Frozen Food Industry
16 CFR Part 22 · 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 These rules and guides are historical: most were rescinded or replaced, so do not assume any is in force.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
Text (1977 edition, OCR)
Chapter |—Federal Trade Commission
ports as to production or sales, with the
capacity and tendency or effect of mis-
leading or deceiving purchasers, pro-
spective purchasers, or the consuming
public, or the advertising, sale, or offer-
ing for sale of industry products at
prices purporting to be reduced from
what are in fact fictitious prices, or at
purported reductions in prices when
such purported reductions are in fact
fictitious or are otherwise misleading or
deceptive, is an unfair trade practice.
(b) It is an unfair trade practice, in
connection. with the sale, offering for
sale, or distribution of industry products
at prices that are in any manner repre-~
sented as reduced from or lower than
current, former, or regular prices, to use,
or to furnish or supply for such use, price
tags, labels, or advertising material that
set forth a false, fictitious, or exagger-~
ated current, former, or regular price, or
a false, fictitious, or exaggerated manu-
facturer’s or distributor’s suggested re-
tail selling price, or that contain what
purport to be bona fide price quotations
which are in fact higher than the prices
at which such products are regularly
and customarily sold in bona fide retail
transactions. It is likewise an unfair
trade practice to distribute, sell, or offer
for sale to the consuming public in such
manner products bearing such false,
fictitious, or exaggerated price tags or
labels.
§ 21.17 Misuse of terms “close-outs,”
“discontinued Lines,” “special bar-
gains,” etc.
It is an unfair trade practice to offer
for sale, sell, advertise, describe, or
otherwise represent, industry products
as “Close-outs,” “Discontinued Lines,” or
“Special Bargains,” by use of such terms
or by words or representations of similar
import, when such is not true in fact; or
to so offer for sale, sell, advertise, de-
scribe, or otherwise represent industry
products where the capacity and tend-
ency or effect thereof is to lead the pur-
chasing or consuming public to believe
such products are being offered for sale
or sold at greatly reduced prices, or at
so-called “bargain” prices, when such is
not the fact.
§ 21.18 Aiding or abetting use of un-
fair trade practices.
Tt is an unfair trade practice for any
person, firm, or corporation to aid, abet,
coerce, or induce another, directly, or
§ 22.0
indirectly, to use or promote the use of
any unfair trade practice specified in
these rules.
PART 22—FROZEN FOOD INDUSTRY
Sec.
22.0 Definitions.
Group I
22.1 Prohibited discrimination.
22.2 Exclusive deals.
22.3 Prohibited sales below cost.
224 Push money.
22.5 Fictitious prices,
22.6 False Invoicing, billing, etc.
22.7 Coerclng the purchase of one product
as @& prerequisite to the purchase
of other products.
228 Misrepresentation in general,
22.9 Defamation of competitors or false
disparagement of thelr producte.
22.10 Enticing away employees of competil-
tors.
22.11 Substitution of products.
22.12 Inducing breach of contract.
22.13 Use of lottery schemes, etc.
22.14 Prohibited forms of trade restraints
(unlawful price fixing, ete.).
22.15 Use of the word “‘free”’.
22.16 Misrepresenting products as conform-
ing to standard.
22.17 Procurement of competitors’ confl-
dential information.
22.18 Alding or abetting use of unfair trade
practices.
Group II
22.101 Contractual obligations,
22.102 Proper refrigeration.
AUTHORITY: The provisions of this Part 22
issued under secs. 6, 6, 38 Stat. 721, 719; 16
U.S.C. 46, 45, unless otherwise noted.
Source: The provisions of this Part 22 ap-
pear at 21 F.R. 266, Jan, 18, 1956, unless
otherwise noted.
§ 22.0 Definitions.
(a) Products of this industry consist
of vegetables, frults, juices, fish and
shellfish. baked goods, and other mis-
cellaneous prepared foods, which are
packed, marketed, and delivered to the
ultimate consumer in a frozen state. Not
included as products of the industry
are meats and poultry, and frozen
dairy products including ice cream and
sherbets.
(b) The term “member of the indus-
try” means any person, firm, corporation,
or organization engaged in the produc-
tion and/or inarketing of products of the
industry.
