Sun Glass Industry

16 CFR Part 156 / 202 · Trade practice rules · in the Code of Federal Regulations 1941-1977 (17 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 These rules and guides are historical: most were rescinded or replaced, so do not assume any is in force.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: 1941 CFR

Text (1977 edition, OCR)

Chapter !—Federal Trade Commission

(b) 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 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 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 pald.

(c) 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 for the payment of advertis-
ing 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 compensa-
tion or in consideration for any services
or facilities furnished by or through such
customer in connection with the process-
ing, handling, sale, or offering for sale
of any products or commodities manu-
factured, sold, or offered for sale by such
member, unless such payment or con-
sideration is available on proportionally
equal terms to all other customers com-
peting in the distribution of such prod-
ucts or commodities,

(d) 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 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 competing purchasers on
proportionally equal terms.

(e) 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.

§ 201.11

(f) Exemptions. The inhibitions of
this section shall not apply to purchases
of their supplies for their own use by
schools, colleges, universities, publle
libraries, churches, hospitals, and chari-
table institutions not operated for profit.

Note: In complaint preceedings charg-
ing discrimination in price or services or
facilities furnished and upon proof having
been made of such discrimination, the
burden of rebutting the prima facie case
thus made by showing justification shall be
upon the person charged; and unless justi-
fication shall be affirmatively shown, the
Commission is authorized to issue an order
terminating the discrimination: Provided,
however, That nothing herein shall prevent
& 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 a competitor—(See sec. 2 (b) Clayton
Act.)

§ 201.11 Aiding or abetting use of un-
fair trade practices.

It is an unfalr trade practice for any
person, firm, or corporation to ald, abet,
coerce, or induce another, directly or in-
directly, to use or promote the use of any
unfair trade practice specified in this
part.

PART 202—SUN GLASS INDUSTRY

Sec.

202.0 Definitions.

202.1 Deception (general).

202.2 Misuse of the terms “ground,” “pol-
ished,” and “ground and polished."

202.8 Misrepresenting products as con-
forming to a standard or specifica-
tion.

202.4 Misuse of the word “Crookes.”

202.5 Deceptive price representations.

202.6 Misrepresentation as to origin and
disclosure of foreign origin.

202.7 Misuse of the term “certified,” etc.

202.8 Misrepresentation as to gold content.

202.9 Guarantees, warranties, etc.

202.10 Defamation of competitors or false
disparagement of their products.

202.11 Consignment distribution.

202.12 Prohibited discrimination.

202.18 Prohibited sales below cost.

202.14 Prohibited forms of trade restraints

(unlawful price fixing, etc.).

AvrHorITY: The provisions of this Part 202
issued under secs. 6, 5, 388 Stat. 721, 719: 15
U.S.C. 46, 45, unless otherwise noted.

Source: The provisions of this Part 202 ap-
pear at 24 F.R. 2952, Apr. 17, 1959, unless
otherwise noted.

159


§ 202.0

§ 202.0 Definitions.

(a) “Industry Products” consist of sun
glasses and sun glass lenses and other
glasses and lenses which are used to pro-
vide protection for the eyes from sun
glare, strong light, or other similar con-
ditions, and frames and other parts for
such glasses. The glasses and lenses
covered are eye-protective, not eye-cor-
rective, devices.

(b) “Industry Members” are persons,
firms, corporations, and organizations
engaged in the manufacture, assembly,
sale, or distribution in commerce of in-
dustry products as defined above.

Note: Nothing in this part shall be con-
strued as relieving any member of the in-
dustry of the necessity of complying with
requirements of State laws or regulations or
other laws or regulations applicable to the
products of this industry.

§ 202.1 Deception (general).

(a) It is an unfair trade practice for
any member of the industry to sell, offer
for sale, or distribute any industry prod-
uct under any representation or circum-~
stance having the capacity and tendency
or effect of misleading or deceiving pur-~
chasers or prospective purchasers of such
product in any material respect.

(b) The inhibitions of this section are
to be understood as applicable to, but not
limited to, misleading claims and repre-
sentations concerning:

(1) The protection afforded users of
the product from eye injury resulting
from exposure to sun glare, strong light,
or other similar conditions;

(2) The efficacy of the product to im-
prove, or to prevent material reduction
of, vision on the part of users when worn
under continuous or intermittent expo-
sure to strong light;

(3) The kind, grade, quallty, value,
durability, composition, construction
and finish of the product, or its im-
munity or resistance to tarnish.

