Consumer Law Library

Hosiery Industry

16 CFR Part 152 · Trade practice rules · in the Code of Federal Regulations 1941-1979 (18 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 These rules and guides are historical: most were rescinded or replaced, so do not assume any is in force.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, 1979 CFR · Earliest edition: 1941 CFR

Decisions that mention this industry's rules (20)

Text (1979 edition, OCR)

Title 14—Commercial

Practices

(This book contains Parts 150 to 999)

CHAPTER I—Federal Trade Commission (Continued)




CHAPTER I—Federal Trade Commission

(Continued)

(Parts 150 to 999).

SUBCHAPTER B—GUIDES AND TRADE PRACTICE RULES (continued)

Part

150-151 [Reserved]

152
154
228
229
230
231
232

233
234
235

236 ~

237
238
239

240
241
242
243
244
245

247
248

HOSie ry industry ..............cccccccssscsseccccssssceccccacessecsucescecees
Luggage and related products industry.................000
Tire advertising and labeling guides. .................cccccesee
Guides for advertising fallout shelters.................cc00
Guides for advertising shell homes.............cc.ccsecsseeeee
Guides for shoe content labeling and advertising...
Guides for advertising radiation monitoring in-

SEYUMENIUG............ccccccccsscccccsscnccscccecccacseseccesscessscssscsceees
Guides against deceptive pricing ...........cccccccccccsseeccnees
Guides for the mail order insurance industry...........
Guides against deceptive labeling and advertising

Of adhesive COMPOSITIONS .............cccccecceccosssssccssesssoees
Guide for avoiding deceptive use of word “mill” in
the textile industry... essssccsscesseessseeseeee
Guides against debt collection deception..................
Guides against bait advertising....................cccccsssssseses
Guides against deceptive advertising of guaran-

LOOS.........0cssscsccccrsccssccsccscecreccsscseccenescerecseccssessenssscesenseeses
Guides for advertising allowances and other mer-

chandising payments and SePVICES .............sccccsseseees
Guides for the dog and cat food industry..................
Guide against deceptive use of the word ‘“‘free” in

connection with the sale of photographic film

and film proceSSing SETVICE...........cccccssscsccccssceecccsecees
Guides for the decorative wall paneling industry ...
Guides for the greeting card industry relating to

discriminatory pPractices.............c.sscccccssssssccccssssecsceces
Guides for the watch industry...............cccsssccsssccsseees
Guides for the ladies’ handbag industry...................
Guides for the beauty and barber equipment and

SUPD]ieS iINGUSUTY ...............csccccssssssecccncesscssecsssccscesceans

Page

39


Part
250
251
252
253
254
255

256
259

300
301
303
304

400
401
402
403
404
405
406
408

409

Title 16—Commercial Practices

Guides for the household furniture industry ..........
Guide concerning use of the word ‘free’ and simi-
1AaYr FEPLESeNtatiONS........cccccccsccssssccccccsrcccreccensseceeseoeeces
Guides for labeling, advertising, and sale of wigs
and other hairpieCes...........cccescosssssccscsoscesscesccsccssnsnoes
Guides for the feather and down products indus-
LLY ..ccccccscccceccccsccscsccccsssersncsscesssscesscecscssssecececssseecceseseeseees
Guides for private vocational and home study
SCKOOIS......cscsceccsccccccccccnccsscocseccscccsscessnsscesssesecesacsenscsenees
Guides concerning use of endorsements and testi-
MoONials in AAVELTtISING .............ccccsccressserssseescesecsesoeses
Guides for the law DOOK iINdUSUry............cccsssccesscoseoeens
Guide concerning fuel economy advertising for
NEW AUTOMODIIES...............ccceccscccsccecccsseasecsessescesonssonsens
SUBCHAPTER C—REGULATIONS UNDER SPECIFIC ACTS OF
CONGRESS
Rules and regulations under the Wool Products
Labeling Act Of 1939 .........c.ccccssssssssssscsscessecsecnsseesoeses
Rules and regulations under Fur Products Label-
ING AC ..........ccccccccececcscrnsccecsscccusccccasssssccescceseceesesecseesees
Rules and regulations under the Textile Fiber
Products Identification Act...........ccccccssssscssrcsssesssses
Rules and regulations under the Hobby Protec-
CIOT ACE oo... cei cccccceccecsccossceeecensceesceseceosecsssecenssesecses

SUBCHAPTER D—TRADE REGULATION RULES

Advertising and labeling as to size of sleeping bags
Misuse of ‘automatic’ or terms of similar import
as descriptive of household electric sewing ma-
CTINES .0.0.......cccccesccscsccccccsccccsccsccscsceneceressenssssesensssssseses
Deception as to nonprismatic and partially pris-
matic instruments being prismatic binoculars......
Deceptive use of “leakproof,” ‘‘guaranteed leak-
proof,” etc., as descriptive of dry cell batteries ....
Deceptive advertising and labeling as to size of ta-
blecloths and related Products .........cscccsssesscessessceeee
Misbranding and deception as to leather content
Of WaiSt DEIES ..............ccccsccssccsssccessceessccnssessseceesecseseesoss
Deceptive advertising and labeling of previously
USEd lUDriICAatiNg Oi] 22.0.0... eecececsecetscceeteeseesesecseeseees
Unfair or deceptive advertising and labeling of
cigarettes in relation to the health hazards of
SMOKING ...........ccccccescccsccsnsccscccesccescccnccceresscacsrecsscovsossons
Incandescent lamp (light bulb) industry ..................

