Slide Fastener Industry

16 CFR Part 193 · Trade practice rules · in the Code of Federal Regulations 1959-1977 (12 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 These rules and guides are historical: most were rescinded or replaced, so do not assume any is in force.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, 1977 CFR · Earliest edition: 1959 CFR

Decisions that mention this industry's rules (1)

Text (1977 edition, OCR)

Chapter i—Federal

judgment in this case applies to the type
of “charge and send” plan you describe, we
have had a number of inquiries relating to
variations of the same plan asking whether
such plans are permissible under the final
judgments entered in the optical rebating
cases. These inquirtes have provided us with
considerable information on the operation
and effect of the various plans.

The basic “charge and send” plan consists
of the following procedure:

(a) the doctor makes a refraction for
which he charges the patient a professional
fee, writes a prescription, and sends the pa-
tlent to a designated optical house to have
it filled;

(b) the optical house makes the necessary
Measurements, displays the frames and
mountings from which the patient makes
his selection, quotes the patient the con-
sumer price for the finished glasses, grinds
the lenses to the prescription and mounts
them;

(c) the patient later returns to the optical
house to have the glasses fitted and ad-
justed, and the optical house then sends the
glasses to the doctor rather than turning
them over to the patient;

(da) the patient returns to the doctor who
turns the glasses over to the patient and
coliects the consumer price for them, remits
to the optical house the wholesale price p.us
the fitting fee, and retains for himself the
difference between that amount and the
consumer price.

You have described a variant whereby the
doctor would Keep a case of sample frames
in his professional office from which the pa-
tient would make his selection, with the
doctor then quoting to the patient the con-
sumer price.

It is our opinion that the basic “charge
and send” plan is prohibited under the op-
tical rebating judgments. The same is true
as to the variations which you describe, and
those variations similar thereto, such as the
“C.0.D. charge and send.” Each of these
procedures constitutes a plan, arrangement,
or scheme whereby the doctor obtains a
financial return arising out of cr connected
with dispensing to his patient, with the
doctor performing no real function in the
dispensing procedure other than collecting
the consumer price. The procedures accom~
plish by indirection, and by a complex and
artificial procedure, what was done directly
and simply under the old rebate system.
The procedures therefore come under the
prohibition of the final Judgments in this
and the related optical rebating cases.

Sincerely yours,
H. G. Morison,
Assistant Attorney General.
By Wits L. Horcuxiss,
Chte/, Midwest Office
Antitrust Division.

90-059—77——9

Trade Commission $193.0

PART 193—SLIDE FASTENER

INDUSTRY

Sec.

193.0 Definitions.

193.1 Prohibited discrimination.

193.2 Prohibited forms of trade restraints
(unlawful price fixing, etc.).

193.3 Prohibited sales below cost.

193.4 Exclusive deals.

193.6 Ooercing purchase of one product
as a prerequisite to the purchase
of other products.

193.6 Consignment distribution.

193.7 Unfair threats of infringement suits.

1938 Inducing breach of contract.

193.9 Substitution of products.

198.10 False invoicing.

193.11 Commercial bribery.

193.12 Enticing away employees of com-
petitors.

193.18 Defamation of competitors or false
disparagement of their producta.

198.14 Procurement of competitors’ confi-
dential information by unfair
means and wrongful use thereof.

193.15 Deceptive use and imitation of trade
or corporate names, trade-marks,
ete.

193.16 Misrepresentation as to origin and
disclosure of foreign origin.

193.17 Deception as to used materials.

193.18 Deception as to length.

193.19 Misrepresentation in general.

COMMITTEE ON TRADE PRACTICES
193.201 Industry committee.

AUTHORITY: The provisions of this Part 193
issued under secs. 6, 5, 38 Stat. 721, 719; 15
U.S.C. 46, 45, unless otherwise noted.

Source: The provisions of this Part 198
appear at 23 F.R. 4508, June 21, 1958, unless
otherwise noted.

§ 193.0 Definitions.

For the purpose of this part, the fol-
lowing definitions apply:

(a) “Member of the industry” (or “in-
dustry member”), shall mean any per-
son, firm, corporation or organization
engaged in the manufacture, assembly,
or distribution and marketing of indus-
try products.