275
§ 22.1
Group I
§ 22.1 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, 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 pur-
chases 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 knowingly receives the benefit
of such discrimination, or with cus-
tomers 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, or charitable insti-
tutions not operated for profit, as sup-
plies for their own use;
(2) That nothing contained in this
paragraph shall 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: Cost justification under the above
proviso depends upon net savings in cost
based on all facts relevant to the transac-
1As used in § 22.1, the word “commerce”
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 juris-
diction 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 jurisdiction of the United States.”
Title 16—-Commercial Practices
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 orders or for
muitiple deliveries.
(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,
actual or imminent deterioration of
perishable goods, distress sales under
court process, or sales m 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, or the services or facilities fur-
nished by a competitor (see paragraphs
(d) and (e) of this section).
Nore: In complaint proceedings, justifica-
tion of price differentials under subpara-
graphs (2), (4), and (5) of this paragraph
is a matter of affirmative defense to be es-
tablished by the person or concern charged
with price discrimination.
(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-
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, colieges,
universities, public libraries, churches,
hospitals, or charitable mstitutions 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 les-
sening competition or tendmg to create
a monopoly in any line of commerce, or
of injuring, destroying, or preventing
competition with the industry member
276
Chapter |—Federal Trade Commission
or with the customer receiving the bene-
fit of the price differential, or with cus-
tomers 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 marketa-
bility 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).
Example No. 1. At the end of a given period
an industry member grants a discount to
a customer equivalent to a fixed percentage
of the total of the customer’s purchases dur-
ing such period and fails to grant such dis-
count to other customers under like condi-
tions.
Example No. 2. An industry member sells
goods to one or more of his customers at a
higher price than he charges other customers
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. An industry member makes
a sale of industry products to a purchaser
under an arrangement whereby the products
are shipped by the industry member’s sup-
plier directly to such purchaser and charges
a@ lower price than that charged other pur-
chasers under similar circumstances, or a
price which, when compared with the price
charged purchasers on sales made out of the
stock of the industry member, constitutes a
discount greater than can be justified by the
difference in costs resulting from the dif-
fering quantities or method of sale or
delivery.
Example No. 4. An industry member sells
to some customers industry products at
prices of drop shipments when in fact such
transactions are out-of-stock sales which are
made to other customers at higher prices,
even though the quantities involved are large
enough to be delivered on a direct shipment
pasis. (As here used an “out-of-stock” sale
is one from the industry member’s stock on
hand and a “drop shipment” sale is one in
which the industry member arranges to have
the goods shipped by the industry member’s
supplier directly to the industry members
customer.)
Example No. §. 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 cus-
tomers are, nevertheless, allowed to take a
6 percent instead of a 2 percent discount
when making payment to the industry mem-
ber within the time prescribed.
§ 22.1
{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 or 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 inter-
mediary therein where such intermedi-
ary 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.
(a) 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 manufactured,
sold, or offered for sale by such member,
unless such payment or consideration is
available on proportionally equal terms
to all other customers competing in the
distribution of such products or com-
modities.
(e) Prohibited discriminatory services
or facilities. It is an unfair trade praec-
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 fur-
nishing of, any services? or facilities?
connected with the processing, handling,
sale, or offering for sale of such commod-
ity so purchased upon terms not accorded
2The term “services,” as here used, in-
cludes, but is not limited to, the installation,
maintenance, and repair of cabinets designed
for use by retail stores in the display, preser-
vation, and storage of frozen food products.
®The term “facilities,” as here used, in-
cludes, but is not limited to, cabinets de-
signed for use by retaii grocery stores in dis-
playing, preserving, and storing frozen food
products.
277
§ 22.2
to all competing purchasers on propor-
tionally equal terms.
(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 paragraphs
(a) to (e) of this section.
Nore: Paragraph (f) of this section 1s &
restatement of section 2(f) of the Clayton
Act as amended. In a complaint proceeding
under this section, in order to make out a
prima facte 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
said act and not justified under paragraph
(a) (2), (4), or (5) of this sectlon. When,
in any such proceeding, the issue is limited
to the question of whether the price differ-
ential 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 delivered, the Commission may estab-
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, when there is a differ-
ence 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
competing 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 re-
sulted in sufficient cost savings of the kind
and character specified as to justify the price
differential.