4

Page
106

113
115
118
121

126
129

135

150
167
187

189

189
191
193
195
196
198


Chapter I—Federal Trade Commission

Part
410

412
413

414
417

418
419

423
424

425

429
432

433
435
436

438

456

Page
Deceptive advertising as to sizes of viewable pic-

tures shown by television receiving sets ................ 202
Discriminatory practices in men’s and boy’s tai-

lored Clothing industry ..............ccccccsssssssscssssssssscoveces 203
Failure to disclose that skin irritation may result

from washing or handling glass fiber curtains

and draperies and glass fiber curtain and drap-

CTY LADTICS.................ccssssecssvsccsccccccceccccaccsaccsevecesessneseees 206
Deception as to transistor count of radio receiving

sets, including transceive2..............c.cccccscesssssssescesere 208

“Failure to disclose the lethal effects of inhaling
quick-freeze aerosol spray products used for

frosting CocKtail glasses .............ccccccsscercsccescecssssesesers 210
Deceptive advertising and labeling as to length of

EXteENSION lAAAETS ...............cccccsccssceccceccsseccceseccasscecssoes 211
Games of chance in the food retailing and gaso-

lime iMGuStrie€ .................ccccccccecesseseeccccccscsessseeceasccsesces 213
Care labeling of textile wearing apparel................... 214
Retail food store advertising and marketing prac-

CICES........ccccssescccccccncssccccccccscesceccsccssecsecasccessessesccaccsoseceses 215
Use of negative option plans by sellers in com-

MET CE ........csscccesscnscccecscccsccncecescctscssesccessccossccsssccsccevscseees 216
Cooling-off period for door-to-door Sales. ..............06 219
Power output claims for amplifiers utilized in

home entertainment Products ............sccccossssssssscoeees 221
Preservation of consumers’ claims and defenses..... 223
Mail order merchandise .................ccccssssscssscssscseccencerees 224
Disclosure requirements and prohibitions con-

cerning franchising and business opportunity

VOENIEUFES ...........ccessssevccccnssvcccccccscnsseccesecsecsessecscecescsessoens 229
Proprietary vocational and home study schools...... 241
Advertising of ophthalmic goods and services. ......... 261

SUBCHAPTER E—RULES, REGULATIONS, STATEMENT OF GENERAL
POLICY OR INTERPRETATION AND EXEMPTIONS UNDER THE
FAIR PACKAGING AND LABELING ACT

500
501
- 502

Regulations under section 4 of the Fair Packaging

and Labeling ACt ............cccccessssssssesccossscssssssssessesscensers 265
Exemptions from requirements and prohibitions

UNer Part 500 .............cccccccsscscceccissccccsccccscssssssecccceneees 276
Regulations under section 5(c) of the Fair Packag-

ing and Labeling Act..............ccccccccsscscssscsssssssssssssceeres 278


Title 16—Commercial Practices

Part Page
503 Statements of General Policy or Interpretation..... 282

SUBCHAPTER F—STATEMENTS OF GENERAL POLICY OR
INTERPRETATIONS UNDER THE FAIR CREDIT REPORTING ACT

600 Statements of general policy or interpretations...... 287

SUBCHAPTER G—RULES, REGULATIONS, STATEMENTS AND
INTERPRETATIONS UNDER THE MAGNUSON-MOSS WARRANTY ACT

700 Interpretations of Magnuson-Moss Warranty Act.. 296
701 Disclosure of written consumer product warranty
terMs and CONGITIONS ...........cccccsecccereese sesevesseceees seeeeees 302
702 Pre-sale availability of written warranty terms....... 304
103 Informal dispute settlement procedures............ seveees 306

704-799 [Reserved]

SUBCHAPTER H—RULES, REGULATIONS, STATEMENTS AND INTER-
PRETATIONS UNDER THE HART-SCOTT-RODINO ANTITRUST IM-
PROVEMENTS ACT OF 1976

800 Transitional rule............... sesececsccccescescesces sececenseseeseees wee 313
801 Coverage rules. ..........ccccccsccescescees aececececcccccsccsccnccos ceseeeece 313
802 Exemption rules .............. sesccescecscesccsscess acssesccecssseceeseteses LO
803 Transmittal rules.................ccceee0 cecsecescececesccnscosees eras 3]

Cross REFERENCES: Animal and Plant Health Inspection Service, Department of Agricul-
ture: 9 CFR Chapter I. Commodity Futures Trading Commission: 17 CFR Chapter I. Con-
sumer Product Safety Commission: 16 CFR Chapter II. Securities and Exchange Commis-
sion: 17 CFR Chapter II.