14n industry product should not be un-
qualifiedly represented as being immune to
breakage. When of such composition, con-
struction, and design as to assure of non-
breakage under normal conditions of use
for a substantial period of time it may
properly be represented as being “break-
resistant.”

2An industry product may properly be
represented as being “tarnish resistant” when
it will not tarnish for a substantial period
of time under normal conditions of use.

Title 16—Commercial Practices

(c) Other practices to be regarded as
among those inhibited by the section are
the following:

(1) Representing or implying that in-
dustry products are surplus goods of any
of the armed services of the United
States, or that such products were ac-
quired, directly or indirectly, from the
United States Government, or any
branch or agency thereof, when such is
not the fact;

(2) Representing or implying by use
of such expressions as “Air Corps Type,”
“Air Force Type,” “Aviation Type,”
“Type Worn by Air Force Pilots,” or by
use of any other terms or expressions of
similar import, that industry products
are of the same type, quality, and effi-
cacy as those worn by aircraft pilots of
the armed forces of the United States.
when such is not the fact.

§ 202.2 Misuse of the terms “ground,”
“polished,” and “ground and
polished.

In connection with the sale, offering
for sale, or distribution of sun glasses or
sun glass lenses, it is an unfair trade
practice to use the terms “ground,” “pol-
ished,” or “ground and polished,” or any
other words or terms of similar import,
as descriptive of sun glass lenses unless
the entire surfaces thereof have been
ground with an abrasive and thereafter
polished to eliminate form and surface
imperfections and to produce an optical
finish which is free from visible surface
defects such as scratches, waves, and
greyness: Provided, however, The terms
“sround,” “polished,” or “ground and
polished,” or any other words or terms
of similar import, may be used as de-
scriptive of sun glass lenses produced
froin plate glass which has been so
ground and polished, and thereafter
thermally curved, bent, or dropped, if, in
immediate conjunction with any of such
representations, it is plainly disclosed
that such plate glass was thermally
curved after being ground and polished;
as for example: “Made from plate glass
ground and polished and thereafter
thermally curved.”

§ 202.3 Misrepresenting products as
conforming to a standard or specifi-
cation.

In the sale, offering for sale, or dis-
tribution of any industry product, it is
an unfair trade practice:

(a) To falsely represent or imply that
any such product conforms to the

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Chapter I—Federal Trade Commission

requirements of any standard or specifi-
cation, whether established or recoge-
nized by a department or unit of a city
or state government, or of the Federal
Government, or otherwise;

(b) To represent or imply that such
product conforms to the requirements of
any standard or specification without
clearly disclosing the identity of the
standard or specification to which ref-
erence is made. Such disclosure shall
be by number, if any, of the standard
or specification referred to, and the type
of glass covered thereby, on all labels,
invoices, sales literature, display cards,
containers, and other advertising, except
that when available space on labels is
insufficient for the full statement in
legible type, the identification may be
made by number only;

(c) For any member of the industry
to represent or imply that the product
conforms to any standard or specifica~
tion which is inapplicable or which has
been rescinded, revised, superseded, or
amended, and thereby mislead or deceive
purchasers or prospective purcliasers.

§ 202.4 Misuse of the word “Crookes.”

(a) It is an unfair trade practice, in
the sale or distribution of sun glasses
or sun glass lenses, to mark, stamp,
brand, label, advertise, describe, or
otherwise represent, such sun glasses or
lenses as being “Crookes” wlien such is
not true in fact; or to use the word
“Crookes” or other words or representa~
tions in any manner as to import or
imply that the lenses to which such
marks, words, or representations are
applied are “Crookes” lenses when such
is not true in fact.

(b) Definition: For purposes of this
part a “Crookes” lens is defined as a
nearly neutral colored ultra-violet ab-
sorption glass which contains sufficient
erude cerium and/or other rare earths
to reduce the ultra-violet transmission
at a thickness of 2.0 mm. to not more
than 1 percent at 334 millimicrons, and
also at this thickness to have prominent
didymium absorption bands in the yel-
low region of the spectrum. For sun
glasses the visual transmission shall be
not more than 67 percent, but may vary
within this limitation according to the
desired shade.