(g) Purchases by U.S. Government;
applicability of Robinson-Patman Anti-
discrimination Act to same. In an
opinion submitted to the Secretary of
War under date of December 28, 1936,
the U.S. Attorney General advised that
the Robinson-Patman Antidiscrimina-
tion Act “is not applicable to Govern-
ment contracts for suppHes.” (38
Opinions, Attorney General 539.)
§ 22.2 Exclusive deals.
It is an unfair trade practice for any
member of the industry engaged in com-
merce,’ in the course of such commerce,
1 See footnote 1 to § 22.1.
Title 16——Commercial Practices
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 iessee 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 substantially to lessen competi-
tion or tend to create a monopoly in any
line of commerce.
Norgt 1: The following is an example of a
practice violative of this section. Manufac-
turer A supplies retail grocery store B with
a cabinet for the display, preservation, or
storage of frozen food products sold by B
under an agreement or understanding with
B that B will deal only in products purchased
from A and the effect of such arrangement
has a reasonable probability of substantially
lessening competition in the sale of frozen
food products.
Note 2: The furnishing of a cabinet or
other benefit by an industry member to his
customer or prospective customer may under
certain circumstances constitute a violation
of section 5 of the Federal Trade Commission
Act, as amended, regardless of the absence of
any agreement or understanding between the
industry member and his customer or pro-
spective customer that the customer or pro-
spective customer will not deal in the
Products of a competitor or competitors of
said industry member.
There are presently pending before the
Commission several complaint cases against
manufacturers and processors of ice cream,
sherbets, and similar frozen dairy products
charging violation of section 5 of the Federal
Trade Commission Act, as amended, by: (1)
Supplying cabinets to customers for display,
storage, and preservation of products; (2)
supplying to customers installation and
maintenance services relating to the faclli-
ties mentioned; (3) making cash or credit
allowances to customers for their purchase
of the facilities or services mentioned; (4)
making loans of money to customers and
prospective customers; and (5) supplying of
other benefits to customers and prospective
customers;
under circumstances having the effect or
Teasonable probabllity of substantially in-
juring, suppressing, or stifling competition
or tending to create a monopoly in the sale
in commerce of the products mentioned.
While §§ 22.1 and 22.2, constituting respec-
tively re-statements of sections 2 and 3 of
the Clayton Act as amended, contain provi-
sions which have application to the practices
mentioned under circumstances and condi-
tions therein specified, the rules for the in-
278
Chapter I—Federal Trade Commission
dustry do not contain any of the limitations
fmposed by section 5 of the Federal Trade
Commission Act as amended relating to such
practices. Decisions made in the mentioned
pending complaint cases may supply sub-
stantial clarification as to the applicability
of said section 5 to these practices, and in
that event consideration will be given to the
inclusion of provisions supplying such clari-
fication. The non-inclusion of provisions
based on said section 5 in the rules promul-
gated for the industry ts not to be regarded
as inferring that the corrective authority of
the Commission respecting the practices is
confined to sections 2 and 3 of the Clayton
Act as amended.
§ 22.3 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 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 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
ordinarily be lacking are cases in which
such sales were: (1) Of seasonal goods
near the conclusion of the season; (2)
of perishable goods in respect to which
deterioration is imminent; (3) of ob-
solescent goods; (4) made under judicial
process; or (5) made in bona fide dis-
continuance of business in the goods
concerned.
(c) As used in 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
py 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, process-
ing, preparation for marketing, sale, and
delivery of the products. Not to be in-
90-058S—77——_19
§ 29.4
cluded are dividends or interest on bor-
rowed or invested capital, or nonoperat-
ing losses, such as fire losses and losses
from the sale or exchange of capital as-
sets. Operating cost should not be re-
duced by items of nonoperating income,
such as income from investments, and
gain on the sale of capital assets.
(d) Nothing in this section shall be
construed as relievmg an industry mem-
ber from compliance with any of the
requirements of the Robinson-Patman
ct.