SUPPLEMENTAL PUBLICATIONS: Federal Trade Commission decisions, Volumes 1-90 Index
digest of volumes 1, 2, and 3 of decisions of the Federal Trade Commission with annota-
tion of Federal cases. Mar. 16, 1915-June 30, 1921. Statutes and decisions pertaining to the
Federal Trade Commission. 1914-1929, 1930-1938, 1939-1943, 1944-1948, 1949-1955, 1956-
1960, 1961-1965, 1966-1970, 1971-1975, 1976, 1977.


Chapter I—Federal Trade Commission

§ 152.1

SUBCHAPTER B—GUIDES AND TRADE PRACTICE
RULES—Continued

Parts 150-151 [Reserved]
PART 152—HOSIERY INDUSTRY

Note: Nothing in these rules is to be con-
strued as relieving anyone of the necessity
of complying with the requirements of the
Wool Products Labeling Act of 1939 or the
requirements of the Textile Fiber Products
Identification Act or with the rules and reg-
ulations issued under such Acts.

Sec.
152.0 Definitions.

Group I

152.1
152.2
152.3

Scope of rules; imports and exports.

Deception (general).

“Lisle.”

152.4 “Irregulars,” or ‘“‘seconds”.

152.5 Removal, obliteration, or alteration
of marks.

152.6 Misrepresentation as to character of
business.

152.7 Deceptive price representations.

152.8 Substitution of products.

152.9 Size markings and designations.

152.10 Commercial bribery.

152.11 Exclusive deals.

152.12 Guarantees, warranties, etc.

152.13 Push money.

152.14 Prohibited discrimination.

152.15 Aiding or abetting use of unfair
trade practices. -

Group II

152.101 Information as to treatment and
care of products.

AvuTHOoRITY: Secs. 6, 5, 38 Stat. 721, 719; 15
U.S.C. 46, 45, unless otherwise noted.

Source: 25 FR 8250, Aug. 30, 1960, unless
otherwise noted. —

§ 152.0 Definitions.

As used in this part the terms ‘‘in-
dustry member” and “industry prod-
ucts” shall have the following mean-
ing:

(a) Industry member. Any person,
firm, corporation, or organization (in-
cluding manufacturers, wholesalers,
jobbers, importers, retailers, etc.) en-
gaged in the sale, offering for sale, or

40-036 O—79——2

distribution, in commerce, of industry
products as defined below.

(b) Industry products. Hosiery for
men, women and children, including
all types and kinds of hose, stockings,
socks, anklets, and other related prod-
ucts of the Hosiery Industry.

Group I

§ 152.1 Scope of rules; imports and ex-
ports.

(a) Applicability. Except where oth-
erwise required by law, the rules in
this part shall apply to all hosiery pro-
duced in the United States or offered
for sale, sold or distributed in the
American market.

(b) Imports. Imported hosiery is sub-
ject to the rules in this part (and the
marking requirements herein speci-
fied) the same as domestic hosiery, ir-
respective of whether the hosiery was
originally manufactured in the United
States and exported and thereafter
imported; or whether it was manufac-
tured in a foreign country and import-
ed from such foreign country or an-
other country into the United States;
or whether the hosiery, foreign or do-
mestic, was introduced into the Ameri-
can market in any other way.

(c) Exports. Hosiery produced in the
United States for export to a foreign
country need not be marked in accord-
ance with the requirements of the
rules in this part, except:

(1) Where such hosiery, although in-
tended for export, or actually export-
ed, is subsequently offered for sale or
sold for use, consumption or resale
within the United States or place sub-
ject to its jurisdiction; or

(2) Where such hosiery manufac-
tured in the United States for export,
or sold for export, is marked, sold or
exported in such manner or under
such conditions as to involve fraud or
deception, or an unfair method of
competition against an American com-
petitor engaged in export trade, or a


§ 152.2

matter otherwise contrary to the
public policy of the United States; or

(3) Where required by the Wool
Products Labeling Act or by other pro-
visions of law. [Rule 1]

§ 152.2 Deception (general).

It is an unfair trade practice to sell,
offer for sale, or distribute industry
products by any method, or under any
representation, description, circum-
stance or condition which has the ca-
pacity and tendency or effect of de-
ceiving purchasers or prospective pur-
chasers as to the grade, character, con-
struction, origin, denier, size, style,
fashion, gauge, twist of yarn, quality,
quantity, value, price, serviceability,
resistance to snagging or the develop-
ment of runs, holes or breaks in the
fabric, strength, stretch, length, color,
finish, manufacture, or distribution of
any product of the industry or compo-
nent part of such product, or in any
other material respect. [Rule 2)

§ 152.3 “Lisle.”