(b) “Industry product,” shall mean a
slide fastener (commonly called ‘“‘zip-
per”), as the term slide fastener is here-
inafter defined, or any component part
or parts thereof, including stringers,
fastener chains, sliders, pulls, bottom
and top stops, and separating end com-
ponents. .

(c) “Slide fastener,” shall mean a pair
of fastener stringers, each having a
series of cooperating fastener elements,
portions, or scoops arranged along their
adjacent longitudinal edges, or a con-
tinuous portion arranged along the

119


$193.1

fongitudinal edge of one stringer which
interlocks with a continuous portion
along the longitudinal edge of the oppo-
site stringer, with a slider mounted
thereon for opening and closing the fas-
tener, and with or without end stops to
limit the movement thereof.

§ 193.1 Prohibited discrimination.’

(a) Prohibited discriminatory prices,
rebates, refunds, discounts, credits, etc.,
which effect unlawful price discrimina-
tion. 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 rebate,
refund, discount, credit, or other form
of price differential, where such rebate,
refund, discount, credit, or other form
of price differential, effects a discrimi-
nation in price between different pur-
chasers of goods of like grade and qual-
ity, where either or any of the purchases
involved therein are in commerce, and
where the effect thereof may be sub-
stantially to lessen competition or tend
to create a monopoly in any line of com-
merce, or to injure, destroy, or prevent
competition with any person who either
grants or knowingiy 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 libraries,
churches, hospitals, and charitable in-
stitutions not operated for profit, as sup-
plies for their own use;

Nore: Purchases by U. 8. Government: In
an opinion submitted to the Secretary of
War under date of December 28, 1936, the
U. 8. Attorney General advised that the
Robinson-Patman Antidiscrimination Act
“Is not applicable to Government contracts

1As 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 Ter-
ritory of the United States and any State,
Territory, or foreign nation, or between 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 Dis-
trict of Columbia or any foreign nation, or
within the District of Columbia or any Ter-
ritory or any insular possession or other
Place under the jurisdiction of the United
States.”

Title 16—Commercial Practices

for supplies.”
eral 539.)

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

Nore 1: Cost justification to be based on
net savings in cost of manufacture, sale or
delivery. Cost justification under the above
Proviso depends upon net savings in cost
based on all facts relevant to the transac-
tions under the terms of subparagraph (2)
of this 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 Justified by cost differences, it does not
follow that the same discount can be cost
justified if granted to a purchaser of the
same quantity by multiple ordera or for
multiple deliveries.

Norge 2: Credit or refund for returned
goods. In determining whether a price dif-
ferential based on cost sa under the
above proviso is warranted there shall be
taken into account any portion of the goods
involved which are returned by the cus-
tomer-purchaser to the seller for credit or
refund. See also Note 2 under paragraph (e)
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 cus-
tomers 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 affecting
the market for or the marketability of
the goods concerned, such as but not
limited to obsolescence of seasonal goods,
distress sales under court process, or
sales in good faith in discontinuance of
business in the goods concerned;

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

Norsr: See subsection (b) of section 2 of
the Clayton Act as amended, which ts set

forth in the note following paragraph (g)
of this section.

(b) The following are examples of
Price differential practices to be con-
sidered as subject to the prohibitions of
paragraph (a) of this section when in-

(38 Opinions, Attorney Gen-

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volving goods of like grade and quality
which are sold for use, consumption, or
resale within any place under the juris-
diction of the United States, and which
are not purchased by schools, colleges,
universities, public libraries, churches,
hospitals, and charitable institutions not
operated for profit, as supplies for their
own use,’ and when,

(1) The commerce requirements spec-
ified in paragraph (a) of this section are
present; and

(2) The price differential has a rea-
sonable probability of substantially less-
ening competition or tending to create a
monopoly in any line of commerce, or of
injuring, destroying, or preventing com-
petition with the industry member or
with the customer receiving the benefit
of the price differential, or with custom-
ers 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
affecting the market for or the market-
ability of the goods concerned (see para-
graph (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).