§ 22.4 Push money.
_ It is an unfair trade practice for any
industry meinber to pay or contract to
pay anything of value to a salesperson
employed by a customer of the industry
member as compensation for, or as an
inducement to obtain, special or greater
effort or service on the part of the sales-
person m promoting the resale of prod-
ucts supplied by the industry member to
the customer:
(a) When the agreeinent 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 salesperson or
customer is dependent on lottery or
chance; or
(c) When any provision of the agree-
ment or understanding requires or con-
templates practices or a course of con-
duct unduly and intentionally hampering
sales of products of competitors of an
industry inember; or
(d) When, because of the terms and
conditions of the understanding or
agreement, including its duration, or the
attendant circumstances, the effect may
be to substantially lessen competition or
tend to create a monopoly; or
(e) When similar payments are not
accorded to salespersons of competing
customs on proportionally equal terms
in compliance with section 2 (d) and
(e) of the Clayton Act, as ainended by
the Robinson-Patman Act.
Note: Payments made by an industry
member to a salesperson of a customer under
any agreement or understanding that all or
any part of such payments is to be trans-
ferred by the salesperson to the customer, or
is to result in a corresponding decrease in
the salesperson’s salary, are not to be consid-
ered within the purview of this section, but
are to be considered as subject to the require
279
§ 22.5
ments and provisions of section 2(a) of the
Clayton Act, as amended by the Robinson-
Patman Act.
§ 22.5 Fictitious prices.
It is unfair trade practice to sell or
offer for sale industry products at prices
purported to be reduced from what are in
fact fictitious prices, or to sell or offer for
sale such products at a purported reduc-
tion in price when such purported reduc-
tion is in fact fictitious or is otherwise
misleading or deceptive.
§ 22.6 False invoicing, billing, etc.
It is an unfair trade practice for a
member of the industry to engage m false
invoicing which has the capacity and
tendency or effect of misleading or,
deceiving purchasers, prospective pur-|
chasers, or the consuming public, by,
withholding from, altering, or insertin:
in, invoices, billings, or sales slips any
statements or information by reason Of
which oinission, alteration, or insertion a
false record is made, wholly or in part
of the transactions represented on the
face of the invoices, billings, or sales slips
§ 22.7 Coercing the purchase of one,
product as a prerequisite to the pur-
chase 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 sub-
stantially to lessen competition or tend
to create a monopoly or unreasonably to
restrain trade, in an unfair trade prac-
tice.
§ 22.8 Misrepresentation in general.
It is an unfair trade practice for any
industry member to make or cause to be
made, directly or indirectly, in news-
paper or periodical advertisements, sales
promotional literature, by television,
radio, or in connection with any deinon-
stration or course of instruction or other-
wise, any statement or representation,
however published, which has the ca-
pacity and tendency or effect of mislead-
ing or deceiving purchasers or prospec-
tive purchasers;
(a) With respect to the identity of any
product of the industry, or its manu-
facture, distribution, or marketing;
(b) With respect to the brand, com-
position, grade, quality, quantity, or size
of any product of the industry;
(c) With respect to the availability of
the supply of a particular product or
products of the industry;
Title 16—Commercial Practices
(d) With respect to the permanency of
service by the seller, or savings available
to the purchaser of, or subscribers to, so-
called “Home Freezer Plans,” which in-
volve the sale of industry products; or
(e) In any other material respect.
Nore: Among the inhibitions of this sec-
tion is “false advertisement,” as defined in
section 15 of the Federal Trade Commission
Act, of any “food” or other product within
the scope of such sectlon. Furthermore,
nothing in the rules in this part is to be
construed as relieving anyone of the necessity
of complying with the provisions of the
Federal Food, Drug, and Cosmetic Act in
respect to labeling or any other matter com-
ing within the purview of that act.
§ 22.9 Defamation of competitors or
false disparagement of their products.
The defamation of competitors by
faisely imputing to them dishonorable
conduct, inability to perform contracts,
questionable credit standing, or by other
false representations, or the false dis-
paragement of the grade, quality, or
manufacture of the products of competi-
tors, or of thcir business methods, selling
prices, values, credit terms, policies, serv-
ices, or conditions of employment is an
unfair trade practice.