(a) It is an unfair trade practice to
use the term “lisle” or word, term, or
representation of similar import, as

descriptive of hosiery or any.: part

thereof, under any condition having
the capacity and tendency or effect of
misleading or deceiving purchasers or
prospective purchasers. For purposes
of this section the term “lisle” as de-
scriptive of hosiery, or part thereof, is
considered as representing that such

hosiery is made of yarn composed of.

two or more ply of combed long staple
cotton fiber, the ply twist of which is
not less than the turns per inch indi-

cated in the following table:
2-ply 3-ply 4ply
Approx- Approx- Approx
. Mini- imate Mini- imate Mini- imate
Count mum twist mum twist mum_ twist
twist muilti- twist multi- twist multi-
plier plier pHer
16 4% 13 4% lt a
19 a” 15 4% 13 4
21 4% 17 4% 14 4
23 4% 18 4% 15 4
25 4% 20 4% 17 4
2 4% 21 an 18 4
28 a% 23 4% 19 4
29 a% 24 4% 20 4
31 a% 26 +" 22 4

Title 16—Commercial Practices

2-ply 3-ply 4-ply
Approx- Approx- Approx-
Mini- imate Mini- imate Mini- imate
Count mum twist mum twist mum_ twist
twist multi- twist multi- twist multi-
plier plier plier
140
and
higher 33 4% 28 4% 24 4

Nore: The minimum twist of intermediate counts
not given should be in proportion to those given in
the table. The average results of tests for number
of turns of twist in a yarn shall be reported to the
nearest whole number.

Yarns having more than 4 plies shall have not
less than the number of turns given for the 4-ply
yarn, minus 1 turn for each additional ply above 4;
that is, for each additional ply above 4, 1 turn per
inch may be deducted from the minimum number
of turns given for the 4-ply yarn. .

(b) The term “long staple cotton
fiber” as used in this section is under-
stood to mean cotton fiber which is
not less than 1%” in length of staple:

Provided, however, That nothing in

this section shall be construed as pro-
hibiting the use of cotton fiber which
is not less than 1%.” in length of
staple for the counts of 35 and less
above referred to. [Rule 3].

§ 152.4 “Irregulars,” or “seconds”.

(a) It~is_an_unfair trade practice to
fail to disclosé,on industry products
and in all advertising and promotional
material relating thereto that such
products are “irregulars” or ‘“‘seconds,”’
when such is the case.

(b) It. is an unfair trade practice to
cause any industry products to be fal-
sely or deceptively marked, advertised,
described or otherwise represented,
either as not being or as being ‘‘irregu-
lars” or ‘‘seconds,’’ when such is not
the fact.

(c) For the purpose of this section
‘irregulars’” shall be considered as in-
cluding all hosiery which is not of first
quality but which contains only minor
imperfections limited to irregularities
in dimensions, size, color or knit, and
without the presence of any obvious
mends, runs, tears or breaks in the
fabric or any substantial damage to
the yarn or fabric itself. “Seconds”
shall be considered as including all ho-
siery which is not of first quality, does
not qualify as “irregulars” and which


Chapter I—Federal Trade Commission

contains runs, obvious mends, irregu-
larities, substantial imperfections, or
defects in material, construction or
finish.

(d) The marking of hosiery under
this section shall be made in a con-
spicuous and non-deceptive manner
with sufficient permanency or indel-
ibility to carry through the channels
of trade to the ultimate consumer in a
clearly legible condition. The words
“irregulars” or “seconds” as the case
may be shall be set out distinctly by
transfer or other marking on the
fabric of each stocking, sock or other
unit, whether sold in pairs, threes or
otherwise. In addition, if the hosiery is
packaged in any manner so as to con-
ceal the disclosures required by this
section then such disclosures shall also
be made on such packaging in a con-
spicuous and non-deceptive manner.
The required disclosures in advertising
and other promotional material that
industry products are “irregulars’”’ or
“seconds,” must also be made in a con-
spicuous and non-deceptive manner.
[Rule 4]

§ 152.5 Removal,
ation of marks.

It is an unfair trade practice for any
manufacturer, converter, processor,
dyer, finisher, distributor, dealer, im-
porter or vendor, or person acting for
or in collusion with any concern or
vendor, (a) to remove, obliterate,
deface, change, alter, conceal, or make
illegible any information required by
the rules in this part to be disclosed on
industry products, without replacing
the same before sale, resale or distri-
bution for sale with a proper mark
meeting the requirements of the rules
in this part; or (b) to sell, resell, or dis-
tribute any industry product without
its being marked and described in ac-
cordance with the requirements of the
rules in this part.

obliteration, or alter-

Note: Hosiery which has been redyed
shall be re-marked in accordance with the
requirements of the rules in this part. Ho-
siery found to contain a false or deceptive
mark, or a mark contrary to the require-
ments of the rules in this part, shall be re-
marked in accordance with the rules in this
Part.

(Rule 5)

§ 152.8

§ 152.6 Misrepresentation as to character
of business.