Ezample 1. At the end of s given period
an industry member grants a discount to a
customer equivalent to a fixed percentage of
the total of such customer’s purchases dur-
ing the period and falls to grant a discount
of the same percentage to all other cus-
tomers during such period.

Ezample 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 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 mem-
ber as inferior, if the goods are in fact of like
grade and quality as the goods sold at the
higher price.

Ezample 3. Terms of 2 percent 10 days
are granted by an industry member to some
customers on goods purchased by them from
the industry member. Another customer or
customers are, nevertheless, allowed to take
a & percent instead of s 2 percent discount
when making payment to the industry mem-
ber within the time prescribed.

Example 4. An industry member sells
goods to one or more of his customers at a
lower price than he charges other customers

2See also note under paragraph (a) (1) of
this section.

Trade Commission $193.1
therefor, basing his justification for the price
difference solely on the fact that the goods
sold at the lower price bear the private brand
name of customers.

Example 5. An industry member invoices
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 supplies 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.

Norte: As previously indicated, the fore-
going 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, exclusions,
or defenses set forth in this paragraph.

(c) Prohibited brokerage 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-
sion, brokerage, or other compensation,
or any allowance or discount in Neu
thereof, except for services rendered in
connection with the sale or purchase of
goods, wares, or merchandise, either te
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 subject to the direct or indirect
control, of any party to such transaction
other than the person by whom such
compensation is so granted or paid.

(a) Prohibited advertising or promo-
tional allowances, ete. It is an unfair
trade practice 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 factli-
ties furnished by or through such cus-
tomer in connection with the processing,
handling, sale, or offering for sale of
any products or commodities manufac-
tured, sold, or offered for sale by such
member, unless such payment or consid-
eration is available on proportionally
equal terms to ali other customers com-
peting in the distribution of such prod-
ucts or commodities.

Nore 1: Industry members giving allow-
ances for advertising or sales promotion must,
in addition to according same to all compet-
ing customers on proportionally equal terms.

121


§ 193.1

exercise precaution and diligence in seeing
that all such allowances are used by the
customers for such purpose. Customers re-
ceiving 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
tion. In such case, the party giving the
allowance may violate paragraph (a) of this
section and the party receiving same may
violate paragraph (g) of this section.

Norge 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 equiy-
alent space is available to one or more, but
not all, such customers, is not to be regarded
by the industry member as warranting the
retention by such customer or customers of
any portion of the allowance for his or their
personal use or benefit.

(e) 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
furnishing, or by contributing to the
furnishing of, any service or facilities
_ connected with the processing, handling,
sale, or offering for sale of such commod-
ity so purchased upon terms not ac-
corded to all competing purchasers on
proportionally equal terms.

Notes 1: See subsection (b) of section 2
of the Clayton Act as amended, which is set
forth in the note following paragraph (g) of
this section.

Nots 2: Among the practices inhibited by
paragraph (e) of this section 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 pur-
chased by them and failing to accord the
same privilege to another or other competing
customers on proportionally equal terms.
In this connection see also Note 2 under cost
justification proviso, paragraph (a) (2) of
this section.

(f) Clarification of requirements for
supplying of marketing services, facili-
ties or allowances. The following is pre-
sented for the purpose of clarifying the
requirements of paragraphs (d) and (e)
of this section with respect to the sup-
plying of marketing services, facilities or
allowances by industry members to their
customers, but it is not intended to imply
by such presentation that other methods
which assure of proportional equality of

Title 16—Commercial Practices

treatment of competing customers may
not also be used.