§ 22.10 Enticing away employees of
competitors.
Knowingly enticing away employees
or sales representatives of competitors
under any circumstance having the ca-
pacity and tendency or effect of sub-
stantially injurimg or lessening present
or potential competition is an unfair
trade practice: Provided, That nothing
in this section shall be construed as pro-
hibiting employees from seeking more
favorable employment, or as prohibiting
einployers from hiring or offering em-
ployment to employees of competitors in
good faith and not for the purpose of
injuring, destroying, or preventing com-
petition.
§ 22.11 Suhstitution of products.
It is an unfair trade practice for a
inember of the industry to make an
unauthorized substitution of products,
where such substitution has the capacity
and tendency or effect of misleading or
deceiving the purchasing or consuming
public, 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
280
Chapter l—Federal Trade Commission
x, without advising the pur-
chaser a the substitution and obtaining
his consent thereto prior to making ship-
ment or delivery; or
(b) Falsely representing the reason
for making a substitution.
§ 22.12 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 any such contractual duties or serv-
ices, under any circumstances 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 for any in-
dustry member to solicit the business of
a customer of a competing industry
member; nor is the section to be con-
strued as in anywise authorizing any
agreement, understanding, or planned
common course of action by two or more
industry meinbers not to solicit business
froin the customers of either of them, or
from customers of any other industry
member.
§ 22.13 Use of lottery schemes, etc.
It is an unfair trade practice to sell,
distribute, or promote the sale or distri-
bution of any industry product by means
of a game of chance, gift enterprise, or
lottery scheme.
§ 22.14 Prohibited forms of trade re-
straints (unlawful price fixing, etc.) ‘
It is an unfair trade practice for any
meinber of the industry, either directly
4 The inhlbltions of this section are subject
to Public Law 542, approved July 14, 1952,
66 Stat. 632 (the McGuire Act) which pro-
vides 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 is in free and open com-
petition with commodities of the same
general class produced or distributed by
others, & 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 com-
modity may be resold by such buyer when
such contract or agreement is lawful as
applied to intrastate transactions under the
laws of the State, Territory, or territorial
§ 29.45
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, intimida-
tion, or coercion to induce any member of
the industry or other person or persons
t engage in any such pianned common
course of action, or to become a party to
any such understanding, agreement,
combination, or conspiracy.
§ 22.15 Use of the word “free.”
In connection with the sale, offering
for sale, or distribution of industry prod-
ucts, lt is an unfair trade practice to
use the word “free,” or any other word
or words of similar import, in advertise-
ments or in other offers to the public,
as descriptive of an article of merchan-
dise, or service, which is not an uncondl-
tional gift, under the following circum-
stances:
(a) When all the conditlons, obliga-
tions, or other prerequisites to the re-
celpt and retention of the “free” article
of merchandise or service offered are not
clearly and consplcuously set forth at
the outset so as to leave no reasonable
probability that the terms of the offer
will be misunderstood; and, regardiess
of such disclosure:
(b) When, with respect to any article
of merchandise required to be purchased
in order to obtain the “free” articie or
service, the offerer (1) increases the or-
dinary and usual price of such article
of merchandise, or (2) reduces its qual-
ity, or (3) reduces the quantity or size
thereof.
Note: The disclosure required by para-
graph (8) of this section shall appear in
close conjunction with the word “free” (or
other word or words of similiar import) wher-
ever such word first appears in each adver-
tisement or offer. A disclosure in the form
of a footnote, to which reference is made
by use of an asterisk or other symbol placed
next to the word “free,” will not be regarded
as compliance.
jurisdiction in which the resale ts to be made
or to which the commodity is to be trans-
ported for such resale, and when such con-
tract or agreement is not between manufac-
turers, or between wholesalers, or between
brokers, or between factors, or between re-
tailers, or between persons, firms, or corpora-
tions in competition with each other.
281
§ 22.16
§ 22.16 Misrepresenting products as
conforming to standard.