§ 202.5 Deceptive price representations.

Members of the industry shall not rep-
resent directly or indirectly in advertis-~
ing or otherwise that an industry product

§ 202.6

may be purchased for a specifled price,
or at a saving, or at a reduced price,
when such ts not the fact; or otherwise
deceive purchasers or prospective pur-~
chasers with respect to the priee of any
product offered for sale; or furnish any
means or instrumentality by which others
engaged in the sale of industry products
may make any such representation.
Nore: On December 20, 1963, the Com-
mission adopted Guides Against Deceptive
Pricing which became effective on January
8, 1964, and which supersede the guides on
this subject as adopted October 2, 1958. The
1964 guides are set forth as an appendix to
these rules.
[29 F.R. 11125, July 31, 1964]

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

(a) It is an unfair trade practice to
misrepresent tlie place of manufacture
or processing of industry products or
their components.

-(b) It is also an unfair trade practice
to offer for sale, sell or distribute any
industry product manufactured or
processed in a foreign country, or any
industry product containing a substan~
tial or material part or parts manufac-
tured or processed in a foreign country,
without clear and: adequate disclosure of
such fact, when the failure to make suchi
disclosure has the capacity and tendency
or effect of misleading or deceiving
purchasers or prospective purchasers as
to the origin of the product, or part or
parts thereof, as the case may be.

Disclosure of foreign origin, as and
when required under this paragraph,
may be in the form of a stamping or
marking on the product itself, or on a
tag or label securely attached to the
product. Such disclosure shall clearly
identify the foreign country in which the
product, or part or parts thereof, were
manufactured or processed, and shall be
of such conspicuousness as to be notice~-
able and readable on casual inspection,
and of such permanence as to remain
thereon until the consummation of con~
sumer sale.

Nore: 1: Paragraph (b) of this section is
not to be construed as requiring disclosure
as to foreign manufacture or processing
when, by reason of further manufacturing
or processing operations in this country, or
merger with another part or other parts, the
imported product or part does not retain the
appearance and essential characteristica
which is possessed at the time of its impor~
tation. In this connection it is to be under-
stood that when lenses imported from a for-

161


§ 209.7

eign country are installed in frames of
domestic or foreign manufacture, such lenses
are not to be regarded as having lost their
identity either in appearance or essential
characteristics by reason of installation in
the frames.

Norr 2: Nothing in this section shall be
construed as relleving any number of the
industry or other party of the necessity of
complying with the requirements of the cus-
toms laws or regulations, or other applicable
provisions of law or regulation, relating to
the marking of imported articles.

§ 202.7 Misuse of the term “certified,”
etc.

It is an unfair trade practice for an
industry member to describe, identify, or
refer to an mdustry product as “Certi-
fled,” or to use respecting such product
any other word or words of similar
meaning or import, unless:

(a) The identity of the certifier and
the specific matters or qualities certified
are clearly disclosed in conjunction
therewith; and

(b) The certifier has examined such
product, has made certification, and ts
qualified to certify as to such matters
and qualities; and

(c) There is available to the purchaser
a certificate setting forth clearly and
nondeceptively the name of the certifier
and the matters and qualities certified.

§ 202.8 Misrepresentation as to gold
content.

(a) It is an unfair trade practice to
sell or offer for sale any industry product
under any trade or product name or des-
ignation or other representation having
the capacity and tendency or effect of
deceiving purchasers or prospective pur-
chasers thereof as to the presence of gold
or gold alloy in the product, or as to the
quantity or fineness of gold alloy con-
tained in the product, or as to the fine-
ness, thickness, weight ratio, or manner
of application of any gold or gold alloy
Plating, covering, or coating on any
surface of any industry product or part
thereof.

(b) The following practices are among
those to be regarded as inhiblted by
paragraph (a) of this section:

(1) Use of the unqualified word
“Gold,” or any abbreviation thereof, as
descriptive of any industry product, or
part thereof, which is not composed
throughout of fine (24 karat) gold.