(1) An industry member may simul-
taneously offer to each of his customers
competing in the resale of his products
the same kind of promotional service,
facility or allowance of a cost value equal
to a uniform percentage of the sales (or
purchases) of the industry member’s
products by each customer during a
specified and identical period of time:
Provided, however, That when the serv-
ice, or facility or allowance offered is of
a type which under reasonable terms and
conditions is not usable or suitable to the
facilities and business of all customers,
and is offered to any one customer, the
member offer each of those customers to
whom the service, facility or allowance is
not usable or suitable an alternate type
of promotional service, facility or allow-
ance which ts of equivalent measurable
cost, is usable by the customer, and is
suitable to his facilities and business,
and promptly inform all competing cus-
tomers of the kind and amount of serv-
ices, facilities or allowances which he has
offered to each and the respective terms
and conditions under which such serv-
ices, facilities or allowances are to be
furnished by the industry member: And
provided further, That when the offer of
any service, facility or allowance to any
customer is conditioned on such cus-
tomer supplying some reciprocal service,
facility or payment, a reciprocal service,
facility or payment be required in the
offers to all other customers and there
be an equality of ratio among all cus-
tomers as to the measurable cost of that
which is supplied by the industry mem-
ber and the reciprocal service, facility or
payment required of any customer. The
industry member must take every rea-
sonable precaution to see that services,
facilities or allowances which he fur-
nishes to customers are used in accord
with the terms of his offer; and upon
failure of the customer to perform any
obligation on his part the industry mem-
ber must cease supplying the customer
any further service, facility or allowance.

(2) Explanatory analysis: In other
words, one but not the only, method of
complying with paragraphs (d) and (e)
of this section is as follows:

The industry member may offer, simul-
taneously, to each competing resale customer,
the same kind of

1. Promotional service, or

2. Facility, or

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3. Allowance,

The value of which must be equal to a
uniform percentage of dollar volume:

1, Of the sales or purchases by each cus-
tomer of the industry member’s products,

2. Computed for an identical, specified
period of time.

However, if the same kind is not usable
and suitable under reasonable terms and
conditions to all such customers, and is
offered to one, the others must be offered an
alternate type of:

1. Promotional service, or

2. Facility, or

8. Allowance, and

The alternate type must be:

1. Of equivalent measurable cost, and

2. Usable by the customer and suitable
with respect to his facilities and character
of business; and

All such customers must be promptly
informed of:

(a) The kind,

(b) The amount, and

(c) Terms and conditions of the offer.

Also: When the offer is conditioned upon
something reciprocal to be furnished by the
customer, the member

1. Must require of all customers the same
proportionate reciprocity (equality of ratio
as to the measurable cost of that supplied
by the customer to that supplied by the
member) ;

2. Must take every reasonable precaution
to see that what he pays or furnishes is used
in accordance with the terms of his offer;
and

3. Must cease furnishing or paying it to
the customer when the industry member
knows, or has reason to believe, tt is not
80 used,

(g) 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 the fore-
going provisions of this section.

Note: Paragraph (g) of this section is a
restatement of sectlon 2 (f) of the Clayton
Act as amended. In a complaint proceeding
under this section, in order to make out
a prima facie violation, the Commission
must show that the favored buyer induced
or received the lower price knowing, or
knowing facts from which he should have
known, that such price was violative of sec-
tion 2 (a) of said act and not justified
under subparagraph (2), (4) or (5) of para-
graph (a) of this section. When, in any
such proceeding, the issue Is limited to the
question of whether the price differential in-
volved made only due allowance for differ-
ences in cost of manufacture, sale, or de-
livery resulting from the differing methods
or quantities in which the goods were sold
and delivered, the Commission may estab-

Trade Commission $ 193.2

lish a prima facie case in a number of ways,
including:

(1) By showing that the buyer paying the
lower price knew that the methods by, and
quantities in, which the goods were sold
and delivered to him by the seller were the
same as in the case of the competing buyer
or buyers paying the higher price or prices;
or

(2) By showing where there is a difference
in the methods or quantities in which the
goods were sold and delivered by the seller
to the buyer than in the case of the com-
peting buyer or buyers paying the higher
price or prices, that the buyer paying the
lower price or prices knew the nature and
extent of such differences and knew or
should have known that they could not have
resulted in sufficient cost savings of the kind
and character specified as to justify the price
differential.

Note: Section 193.1 Is based on the pro-
visions of Section 2 of the Clayton Act as
amended by the Robinson-Patman Act.