It is an unfair trade practice for any
member of the industry to represent,
directly or indirectly, through the use
of any word or term in his corporate
or trade name, in his advertising or
otherwise, that he is a manufacturer,
producer, or importer of industry
products, or that he is the owner or
operator of a mill or factory manufac-
turing them, when such is not the
fact, or in any other manner to mis-
represent the character, extent,
volume, or type of his business. [Rule
6}

§ 152.7 Deceptive price representations.

Members of the industry shall not
represent directly or indirectly in ad-
vertising or otherwise than an indus-
try product may be purchased for a
specified price, or at a saving, or at a
reduced price, when such is not the
fact; or otherwise deceive purchasers
or prospective purchasers with respect
to the price of any product offered for
sale; or furnish any means or instru-
mentality by which others engaged in
the sale of industry products may
make any such representation.

Nore: On December 20, 1963, the Commis-
sion adopted Guides Against Deceptive Pric-
ing which became effective on January 8,
1964 and which superseded the Guides on
this subject as adopted October 2, 1958. The
1964 Guides appear in the January 8, 1964
issue of the FEDERAL REGISTER on pages 178-
180 and are set forth as an appendix to the
rules in this part. Copies of the Guides will
be furnished upon request.

[Rule 7}
(29 FR 7461, June 10, 1964]

§ 152.8 Substitution of products.

It is an unfair trade practice for a
member of the industry to make an
unauthorized substitution of products,
where such substitution has the capac-
ity and tendency or effect of mislead-
ing or deceiving purchasers or prospec-
tive purchasers, by (a) shipping or de-
livering industry products which do
not conform to samples submitted, to
specifications upon which the sale is
consummated, or to representations
made prior to securing the order, with-


§ 152.9

out advising the purchaser of the sub-
stitution and obtaining his consent
thereto prior to making shipment or
delivery; or (b) falsely representing
the reason for making a substitution.
[Rule 8]

§ 152.9 Size markings and designations. ?

In connection with the sale or offer-
ing for sale of industry products, it is
an unfair trade practice:

(a) To mark or otherwise represent
any industry product as being of a cer-
tain size which is not in fact the true
and normal size thereof; or

(b) To alter the true and normal size
of industry products by stretching or
manipulation so as to deceive purchas-
ers or prospective purchasers as to
such size; or

(c) To fail to disclose on industry
products the true and normal size
thereof when the failure to make such
disclosure has the capacity and ten-
dency or effect of deceiving. purchas-
ers or prospective purchasers as to the
size of such products. ,

Note: So-called “stretch” hose (which is
represented as being suitable for more than
one size foot) should be marked so as to
clearly disclose the minimum and the maxi-
mum sizes for which such hose is in fact
suitable, and the range should be limited to
the sizes which such hose will comfortably
fit without undue looseness or tension.

(Rule 9]

§ 152.10 Commercial bribery.

It is an unfair trade practice for a
member of the industry, directly or in-
directly, to give, or offer to give, or
permit or cause to be given, money or
anything of value to agents, employ-
ees, or representatives of customers or
prospective customers, or to agents,
employees, or representatives of com-
petitors’ customers or prospective cus-
tomers, without the knowledge of
their employers or principals, as an in-
ducemént to influence their employers
or principals to purchase or contract
to purchase products imported, manu-
factured, or sold by such industry
member or the maker of such gift or

?Commercial Standard CS 46-49, ‘‘Hosiery
Lengths and Sizes” is recognized as a proper
method to follow in determining measure-
ments and sizes of hosiery.

10

Title 16—Commercial Practices

offer, or to influence such employers
or principals to refrain from dealing in
the products of competitors or from
dealing or contracting to deal with
competitors.—([Rule 10]

$152.11 Exclusive deals.

It is an unfair trade practice for any
member of the industry to contract to
sell or sell any industry product, or fix
a price charged therefor, or discount
from, or rebate upon, such price, on
the condition, agreement, or under-
standing that the purchaser thereof
shall not use or deal in the products of
a competitor or competitors of such in-
dustry member, where the effect of
such sale or contract for sale, or of
such condition, agreement, or under-
standing, may be substantially to
lessen competition or tend to create a
monopoly in any line of commerce.
CRule 11)

§ 152.12 Guarantees, warranties, etc.

(a) It is an unfair trade practice to
represent, in advertising or otherwise, -
that any industry product is ‘“guaran-
teed” unless the nature and extent of
such guarantee is conjunctively dis-
closed and 1_without deceptively mini-
mizing the terms and conditions relat-
ing to the obligations of the guaran-
tor.

(b) It is also an unfair trade practice
to use, or cause to be used, any guar-
antee in which the obligations of the
guarantor are impracticable of fulfill-
ment, or in respect to which the guar-
antor fails or refuses to observe his li-
abilities thereunder.

(ce) This section shall be applicable
not only to guarantees but also to war-
ranties, to purported guarantees and
warranties, and to any promise or rep-
resentation in the nature of a guaran-
tee or warranty.

Nore: The “guarantees” and “warranties”
to which this section relates do not include
the “guaranty” provided for in the Wool
Products Labeling Act of 1939, the Textile
Fiber Products Identification Act, or in the
rules and regulations issued under such
Acts.