(2) Use of the word “Gold,” or any
abbreviation thereof, as descriptive of

Title 16—Commercial Practices

any industry product, or part thereof
which is composed throughout of an als
loy of gold, unless a correct designation
of the karat fineness of the alloy im-
mediately precedes the word “Gold,” or
abbreviation thereof, and such fineness
designation is of at least equal conspicu-
ousness therewith.

(3) Use of the word “Gold,” or any
abbreviation thereof, as descriptive of
any industry product, or part thereof
which is not composed throughout of
gold or gold alloy, but is surface-plated
or coated with gold alloy, unless the
word “Gold,” or abbreviation thereof, is
so qualified as adequately and nondecep-
tivety to disclose that the product or part
is but surface-plated or coated with an —
alloy of gold; and, when such plating has
been mechanically applied, unless such
word “Gold,” or abbreviation thereof, is
immediately preceded by a correct desig-
nation of the karat fineness of the alloy
and such fineness designation is of at
least equal conspicuousness therewith.

Note: See acceptable forms of markings

and descriptions for such products set out
in paragraph (c)(2) of this section.

(4) Use of the terms “Gold Filled,”
“Rolled Gold Plate,” “Rolled Gold
Plated,” “Gold Overlay,” “Gold Plated,”
or “Gold Plate,” as descriptive of an in-
dustry product or part thereof, unless
such product or part contains a surface-
plating of gold alloy applied by a me-
chanical process which is of such thick-
ness and extent of surface coverage that
use of the term as descriptive of the
product or part will not have the ca-
pacity and tendency of deceiving pur-
chasers or prospective purchasers, and
unless the term is immediately preceded
by a correct designation of the karat
fineness of the alloy and such designa-
tion is of at least equal conspicuousness
as the term used.

Nore: See acceptable forms of markings

and descriptions for such products set out in
Paragraph (c)(2) of this section.

(5) Use of the term “Gold Electro-
plate,” or “Gold Electroplated,” as de-
scriptive of any industry product or part
thereof, unless such product or part is
plated or coated with gold or a gold alloy
and such plating or coating is of such
karat fineness, thickness, and extent of
surface coverage that the use of the term
will not have the capacity and tendency

162


Chapter |1—Federa!l Trade Commission

of deceiving purchasers or prospective
purchasers.
Nore: See acceptable forms of markings

and descriptions for such products set out
in paragraph (c)(3) of this section.

(6) Representing, directly or by impli-
cation, by use of any name, terminology,
or otherwise, that an industry product
is equal or superior to, or different than,
a known and established type of industry
product with reference to its gold content
or method of manufacture, unless the
representation ts true in fact (namely,
that it is equal or superior to or different
than the established type in the respects
represented or implied.)

Nore: Requirements for use of the word
“Gold,” or any abbreviation thereof, as above
set forth, are applicable to ‘ ‘old,””
“Diragold,” “Noblegold,” “Goldine,” or any
words or terms of similar import.

(c) Markings and descriptions of in-
dustry products or parts thereof will be
considered as meeting the requirements
of this section when in conformity with
the following:

(1) An industry product or part there~-
of composed throughout of an alioy of
gold of not less than 10 karat fineness
may be marked and described as “Gold”
when such word “Gold,” wherever ap-
pearing, is immediately preceded by a
correct designation of the karat fineness
of the alloy and such Karat designation is
of equal conspicuousness as the word
“Gold” (as, for example, “14 Karat
Gold;” “14 K. Gold;” and “14 Et. Gold’”’).
Such a product may also be marked and
described by a designation of the karat
fineness of the gold alloy unaccompanied
by the word “Gold” (as, for example, “14
Karat,” “14 Et.,” and “14 K.”),

Nore: When the term “Gold,” or any ab-
breviation thereof, is used as descriptive of
any product or part of a product which is
composed throughout of gold alloy but con-
tains a concealed hollow center or interior,
the term or ita abbreviation shall also be
immediately accompanied by a disclosure of
the fact that the product or part contains a
hollow center or interlor (as, for example,
“14 Karat Gold-Hollow Center” and “14 K.
Gold Tubing,” when of a gold alloy tubing
of such a karat fineness), when the failure
to make such disclosure has the capacity and
tendency or effect of deceiving purchasers or
prospective purchasers. Such products must
not be marked or described as “solid” or as
being solidly of gold or of a gold alloy. For
example, though the composition of such a
product is 14 Karat gold alloy, it shall not he

§ 209.8

described or marked as either “14 Kt. Solid
Gold” or as “Solid 14 Kt. Gold.”