Subsection (b) of section 2 of the Clayton
Act, as amended, to which reference is made
in the note to subparagraph (5) of para-
graph (a) of this section and in Note 1 under
paragraph (e) of this section, reads as fol-
lows: “Upon proof being made, at any hear-
ing on a complaint under this section, that
there has been discrimination in price or
services or faellities 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 affirm-
atively shown, the Commission is author-
ized to Issue an order terminating the
discrimination: Provided, however, That
nothing herein contained shall prevent a
seller rebutting the prima facie case thus
made by showing that his lower price or the
furnishing of services or facilities to any
purchaser or purchasers was made in good
faith to meet an equally low price of a com-
petitor, or the services or facilities furnished
by @ competitor.”

§ 193.2 Prohibited forms of trade re-
straints (unlawful price fixing, etc.) ?

It is an unfair trade practice for any
member of the industry, either directly

2The inhibitions of this section are sub-
Ject to Public Law 542, approved July 14,
1952—66 Stat. 682 (the McGuire Act) which
provides that with respect to a commodity
which bears, or the label or container of
which bears, the trade-mark, brand, or name
of the producer or distributor of such com-
modity and which js in free and open com-
petition with commodities of the same gen-
eral class produced or distributed by others,
a seller of such a commodity may enter into
a contract or agreement with a buyer thereof
which establishes a minimum or stipulated
price at which such commodity may be re-
sold by such buyer when such contract or

128


$193.3

or indirectly, to engage in any planned
common course of action, or to enter into
or take part in any understanding,
agreement, combination, or conspiracy,
with one or more members of the in-
dustry, or with any other person or per-
sons, to fix or maintain the price of any
goods or otherwise unlawfully to restrain
trade; or to use any form of threat, in-
timidation, or coercion to induce any
member of the industry or other person
or persons to engage in eny such
planned common course of action, or to
become a party to any such understand-
ing, agreement, combination, or con-
spiracy.

§ 193.3 Prohibited sales below cost.

(a) The practice of selling products of
the industry at a price less than the cost
thereof to the seller, with the purpose or
intent, and where the effect 1s, or where
there is a reasonable probability that
the effect will be, to substantially injure,
suppress, or stifle competition or tend to
create a monopoly, is an unfair trade
practice.

(b) This section is not to be construed
as prohibiting all sales below cost, but
only such selling below the seller’s cost
as is resorted to and pursued with the
wrongful intent or purpose referred to
and where the effect is, or where there
is reasonable probability that the effect
will be, to substantially injure, suppress,
or stifle competition or to create a mo-
nopoly. Among the situations in which
the requisite purpose or intent would or-
dinarily be lacking are cases in which
such sales were: (1) Of seasonal goods
near the conclusion of the season; (2) of
obsolescent goods; (3) made under
judicial process; or (4) made in bona
fied discontinuance of business in the
goods concerned.

(o) As used in paragraphs (a) and (b)
of this section, the term “cost” means
the respective seller’s cost and not an
average cost in the industry whether
such average cost be determined by
an industry cost survey or some other

agreement is lawful as applied to intrastate
transactions under the laws of the State,
Territory, or territorial jurisdiction in which
the resale is to be made or to which the com-
modity is to be transported for such resale,
and when such contract or agreement is not
between manufacturers, or between whole-
salers, or between brokers, or between fac-
tors, or between retailers, or between persons,
firms, or corporations in competition with
each other.

Title 16—-Commercial Practices

method. It consists of the total outlay
or expenditure by the seller in the ac-
quisition, production, and distribution of
the products involved, and comprises all
elements of cost such as labor, material,
depreciation, taxes (except taxes on net
income and such other taxes as are not
properly applicable to cost), and general
overhead expenses, incurred by the
seller in the acquisition, manufacture,
processing, preparation for marketing,
sale and delivery of the products. Not
to be included are dividends or interest
on borrowed or invested capital, or non-
operating losses, such as fire losses and
josses from the sale or exchange of
capital assets. Operating cost should not
be reduced by items of nonoperating in-
come, such as income from investments,
and gain on the sale of capital assets.
(d) Nothing in this section shall be
construed as relieving an industry mem~
ber from compliance with any of the re-
quirements of the Robinson-Patman Act.

§ 193.4 Exclusive deals.