(Rule 12]


Chapter I—Federal Trade Commission

§ 152.13 Push money.

It is an unfair trade practice for any
industry member to pay or contract to
pay anything of value to a salesperson
employed by a customer of the indus-
try member as compensation for, or as
an inducement to obtain, special or
greater effort or service on the part of
the salesperson in promoting the
resale of products supplied by the in-
dustry member to the customer:

(a) When the agreement or under-
standing under which the payment or
payments are made or are to be made
is without the knowledge and consent
of the salesperson’s employer; or

(b) When the terms and conditions
of the agreement or understanding are
such that any benefit to the salesper-
son or customer is dependent on lot-
tery or chance; or

(c) When any provision of the agree-
ment or understanding requires or
contemplates practices or a course of
conduct unduly and_ intentionally
hampering sales of products of com-
petitors of an industry member; or

(d) When, because of the terms and
conditions of the agreement or under-
standing, including its duration, or the
attendant circumstances, the effect
may be substantially to lessen compe-
tition or tend to create a monopoly; or

ce) When similar payments are not
accorded to salespersons of competing
customers on proportionally equal
terms in compliance with sections 2 (d)
and (e) of the Clayton Act.

Note: Payments made by an industry
member to a salesperson of a customer
under an agreement or understanding that
all or any part of such payments is to be
transferred by the salesperson to the cus-
tomer, or is to result in a corresponding de-
crease in the salesperson’s salary, are not to
be considered within the purview of this sec-
tion, but are to be considered as subject to
the requirements and provisions of section
2(a) of the Clayton Act.

[Rule 13]
§ 152.14 Prohibited discrimination. *

(a) Prohibited discriminatory prices,
rebates, refunds, discounts, credits,

3As used in this section, the word “com-
merce” means “‘trade or commerce among
the several States and with foreign nations,
or between the District of Columbia or any

11

§ 152.14

etc.,, which effect unlawful price dis-
crimination: It is an unfair trade prac-
tice for any member of the industry
engaged in commerce, in the course of
such commerce, to grant or allow, se-
cretly or openly, directly or indirectly,
any rebate, refund, discount, credit, or
other form of price differential, where
such rebate, refund, discount, credit,
or other form of price differential, ef-
fects a discrimination in price between
different purchasers of goods of like
grade and quality, where either or any
of the purchases involved therein are
in commerce, and where the effect
thereof may be substantially to lessen
competition or tend to create a mo-
nopoly in any line of commerce, or to
injure, destroy, or prevent 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, con-
sumption, or resale within any place
under the jurisdiction of the United
States, and are not purchased by
schools, colleges, universities, public li-
braries, churches, hospitals, and chari-
table institutions not operated for
profit, as supplies for their own use.

Nore: Purchases by the U.S. Government.
In an opinion submitted to the Secretary of
War under date of December 26, 1936, the
U.S. Attorney General advised that the
Robinson-Patman Antidiscrimination Act
“is not applicable to Government contracts
for supplies.”’ (38 Opinions, Attorney Gener-
al 539.)

(2) That nothing contained in this
paragraph shall prevent differentials
which make only due allowance for
differences in the cost of manufacture,
sale, or delivery resulting from the dif-
fering methods or quantities in which
such commodities are to such purchas-
ers sold or delivered;

Territory of the United States and any
State, Territory, or foreign nation, or be-
tween any insular possessions or other
places under the jurisdiction of the United
States, or between any such possession or
place and any State or Territory of the
United States or the District of Columbia or
any foreign nation or within the District of
Columbia or any Territory or any insular
possession or other place under the jurisdic-
tion of the United States.”


§ 152.14

Note 1: Cost justification to be based on

net savings in cost of manufacture, sale or
delivery. Cost justification under paragraph
(a)(2) of this section depends upon net sav-
ings in cost based on ali facts relevant to the
transactions under the terms of such sub-
paragraph. For example, if a seller regularly
grants a discount based upon the purchase
of a specified quantity by a single order for
a single delivery, and this discount is justi-
fied by cost differences, it does not follow
that the same discount can be cost justified
if granted to a purchaser of the same quan-
tity by multiple orders or for multiple deliv-
eries,
“Notre 2: Credit or refund for returned
goods. In determining whether a price dif-
ferential based on cost savings under para-
graph (a)(2) of this section is warranted
there shall be taken into account any por-
tion of the goods involved which are re-
turned by the customer-purchaser to the
seller for credit or refund. See also para-
graph (e)(2) of this section.

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

(4) That nothing contained in this
paragraph shall prevent price changes
from time to time where made in re-
sponse to changing conditions affect-
ing the market for or the marketabil-
ity of the goods concerned, such as but
not limited to obsolescence of seasonal
goods, distress sales under court proc-
ess, or sales in good faith in discon-
tinuance of business in the goods con-
cerned;

(5) That nothing contained in this
section shall prevent the meeting in
good faith of an equally low price of a
competitor.

