is an unfair trade practice.

§ 117.14 Commercial bribery. For
any person, firm or corporation to give
anything of value to those employed in
any capacity involving special trust (such
as instructor, purchaser, agent, super-
visor, or school official), without the
knowledge of their employers, upon the
condition or understanding, express or
implied, that its goods be recommended
or used by such person in preference to
the goods or equipment of a competitor
or competitors of that person, firm or
corporation, with the tendency to injuri-
ously affect the business of competitors,
is an unfair trade practice: Provided,
That nothing in this resolution shali
prevent any person, firm or corporation
from seliing its goods to anyone upon
whatever terms it sees fit but without
any condition or understanding, express
or implied, as to the recommendation
or use of said goods or equipment.

§ 117.15 Imitation of trade-marks,
trade names, ete. The imitation of
the trade-marks, trade names, brands,
labels, or other marks of identification
of competitors, having the tendency, ca-
pacity or effect of misleading or deceiv-
ing purchasers, prospective purchasers
or the consuming public, is an unfair
trade practice.

§ 117.16 Espionage. Securing infor-
mation from competitors concerning
their businesses by false or misleading
statements or representations or by false
impersonations of one in authority and
the wrongful use thereof to unduly
hinder or stifle the competition of such
competitors is an unfair trade practice.

§117.17 Misrepresenting products as
conforming to standard. In connection
with the sale or offering for saie of prod-
ucts of the industry, representing


Chapter |—Federal Trade Commission

through advertising or otherwise that
such products conform to any standards
recognized in or applicable to the indus-
try when such is not the fact, with the
tendency, capacity or effect of misleading
or deceiving purchasers, prospective pur-
chasers or the consuming public, is an
unfair trade practice. °

§117.18 Consignment selling. Itisan
unfair trade practice for any member of
the industry to use the practice of ship-
ping goods on consignment for the pur-
pose and with the effect of artificially
clogging trade outlets and unduly re-
stricting competitors’ use of said trade
outlets in getting their goods to con-
sumers through regular channels of dis-
tribution, or with such purpose to entirely
close said trade outlets to such competi-
tors so as to substantially lessen com-
petition or trend to create a monopoly
or to unreasonably restrain trade: Pro-
vided, however, That nothing in this sec-
tion shall be construed or used as
restricting or preventing consignment
shipping or marketing of commodities in
good faith and without artificial inter-
ference with competitors’ use of the usual
channels of distribution in such manner
as thereby to suppress competition or
restrain trade.

§ 117.19 False invoicing. Withholding
from or inserting.in the invoice state-
ments which make the invoice a false
record, wholly or in part, of the trans-
action represented on the face thereof,
with the purpose or effect of misleading
or deceiving purchasers, prospective
purchasers or the consuming public, is
an unfair trade practice.

§ 117.20 Loss leaders. The practice of
using any product of the industry as a
“loss leader” to induce the purchase of
other merchandise the sale of which
merchandise is used to recoup the loss
sustained on the “loss leader’ product
so sold, with the tendency or capacity
of misleading or deceiving purchasers,
prospective purchasers or the consuming
public, and which unfairly diverts trade
from or otherwise injures competitors,
is an unfair trade practice.

§ 117.21 Misrepresenting character of
business. For any person, firm or cor-
poration to hold himself or itself out to
the public as a wholesaler, when such
is not the fact, or in any other manner
to misrepresent the character, extent or

§ 117.107

type of his business, with the tendency or
capacity to mislead or deceive purchasers,
prospective purchasers or the consum-
ing public, is an unfair trade practice.

GROUP II

8 117.101 Dissemination of credit in-
formation. The industry records its ap-
proval of distributing to its members in-
formation covering delinquent and slow
accounts insofar as this may be lawfully
done.

§ 117.102 Publication of price lists and
terms of sale. (a) The industry ap-
proves the practice of each individual
member of the industry independently
publishing and circulating to the pur-
chasing trade his own price lists.

(b) The industry approves the prac-
tice of making the terms of sale a part
of all published price schedules.

§ 117.103 Cost accounting. It is the
judgment of the industry that each
member should independently keep
proper and accurate records for deter-
mining his own costs.

§ 117.104 Arbitration. The industry
approves the practice of handling busi-
ness disputes between members of the
industry and their customers in a fair
and reasonable manner, coupled with a
spirit of moderation and good will, and
every effort should be made by the dis-
putants themselves to compose their dif-
ferences. If unable to do so they should,
if possible, submit these disputes to arbi-
tration.

§ 117.105 Consumer protection. All
members of this industry shall protect
the consumer not only as far as is re-
quired by law, but as required by good
morals and the best ethics of business.

§ 117.106 Fictitious bids. The indus-
try condemns fake or fictitious bids made
for the purpose of deceiving competitors
and securing undue advantage. If plans
and specifications are changed and new
bids called for after the original bids
have been submitted and opened, the
same fairness should obtain as with the
original bid.

§ 117.107 “Blind bids.” In cases of
competitive bidding, the practice of re-
ceiving or making so-called “blind bids,”
which discount the lowest competitive
bid regardless of the amount, tends to
destroy competitive bidding, and is con-
demned by the industry.

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