It is an unfair trade practice for any
member of the industry engaged in com-
merce, in the course of such commerce,
to lease or make a sale or contract for
sale of any industry product, for use,
consumption, or resale within any place
under the jurisdiction of the United
States, or fix a price charged therefor, or
discount from, or rebate upon, such price,
on the condition, agreement, or under-
standing that the lessee or purchaser
thereof shall not use or deal in the goods
of a competitor or competitors of the
lessor or seller, where the effect of such
lease, sale, or contract for sale, or such
condition, agreement, or understanding,
may be to substantially lessen competi-
tion or tend to create a monopoly in any
line of commerce.

§ 193.5 Coercing purchase of one prod-
uct as a prerequisite to the purchase
of other products.

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 sub-
stantially lessen competition or to tend to
create a monopoly or to unreasonably
restrain trade, is an unfair trade
practice.

§ 193.6 Consignment distribution.

(a) It is an unfair trade practice for
any member of the industry to employ
the practice of shipping industry prod-
ucts on consignment without the express

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Chapter !|—Federal

request or prior consent of the pur-
chasers.

(b) It is an unfair trade practice for
any member of the industry to employ
the practice of shipping industry prod-
ucts on consignment or pretended con-
signment for the purpose and with the
effect of artificially clogging or closing
trade outiets and unduly restricting com-
petitors’ use of said trade outiets in
getting their products to purchasers
through regular channels or distribution,
thereby injuring, destroying, or prevent-
ing competition or tending to create a
monopoly or unreasonably to restrain
trade.

(ce) Nothing in this section shall be
construed to authorize any understand-
ing or agreement, combination or con-
spiracy, or planned common course of
action, by and between industry mem-~-
bers, mutually to conform or restrict
their practice of shipping goods on con-
signment with the intent or effect of
lessening competition.

$193.7 Unfair threats of infringement
suits.

The circulation of threats of suit for
infringement of patents or trade-marks
among customers or prospective custom-
ers of competitors, not made in good
faith but for the purpose and with the
effect of harassing of intimidating such
customers or prospective customers, or
of unduly hampering, injuring, or preju-
dicing competitors in their business, is
an unfair trade practice.

§ 193.8 Inducing breach of contract.

(a) Knowingly inducing or attempting
to induce the breach of existing lawful
contracts between competitors and their
customers or their suppliers, or interfer-
ing with or obstructing the performance
of their contractual duties or services,
under any circumstance having the
capacity and tendency or effect of sub-
stantially injuring or lessening present or
potential competition, is an unfair trade
practice.

(b) Nothing in this section is intended
to imply that it is improper to sollcit the
business of a customer of a competing
industry member; nor ts the section to be
construed as in anywise authorizing any
agreement, understanding, or planned
common course of action by two or more
industry members not to solicit business
from the customers of either of them, or
from customers of any other industry
member.

Trade Commission § 193.12

§ 193.9 Substitution of products.

It is an unfair trade practice for a
member of the industry to make an un-
authorized substition of products, where
such substitution has the capacity and
tendency or effect of misleading or de-
ceiving purchasers or prospective pur-
chasers, by:

(a) Shipping or delivering industry
products which do not conform to sam-
ples submitted, to specifications upon
which the sale is consummated, or to
representations made prior to securing
the order, without advising the purchaser
of the substitution and obtaining his
consent thereto prior to making ship-
ment or delivery; or

(b) Falsely representing the reason for
making a substitution.

§ 193.10 False invoicing.

Withholding from or inserting in in-
voices or sales slips any statements or in-
formation by reason of which omission
or insertion a false record is made, wholly
or in part, of the transactions repre-
sented on the face of such invoices or
sales slips, with the capacity and ten-
dency or effect of thereby misleading or
deceiving purchasers, prospective pur-
chasers, or the consuming public, is an
unfair trade practice.

§ 193.11 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 per-
mit or cause to be given, Money or any-
thing of value to agents, employees, or
representatives of customers or prospec-
tive customers, or to agents, employees,
or representatives of competitors’ cus-
tomers or prospective customers, without
the knowledge of their employers or prin-
cipals, as an inducement to influence
their employers or principals to purchase
or contract to purchase products, im-
ported, manufactured, or sold by such
industry member or the maker of such
gift or offer, or to influence such employ-
ers or princlpals to refrain from dealing
in the products of competitors or from
dealing or contracting to deal with com-
petitors.