Norte 1: An industry member cannot justi-
fy a price differential under paragraph
(a5) of this section if his lowered price is
part of his general pricing system and is not
made in response to an individual competi-
tive demand.

Norte 2: Subsection (b) of Section 2 of the
Clayton Act, as amended, reads as follows:

“Upon proof being made, at any hearing
on a complaint under this section, that
there has been discrimination in price or
services or facilities furnished, the burden
of rebutting the prima facie case thus made
by showing justification shall be upon the
person charged with a violation of this sec-
tion, and unless justification shall be affir-
matively shown, the Commission is author-

12

Title 16—Commercial Practices

ized to issue an order terminating the dis-
crimination; Provided, however, That noth-
ing herein contained shall prevent a seller
rebutting the prima facie case thus made by
showing that his lower price or the furnish-
ing of services or facilities to any purchaser
or purchasers was made in good faith to
meet an equally low price of a competitor,
or the services or facilities furnished by a
competitor.”

Nore 3: In complaint proceedings, justifi-
cation of pricé” differentials under para-
graphs (a)(2), (4) and (5) of this section is a
matter of affirmative defense to be estab-
lished by the person or concern charged
with price discrimination.

(bo) The following are examples of
price differential practices to be con-
sidered as subject, to the prohibitions
of paragraph (a) of this section when
involving goods of like grade and qual-
ity which are sold for use, consump-
tion, or resale within any place under
the jurisdiction of the United States,
and which are not purchased by
schools, colleges, universities, public li-
braries, churches, hospitals, and chari-
table institutions not operated for
profit, as supplies for their own use,‘
and when:

(1) The commerce requirements
specified in paragraph (a) of this sec-
tion are present; and

(2) The price differential has a rea-
sonable probability of substantially
lessening competition or tending to
create a monopoly in any line of com-
merce, or of injuring, destroying, or
preventing competition with the in-
dustry member or with the customer
receiving the benefit of the price dif-
ferential, or with customers of either
of them; and

(3) The price differential is not justi-
fied by cost savings (see paragraph
(a)(2) of this section); and

(4) The price differential is not made
in response to changing conditions af-
fecting the market for or the market-
ability of the goods concerned (see
paragraph (a)(4) of this section); and

(5) The lower price was not made to
meet in good faith an equally low
price of a competitor (see paragraph
(a)(5) of this section):

Example No. 1. At the end of a given
period an industry member grants a dis-

‘See also Note under paragraph (a)(1) of
this section.


Chapter I—Federal Trade Commission

count to a customer equivalent to a fixed
percentage of the total of the customer’s
purchase during such period and fails to
grant such discount to other customers
under like conditions.

Example No. 2. An industry member sells
goods to one or more of his customers at a
higher price than he charges other custom-
ers for like merchandise. It is immaterial
whether or not such discrimination is ac-
complished by misrepresentation as to the
grade and quality of the products sold.

Example No. 3. Terms of 2/10th prox. are
granted by an industry member to some cus-
tomers on goods purchased by them from
the industry member. Another customer or
custumers are, nevertheless, allowed to take
a 5% instead of a 2% discount when making
payment to the industry member within the
time prescribed.

Example No. 4. An industry member sells
goods to one or more of his customers at a
lower price than he charges other customers
therefor, basing his justification for the
price difference solely on the fact that the
goods sold at the lower price bear the pri-
vate brand name of customers.

Example No. 5. An industry member in-
voices goods to all his customers at the same
price but supplies additional quantities of
such goods at no extra charge to one or
more, but not to all, such customers; or sup-
plies other goods or premiums to one or
more, but not to all, such customers for
which he makes no extra charge and which
effects an actual price difference in favor of
certain of his customers.

Example No. 6. An industry member sells
goods to one or more of his customers at a
higher price than he charges other custom-
ers for like merchandise. It is immaterial
whether the goods sold at the lower price
are classified by the industry member as
“seconds,” “secondary line,” “rejects,” or
are otherwise represented by the industry
member as inferior, if the goods are in fact
of like grade and quality as the goods sold
at the higher price.

NotE: As previously indicated, the forego-
ing are examples of practices to be consid-
ered violative of the prohibitions of para-
graph (a) of this section when involving
goods of like grade and quality and when
not subject to the other exemptions, exclu-
sions, or defenses set forth in this para-
graph.

(c) Prohibited brokerage and com-
missions: It is an unfair trade practice
for any member of the industry en-
gaged in commerce, in the course of
such commerce, to pay or grant, or to
receive or accept, anything of value as
a commission, brokerage, or other
compensation, or any allowance or dis-

13

§ 152.14

count in lieu thereof, except for serv-
ices 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 intermediary
therein where such intermediary is
acting in fact for or in behalf, or is
subject to the direct or indirect con-
trol, of any party to such transaction
other than the person by whom such
compensation is so granted or paid.