(2) An industry product or part there-
of on which there has been affixed on all
significant surfaces, by soldering, braz-
ing, welding, or other mechanical means,
a plating of gold alloy of not less than 10
karat fineness which is of substantial
thickness,* may be marked or described
as “Gold Filled,” “Gold Plate,” “Gold
Plated,” “Gold Overlay,” “Rolied Gold
Plate,” or adequate abbreviations there-
of, when such plating constitutes at least
1/20th of the weight of the metal in the
entire article, and when the term is im-
mediately preceded by a designation of
the Karat fineness of the plating which
is of equal conspicuousness as the term
used (as, for example, “14 Kt. Gold
Filled,” “14 Kt. GF.” “14 Et. Gold
Plated,” “14 Kt. G.P.,” and “14 Kt. Gold
Overlay”). When conforming to all
such requirements except the specified
minimum of 1/20th of the weight of the
metal in the entire article, the terms
“Gold Plate,” “Gold Plated,” “Rolled
Gold Plate,” and “Gold Overlay” may be
used when the karat fineness designation
is immediately preceded by a fraction
which accurately discloses the portion
of the weight of the metal! in the entire
article accounted for by the plating, and
when such fraotion is of equal conspic-
uousness as the term used (as, for ex-
ample, “1/40 12 Kt. Rolled Gold Plate,”
and “1/40 12 Kt. R.G.P.”).

(3) An industry product or part
thereof, all significant surfaces on which
there has been affixed by an electrolytic
process a coating or plating of gold, or
of a gold alloy of not less than 10 karat
fineness, the minimum _ thickness
throughout of which its equivalent to
7/1,000,000ths of an inch of fine gold,
may be marked or described as “Gold
Electroplate” or “Gold Electroplated.”
When the coating or plating meets the
minimum fineness, but not the minimum
thickness, above specified, the marking
or description may be “Gold Flashed”
or “Gold Washed,” and when of the
minimum fineness above specified and of
a minimum thickness throughout which
is equivalent to 100/1,000,000ths of an

* As here used, the term “substantial thick-
ness” is to be construed as requiring that all
areas of the plating be of such thickness as
to assure of a durable coverage of the base
metal to which it has been affixed.

163


§ 202.9

inch of fine gold, the marking or descrip-
tion may be “Heavy Gold Electroplate”
or “Heavy Gold Electroplated.” When
coatings or platings qualify for the term
“Gold Electroplate” (or “Gold Electro-
plated’), or the term “Heavy Gold Elec-
troplate”’ (or “Heavy Gold Electroplat~
ed’), and have been applied by use of a
special kind of an electrolytic process,
the designation for which the coating or
Plating is qualified may be accompanied
by an identification of the process used,
as for example, “Gold Electroplated (X
Process)”; “Heavy Gold Electroplated
CY Process) .”

Nore: When a quality mark has proper
application but to one or more parts of an
industry product and not to another part or
parts thereof which are of similar surface
appearance, it shall be accompanied by iden-
tification of the part or parts to which it is
applicabie. No quality mark shall be used
in which words or letters appear in greater
size than other words or letters of the mark-
ing, e.g. the marking “gold electroplated,”
“gold flashed,” or “gold washed” shall not be
used with the word “electroplated,” “flashed,”
or “washed” in small type and the word
“gold” in larger type. As used in this section,
the term “quality mark” means any letter,
figure, numeral, symbol, sign, word, or term,
or any combination thereof, which has been
stamped, embossed, inscribed, or otherwise
placed, on any industry product and which
indicates or suggests that such product is
composed throughout of gold or gold alloy,
or has a surface or surfaces on which there
has been plated or deposited any gold or gold
alloy. Included are the words “gold,”
“Karat,” “carat,’’ or any abbreviation thereof,
whether used alone or in conjunction with
the word “filled,” “plated,” “overlay,” “‘elec-
troplated,” “flashed,” or “washed.”