§ 193.12 Entiring away employees of
competitors.

It is an unfair trade practice for
any member of the industry willfully
to entice away employees or sales-
contact personnel of competitors with
the intent and effect of thereby unduly

125


§ 193.13

hampering or injuring competitors in
their business and destroying or sub-
stantially lessening competition: Pro-
vided, That nothing in this section shall
be construed as prohibiting such persons
from seeking more favorable employ-
ment, or as prohibiting employers from
hiring or offering employment to em-
ployees of a competitor in good faith
and not for the purpose of inflicting in-
jury on such competitor.

$193.13 Defamation of competitors or
false disparagement of their prodncts.

(a) The defamation of competitors by
falsely imputing to them dishonorable
conduct, inability to perform contracts,
questionable credit standing, or by other
false representations, or the false dis-
paragement of competitors’ products in
any respect, or of their business meth-
ods, selling prices, values, credit terms,
policies, or services, Is an unfair trade
practice.

(b) Likewise, the demonstration of
obsolete models of a competitor’s product
as and for current models, and the de-
liberate tampering with, damaging, or
destroying of competitors’ products so
as to disparage the products in the eyes
of customers or prospective customers,
is an unfair trade practice.

(c) Nothing in paragraphs (a) and
(b) of this section shall be construed as
preventing the full, fair, and nondecep-
tive comparison, by demonstration or
otherwise, of competitors’ products with
the product of another industry member
before public officials or other purchasers
or prospective purchasers.

§ 193.14 Procurement of competitors’
confidential information by unfair
means and wrongful use thereof.

It is an unfair trade practice for any
member of the industry to cotain infor-
mation concerning the business of a com-
petitor by bribery of an employee or
agent of such competitor, by false or mis-
leading statements or representations, by
the impersonation of one in authority, or
by any other unfair means, and to use the
information so obtained so as substan-
tially to injure competition or unreascn-
ably restrain trade.
$193.15 Deceptive use and imitation of

trade or corporate names, trade-
marks, ete.

It is an unfair trade practice for any
member of the industry to use any
trade name, corporate name, trade-
mark. or other trade designation, which
has the capacity and tendency or effect

Title 16—-Commerclal Practices

of misleading or deceiving purchasers or
prospective purchasers as to the charac-
ter, name, nature, or origin of any prod-
uct of the industry, or of any material
used therein, or which is false or mis-
leading in any material respect.

§ 193.16 Misrepresentation as to origin
and disclosure of foreign origin.

(a) It is an unfair trade practice to
misrepresent the place of origin, produc-
tion, assembly, or manufacture of in-
dustry products or their components.

(>) It is an unfair trade practice to
offer for sale, sell, or distribute any in-
dustry product manufactured or pro-
duced in a foreign country, or any in-
dustry product containing a substantial
or material part or parts manufactured
or produced in a foreign country, with-
out affirmatively and clearly disclosing
thereon, or in immediate conjunction
therewith, by a truthful and nondecep-
tive mark, stamp, brand, or label, the
country of origin of such product or part,
where failure to so disclose the country
of origin has the capacity and tendency
or effect of misleading or deceiving the
purchasing or consuming public in any
material respect.

§ 193.17 Deception as to used materials.

(a) It is an unfair trade practice for
any member of the industry to sell,
offer for sale, advertise, or otherwise
represent any industry product, or any
component thereof, as being new when
such is not true in fact.

(b) In the marketing of used, re-
claimed, or second-hand industry prod-
ucts or, industry products containing
used, reclaimed, or second-hand parts,
it is an unfair trade practice to fail or
refuse to make full and nondeceptive
disclosure, by stamp or mark, or by tag
or label attached to the product, of the
fact that such industry products or com-
ponents thereof are not new but are used,
reclaimed, or second-hand, as the case
may be, such failure or refusal to make
disclosure having the capacity and tend-
ency or effect of misleading or decetving
purchasers or the consuming public.

§ 193.18 Deception as to length.