In connection with the sale or offering
for sale of industry products, it is an un-
fair trade practice to represent, through
advertising or otherwise, that such prod-
ucts conform to any standards recog-
nized in or applicable to the industry
when such is not the fact.
§ 22.17 Procurement of competitors’
confidential information.
Tt is an unfair trade practice for any
member of the industry to obtain infor-
mation concerning the business of a
competitor by bribery of an employee or
agent of such competitor, by false or
misleading statements or representa-
tions, by the impersonation of one in au-
thority, or by any other unfair means,
and to use the information so obtained
so as substantially to injure competition
or unreasonably restrain trade.
§ 22.18 Aiding or abetting use of un-
fair trade practices.
It 1s an unfair trade practice for any
person, firm, or corporation to aid, abet,
coerce, or induce another, directly or in-
directly, to use or promote the use of any
unfair trade practice specified m the
rules in this part, or of any other unfair
method of competition or unfair or de-
ceptive act or practice.
Group IT
§ 22.101 Contractual obligations.
The industry condemns repudiation of
contracts by sellers on a rising market or
by buyers on a declining market. Lawful
contracts of business obligations should
be performed in letter and in spirit.
§ 22.102 Proper refrigeration.
The industry condemns practices at
variance with essential health and sani-
tary temperature and refrigeration con-
trol requirements as constituting a men-
ace to the public health and the general
welfare of the consuming public and the
industry. It recommends that the tem-
perature and refrigeration of industry
products should be maintained con-
stantly and uniformly not higher than
zero degrees Fahrenheit in order to pre-
vent spoilage, deterioration, and con-
tamination.
PART 23-——-JEWELRY INDUSTRY
Sec.
23.0
23.1
Definitions.
Deception (general).
Title 16—Commercial
Practices
Sec.
23.2 Misleading illustrations.
23.3 Misrepresentation as to character of
business.
Deceptive pricing.
Misuse of terms “close-outs,” “dis-
continued lines,” “special bargains,”
etc.
Substitution of products.
Use of the word “free.”
Guarantees, warranties, etc.
Misuse of term “certified,” etc.
Misrepresentation as to origin and dis-
closure of foreign origin.
Misuse of terms “hand-made,” “hand-
polished,” etc.
Deceptive use and imitation of trade
oe corporate names, trade-marks,
etc.
Commercial bribery.
Consignment distribution.
Inducing breach of contract.
Defamation of competitors or false
disparagement of their products.
Enticing away employees of competi-
Ors.
Push money.
Prohibited forms of trade restraints
(unlawful price fixing, ete.).
Prohibited sales below cost.
Prohibited discrimination.
Misrepresentation as to gold content.
Misrepresentation as to silver content.
Misuse of words “piatinum,” “iridum,”
“palladium,” “ruthenium,” “rhodi-
um,” and “osmium.”
Additional requirements relating to
quality marks.
Misuse of the word “diamond.”*
Misuse of word “perfect,” ete,
Misuse of term “blue white,”
Misuse of the term “properly cut,” ete.
Misuse of the words “brilliant” and
“full cut.”
aus e of term “clean,” ete.
representation of weight, “
weight.” ght, “total
Misuse of word “pearl.”
Misuse of terms “cultured pearl,” “cul-
tivated pearl,” “seed pearl,” “Ort.
ental pearl,” “Oriental,” “natura,”
and “kultured.”
Misrepresentation as to cultured
pearls.
Deception as to precious and semi-
precious stones,
Misuse of words “ruby,” “sapphire,”
“emerald,” “topaz,” “stone,” “birth-
stone,” etc,
Misuse of words “real,” “genuine,”
“natural,” etc,
Misuse of words “gem,” “reproduc-
tion,” “replica,” “synthetic,” etc.
Appendix—Listing and classification of
rules for convenient reference by industry
members.
23.13
23.15
23.16
23.17
23.18
23.19
23.20
23.21
23.22
23.24
23.25
23.26
23.27
23.28
23.29
23.30
23.31
23.32
23.33
23.34
23.35
23.36
23.37
23.38
23.39
AvutHoriry: The provisions of this Part 33
issued under secs. 6, 5, 38 Stat. 721, 719; 15
U.S.C. 46, 45, unless otherwise noted.
282