(d) Prohibited advertising or promo-
tional allowances, etc.: It is an unfair
trade practice for any member of the
industry engaged in commerce to pay
or contract fcr the payment of adver-
tising 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 facilities furnished by
or through such customer in connec-
tion with the processing, handling,
sale, or offering for sale of any prod-
ucts or commodities manufactured,
sold, or offered for sale by such
member, unless such payment or con-
sideration is available on proportional-
ly equal terms to all other customers
competing in the distribution of such
products or commodities.

Note 1: Industry members giving
allowances for advertising or sales promo-
tion must, in addition to according same to
all competing customers on proportionally
equal terms, exercise precaution and dili-
gence in seeing that all such allowances are
used by the customers for such purpose.
Customers receiving such allowances must
not use same for any other purpose.

When an allowance is made ostensibly for
advertising or sales promotion of products
and is not in fact used for that purpose the
practice may constitute a price discrimina-
tion. In such case, the party giving the al-
lowance may violate paragraph (a) of this
section and the party receiving same may
violate paragraph (f) of this section.

Norte 2: When an industry member gives
allowances to competing customers for ad-
vertising in a newspaper or periodical, the
fact that a lower advertising rate for equiva-
lent space is available to one or more, but
not all, such customers, is not to be regard-
ed by the industry member as warranting
the retention by such customer or custom-
ers of any portion of the allowance for his
or their personal use or benefit.


§ 152.15

(e) Prohibited discriminatory serv-
ices or facilities: It is an unfair trade
practice for any member of the indus-
try engaged in commerce to discrimi-
nate in favor of one purchaser against
another purchaser or purchasers of a
commodity bought for resale, with or
without processing, by contracting to
furnish or furnishing, or by contribut-
ing to the furnishing of, any services
or facilities connected with the proc-
essing, handling, sale, or offering for
sale of such commodity so purchased
upon terms not accorded to all com-
peting purchasers on proportionally
equal terms.

Note 1: See subsection (b) of section 2 of
the Clayton Act, as amended, which is set
forth in paragraph (a)(5) Note No. 2 of this
section.

Nore 2: Among the practices inhibited by
this paragraph is that of an industry
member according to one or more customers
the privilege of returning for credit or
refund any or all of the goods purchased by
them and failing to accord the same privi-
lege to another or other competing custom-
ers on proportionally equal terms. In this
connection see also paragraph (a)(2) Note
No. 2 of this section.

Nore: Paragraphs (d) and (e) of this sec-
tion are based on subsections (d) and (e) of
section 2 of the Clayton Act, as amended.
The Commission, on May 19, 1960, adopted
Guides relating to the requirements of
these statutory subsections which are of
value to members of the industry in avoid-
ing violations of such requirements in giving
or receiving promotional allowances, includ-
ing advertising or special services for pro-
moting the sale of industry products. Copies
of these Guides will be mailed to industry
members upon request.

(f) Inducing or receiving an illegal
discrimination in price: It is an unfair
trade practice for any member of the
industry engaged in commerce, in the
course of such commerce, knowingly
to induce or receive a discrimination in
price which is prohibited by provisions
of this section.

Note: This section is based on the provi-
sions of section 2 of the Clayton Act as
amended by the Robinson-Patman Act.

[Rule 14]
§152.15 Aiding or abetting use of unfair
trade practices.

It is an unfair trade practice for any
person, firm or corporation to aid,

14

Title 16—Commercial Practices

abet, coerce, or induce another, direct-
ly or indirectly, to use or promote the
use of any unfair trade practice speci-
fied in this part. [Rule 15)

Grovr II

§ 152.101 Information as to treatment and
care of products.

The practice, by producers, manu-
facturers, distributors and vendors, of
furnishing and disseminating, through
tags, labels, advertisement, or other
publicity, accurate information as to
the proper treatment, care and wash-
ing of hosiery products is approved
and recommended as a desirable prac-
tice to follow in the interest of en-
abling consumers to obtain and enjoy
full benefit of the desirable qualities
and service of such products.

Note: This section is not to be construed
as relieving anyone of the necessity of com-
plying with the requirements of the Wool
Products Labeling Act of 1939 or the re-
quirements of the Textile Fiber Products
Identification Act or with the rules and reg-
ulations issued under such Acts.

(Rule A)

PART 154—LUGGAGE AND RELATED
PRODUCTS INDUSTRY

Sec.
154.0
154.1

Definitions.

Deception (general).

154.2 Deception as to composition.

154.3 Deceptive practices as to aniline
finish, graining, embossing and process-
ing.

154.4 Deception as to hardware, frame or
box.

154.5 Misuse of the terms “waterproof,”
“dustproof,” “warpproof,” “scuffproof”
and “scratchproof.”

154.6 False invoicing.

154.7 Substitution of products.

154.8 Commercial bribery.

154.9 Defamation of competitors or false
disparagement of their products.

154.10 Procurement of competitors’ confi-
dential information.

154.11 Unfair threats of infringement
suits.

154.12 Deceptive use and imitation of trade
or corporate names, trade-marks, etc.

154.13 Guarantees, warranties, etc.

154.14 Coercing purchase of one product as
a prerequisite to the purchase of other
products.

154.15 Inducing breach of contract.