(a) It is an unfair trade practice for
misrepresent the length of any industry
product, or to seli, offer for sale, or
distribute industry products under any
circumstance or condition having the
capacity and tendency or effect of mis-
leading or deceiving purchasers, pro-
spective purchasers, or the consuming

126


Chapter I—Federal Trade Commission

public concerning the length or measure
of any such product.

(b) In order to avoid and prevent
deception in the sale of industry prod-
ucts, the linear measure of each industry
product should be indicated clearly and
nondeceptively on the package or other
container of the product, or on a label,
stamp, or tag securely affixed thereto:
Provided, however, That with respect to
industry products of the same length put
up for the industrial or manufacturing
trade and not for individual retail sale
to consumer-purchasers, disclosure of
the linear measure of such industry
products may be made on the box or
other container in which such industry
products are packaged for shipment to
the industrial user, or on a label, stamp,
or tag securely affixed thereto: And pro-
vided further, That the linear measure
so indicated shall be the true length of
the metal or plastic fastener elements
and the stops and separating units, if
any, when the slide fastener is closed,
subject, however, to unavoidable varia-
tions in manufacture not to exceed ap-
plicable length of tolerances provided
for in Federal Specification V-F-106,
dated February 1, 1949.

§ 193.19 Misrepresentation in general.

Ié is an unfair trade practice for any
member of the industry to use, or cause
or promote the use of, any advertising
matter, guarantee, warranty, trade pro--
motional literature, mark, brand, label,
or other representation, however dis-
seminated or published, which has the
capacity and tendency or effect of mis-
leading or deceiving purchasers, pro-
spective purchasers, or the consuming
public with respect to the grade, quality,
length, weight, size, use, colorfastness,
material, composition, construction, fab-
rication, manufacture, distribution,
origin, or price or terms of sale, of any
industry product or any component part
thereof, or with respect to the character,
extent, or type of the business of any
industry member, or which has the ca-
pacity and tendency or effect of mislead-
ing or deceiving purchasers or the con-
suming public in any other material
respect.

COMMITTEE ON TRADE PRACTICES

§ 193.201 Industry committee.

The provisions of § 16.1 of this sub-
chapter shall be applicable to an indus-

§ 194.0
try committee established under this

PART 194—-COCOA AND CHOCO-
LATE INDUSTRY

Bec.
194.0 Definition; industry product.
Grovur I

194.1 Deception (general).

194.2 Misuse of the word “free.”

194.3 Imitiation or simulation of trade-
marks, trade names, etc.

194.4 False invoicing.

194.5 False and misleading price quota-
tions, etc.

194.6 Tie-in sales; coercing purchase of
one product as a prerequisite to
the purchase of other products.

194.7 Consignment distribution.

194.6 Commercial bribery.

194.9 Defamation of competitors or dis-
paragement of their products.

194.10 Unlawful coercion or combinations
in restraint of trade.

194.11 Prohibited discrimination.

194.12 Exclusive deals.

194.18 Inducing breach of contract.

194.14 Enticing away employees of compet-
itors.

194.15 Marketing of products through lot-
tery or game of chance.

194.16 Selling below cost.

194.17 Aiding or abetting use of unfair trade

practices.
COMMITYEE ON TRADE PRACTICES
194.201 Industry committee.

AvTHORIrr: The provisions of this Part
194 issued under secs. 6, 5, 88 Stat. 721, 719;
15 U.8.C. 46, 45, unless otherwise noted.

Source: The provisions of this Part 194

appear.at 15 P.R. 6548, Sept. 28, 1950, unless
otherwise noted.

§ 194.0 Definition; industry product.

As used in this part, the term “indus-
try product” shall mean any and all
kinds of commercially manufactured or
processed cocoa or chocolate, or cocoa
or chocolate products, which are pack-
aged, designed, or marketed for the
use of consumers either without further
processing or with only such processing
as is usually performed in the home.
Such products shall be those included in
the Definitions and Standards of
Identity for Cacao Products as promul-
gated by the Food and Drug Administra-
tion (21 CFR Part 14), such as baking
chocolate, bitter chocolate, cooking
chocolate, breakfast cocoa, high fat
cocoa, medium fat cocoa, low fat cocoa,
cocoa, sweet chocolate, milk chocolate,
sweet milk chocolate, skim milk choco-

127