(ad) The requirements of this section
relating to markings and descriptions of
industry products and parts thereof are
subject to the tolerances applicable
thereto under the National Stamping Act
(15 U.S. Code, Sections 294, et seq.).
Such requirements are also subject to
exemptions applicable thereto under sec-
tion 10(a) of Commercial Standard CS
67-38, relating to articles made of karat
gold, and under sectlon 12(a) of Com-
mercial Standard CS 47-34, relating to
articles. having mechanically-applied
surface platings of gold alloy.

§ 202.9 Guarantees, warranties, ete.

(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

Title 16—Commercial Practices

such guarantee is conjunctively disclosed
and without deceptively minimizing the
terms and conditions relating to the
obligations of the guarantor.

(b) It is also an unfair trade practice
to use, or cause to be used, any guarantee
in which the obligations of the guarantor
are impracticable of fulfillment, or in
respect to which the guarantor fails or
refuses to observe his liabilities there-
under.

(c) This section shall be applicable
not only to guarantees but also to war-~
ranties, to purported guarantees and
warranties, and to any promise or repre-
sentation in the nature of a guarantee or
warranty.

§ 202.10 Defamation of competitors or
false disparagement of their products.

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 methods,
seliing prices, values, credit terms, poii-
cies, or services, is an unfair trade prac-

ice.

§ 202.11 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
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 corn-
signment for the purpose and with the
effect of artificially clogging or closing
trade outlets and unduly restricting com-
petitors’ use of said trade outlets in get-
ting their products to purchasers
through regular channeis of distribu-~
tion, thereby injuring, destroying, or
preventing competition or tending to
create @ monopoly or unreasonably to
restrain trade.

(c) Nothing in this section shall be
construed te 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.

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Chapter I—Federal

§ 202.12 Probibited discrimination.‘
Nore: This section is based on the pro-

visions of section 2 of the Clayton Act as

amended by the Robinson-Patman Act.

(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 indlrectly, any rebate,
refund, discount, credit, or other form of
price differential, where such rebate, re-
fund, discount, credit, or other form of
price differential, effects a discrimina-
tion in price between different pur-
chasers 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 substan-
tially 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 knowingly receives the benefit
of such discrimination, or with customers
of elther of them: Provided, however,

(1) That the goods involved in any
such transactlon 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, unlversitles, public libraries,
churches, hospitals, and charltable in-
stitutlons 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 26, 1936, the
U.S. Attorney General advised that the
Robinson-Patman Antidiscrimination Act “ls
not applicable to Government contracts for
supplies.” (88 Opinions, Attorney General
639.)

(2) That nothing contained in this
paragraph shall prevent differentials
which make only due allowance for dif-

*As 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
Territory 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.”

Trade Commission § 909.19

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: Cost justification under the above
proviso depends upon net savings in cost
based on all facts relevant to the transactions
under the terms of subparagraph (2) of this
section. 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, 1t does not follow that
the same discount can be cost justified if
granted to a purchaser of the same quantity
by multiple orders or for multiple deliveries.

(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 fled transactions and
not in restraint of trade;

(4) That nothing contained in this
paragraph shali 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
competitor.

Note: Subsection (b) of section 2 of the
Clayton Act, as amended, reads as follows:

Upon proof being made, at any hearing on
& complaint under this section, that there
has been discrimination in price or services
or facilities furnished, the burden of rebut-
ting the prima facie case thus made by
showing justification shall be upon the per-
son charged with a violation of this section,
and unless justification shall be afirmatively
shown, the Commission is authorized to issue
an order terminating the discrimination:
Provided, however, That nothing herein con-
tained 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 competitor, or the services or
facilitles furnished by a competitor.

(b) Prohibited brokerage and commis-
sions. It is an unfalr trade practice for
any member of the industry engaged in
commerce, in the course of such com-
merce, to pay or grant, or to recelve or
accept, anything of value as a commis-

165


§ 209.13

sion, 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 inter-
mediary therein where such intermediary
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 compen-
sation is so granted or paid.

(c) 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 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 facil-
ities 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 ail other customers com-
peting in the distribution of such prod-
ucts or commodities.

Nore 1: Industry members giving advertis-
ing allowances to competing customers must
exercise precaution and diligence in seeing
that all of such allowances are used in ac-
cordance with the terms of their offers.

Nors 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 ali, such customers, 1s 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.

(a) Prohibited discriminatory services
or facilities. It is an unfair trade prac-
tice for any member of the industry
engaged 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 fur-
nishing, or by contributing to the fur-
nishing of, any services or facilities
connected with the processing, handling,
sale, or offering for sale of such com-
modlty so purchased upon terms not ac-
corded to all competing purchasers on
proportionally equal terms.

Title 16—Commercial Practices

Notre: See subsection (b) of section 2 of
the Clayton Act, as amended, which ts set
forth in the note concluding paragraph (a)
of this section.

(e) 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.

Nore: Paragraph (e) of this section is 6
Testatement of section 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 re«
ceived the lower price knowing, or knowing
facts from which he should have known, that
such price was violative of section 2(a) of
sald Act and not justified under subpara-
graph (2), (4), or (5), of paragraph (a) of
this section. When, in any such proceeding,
the tssue is limited to the question of
whether the price differential involved made
only due allowance for differences in cost of
manufacture, sale, or delivery resulting from
the differing methods or quantities in which
the goods were sold and dellvered, the Com-
mission may establish a prima facie case in 8
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 compet-
ing 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 char-
acter specified as to justify the price
differential.

§ 202.13 Prohihited sales below cost.

(a) The practice of selling industry
products at a price less than the cost
thereof to the seller, with the purpose
or intent, and where the effect is, 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
resorted to and pursued with the
wrongful intent or purpose referred to

166


Chapter [—Federal Trade Commission

and where the effect is, or where there is
a@ 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
ordinarily be lacking are cases in which
such sales were (a) of seasonal goods
near the conclusion of the season; (b) of
perishable goods in respect to which de-
terioration is imminent; (c) of obso-
lescent goods; (d) made under judicial
process; or (e) made in bona fide dis-
continuance of business in the goods
concerned.

(c) 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
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, prooess-
ing, preparation for marketing, sale, and
delivery, of the products. Not to be in-
cluded are dividends or interest on
borrowed or invested capital, or nonop-
erating losses, such as fire losses and
losses from the sale or exchange of capt-
tal 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.

(dad) Nothing in this section shall be
construed as relieving an industry mem-
ber from compliance with any of the
requirements of the Robinson-Patman
Act.

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

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

5The inhibitions of this section are sub-
ject to Pubiic Law 642, approved July 14,
1952, 66 Stat. 682 (the McGuire Act) which
provides that with respect to a commodity
which bears, or the label or contalner of
which bears, the trade-mark, brand, or name
of the producer or distributor of such com-
modity and which is in free and open com-
petition with commodities of the same
general class produced or distributed by

90-059--77——12

§ 209.14

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 indus-
try, or with any other person or persons,
to fix or maintain the price of any goods
or otherwise unlawfully to restrain
trade; or to use any form of threat,
intimidation, or coercion to mduce any
member of the industry or other person
or persons to engage in any such
planned common course of action, or to
become a party to any such understand-
ing, agreement, combination, or con-
spiracy.

PART 205—-UPHOLSTERY AND
DRAPERY FABRICS INDUSTRY

Group I

Sec.

205.1 Misrepresentation (general).

205.2 Misbranding.

205.3 False invoicing.

205.4 Deception as to origin.

205.5 Identification and disclosure of fiber
or material content.

205.6 Disclosure of presence of used fiber
or material.

205.7 Substitution of products.

205.8 Inducing breach of contract.

205.9 Commercial bribery.

205.10 Imitation of trade-marks, etc.

205.11 Defamation of competitors or false
disparagement of their products.

205.12 Fictitious price Lists.

205.13 Use of lottery schemes.

205.14 Misrepresentation as to character of
business.

205.15 Prohibited discrimination.

205.16 Aiding or abetting use of unfair
trade practices.

Group II

205.101 Repudiation of contracts.

205.102 Use of written sales contracts.

205.103 Use of samples.

205.104 Arbitration of disputes.

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 resold by such buyer when such
contract or agreement is lawful as applied
to intrastate transactions under the iaws of
the State, Territory, or territorial furisdic-
tion in which the resale is to be made or to
which the commodity is to be transported
for such resale, and when such contract or
agreement Is not between manufacturers, or
between wholesalers, or between brokers, or
between factors, or between retailers, or be-
tween persons, firms, or corporations in
competition with each other.

167