Jewelry Industry
16 CFR Part 23 · Trade practice rules · in the Code of Federal Regulations 1959-1979 (14 annual editions)
Scanned CFR pages, OCR text may contain errors; the linked Library of Congress PDF is the authority. Not legal advice; not affiliated with the FTC. These rules and guides are historical: most were rescinded or replaced, so do not assume any is in force.
Latest edition: Library of Congress, 1979 CFR · Earliest edition: 1959 CFR
Text (1979 edition, OCR)
Chapter !—Federal Trade Commission § 17.4 SUBCHAPTER B—GUIDES AND TRADE PRACTICE RULES PART 17—APPLICATION AND DEFINITIONS Sec. 17.1 Application of guides and trade prac- tice rules in preventing unlawful com- petitive restraints. 17.2 Definition of “commerce.” 17.3. Definition of Group I rules. 17.4 Definition of Group II rules. AUTHORITY: Sec. 6(g), 38 Stat. 722; 15 U.S.C. 46(g), unless otherwise noted. Source: Part 17 is derived from the Trade Practice Conference rules in this sub- chapter. §17.1 Application of guides and trade practice rules in preventing unlawful competitive restraints. (a) Industry guides are administra- tive interpretations of laws adminis- tered by the Commission for the guid- ance of the public in conducting its af- fairs in conformity with legal require- ments. They provide the basis for vol- untary and simultaneous abandon- ment of unlawful practices by mem- bers of industry. Failure to comply with the guides may result in correc- tive action by the Commission under applicable statutory provisions. Guides may relate to a practice common to many industries or to specific practices of a particular industry. (b) Trade practice rules promulgated by the Commission are designed to foster and promote the maintenance of fair competitive conditions in the interest of protecting industry, trade, and the public. It is to this end, and to the exclusion of any act or practice which suppresses competition, re- strains trade, fixes or controls price through combination or agreement, or which otherwise injures, destroys, or prevents competition, that the rules are to be applied. (32 FR 15540, Nov. 8, 1967] §17.2 Definition of “commerce.” As used in the sections of the rules on the subject of discrimination, the word “commerce” means “trade or commerce among the several States and with foreign nations, or between the District of Columbia or any Terri- tory 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 District of Columbia or any for- eign nation, or within the District of Columbia or any Territory or any in- sular possession or other place under the jurisdiction of the United States.” §17.3 Definition of Group I rules. The unfair trade practices embraced in the Group I rules herein are consid- ered to be unfair methods of competi- tion, unfair or deceptive acts or prac- tices, or other illegal practices, prohib- ited under laws administered by the Federal Trade Commission; and appro- priate proceedings in the public inter- est will be taken by the Commission to prevent the use, by any person, part- nership, corporation, or other organi- zation subject to its jurisdiction, of such unlawful practices in commerce. §17.4 Definition of Group II rules. - Compliance with trade practice pro- visions in Group II rules is considered to be conducive to sound business methods and is to be encouraged and promoted individually or through vol- untary cooperation exercised in ac- cordance with existing law. Nonobser- vance of such rules does not per se constitute violation of law. Where, however, the practice of not comply- ing with any such Group II rules is followed in such manner as to result in unfair methods of competition, or unfair or deceptive acts or practices, corrective proceedings may be institut- ed by the Commission as in the case violation of Group I rules. PART 23—JEWELRY INDUSTRY Sec. 23.0 Definitions. 23.1 Deception (general). 23.2 Misleading illustrations. 313 § 23.0 Sec. 23.3 Misrepresentation as to character of business. 23.4 Deceptive pricing. 23.5 Misuse of terms “close-outs,” “discon- tinued lines,” “special bargains,” etc. 23.6 Substitution of products. 23.7 Use of the word “free.” 23.8 Guarantees, warranties, etc. 23.9 Misuse of term ‘“‘certified,” etc. 23.10 Misrepresentation as to origin and disclosure of foreign origin. 23.11 Misuse of terms “hand-made,” “hand-polished,” etc. 23.12 Deceptive use and imitation of trade or corporate names, trade-marks, etc. 23.13 Commercial bribery. 23.14 Consignment distribution. 23.15 Inducing breach of contract. 23.16 Defamation of competitors or false disparagement of their products. 23.17 Enticing away employees of competi- tors. 23.18 Push money. 23.19 Prohibited forms of trade restraints (unlawful price fixing, etc.). 23.20 Prohibited sales below cost. 23.21 Prohibited discrimination. 23.22 Misrepresentation as to gold content. 23.23 Misrepresentation as to silver con- tent. 23.24 Misuse of words ‘fridum,” “palladium,” “rhodium,” and “osmium.” 23.25 Additional requirements relating to quality marks. 23.26 Misuse of the word “diamond.” 23.27 Misuse of word “perfect,” etc. 23.28 Misuse of term “blue white.” 23.29 Misuse of the term “properly cut,” etc. 23.30 Misuse of the words “brilliant” and “full cut.” 23.31 Misuse of term “clean,” etc. 23.32 Misrepresentation of weight, ‘total weight.” 23.33 Misuse of word “pearl.” 23.34 Misuse of terms “cultured pearl,” “cultivated pearl,” “seed pear!,” “Orien- tal pearl,” “Oriental,” “natura,” and “kultured.” 23.35 Misrepresentation as to cultured pearls. 23.36 Deception as to precious and semi- precious stones. 23.37 Misuse of words “ruby,” “sapphire,” “emerald,” “topaz,” “stone,” “birth- stone,” etc. 23.38 Misuse of words “real,” “genuine,” “natural,” etc. 23.39 Misuse of words “gem,” “reproduc- tion,” “replica,” “synthetic,” ete. Appendix—Listing and classification of rules for convenient reference by industry members. “platinum,” “ruthenium,” Title 16—Commercial Practices Autuoriry: Secs. 6, 5, 38 Stat. 721, 719; 15 U.S.C. 46, 45, unless otherwise noted. Source: 22 FR 4568, June 28, 1957, unless otherwise noted. § 23.0 Definitions. As used in the rules in this part, the terms hereinafter set forth shall be understood to have the following meanings: (a) Diamond. A diamond is a natural mineral consisting essentially of pure carbon crystallized in the isometric system and is found in many colors. Its hardness is 10; its specific gravity approximately 3.52; and it has a re- fractive index of 2.42. (b) Pearl. A calcareous concretion consisting essentially of alternating concentric layers of carbonate of lime and organic material formed within the body of certain mollusks, the result of an abnormal secretory proc- ess caused by an irritation of the mantle of the mollusk consequent on the intrusion of some foreign body inside the shell of the mollusk, or due to some abnormal] physiological condi- tion in the mollusk, neither of which has in any way been caused or induced by man. (c) Cultured pearl. The composite product created when a nucleus (usu- ally a sphere of calcareous mollusk shell) planted by man inside the shell ‘or in the mantle of a mollusk is coated with nacre by the mollusk. (d) Imitation pearl. A manufactured product composed of any material or materials which stimulates in appear- ance a pearl or cultured pearl. § 23.1 Deception (general). (a) It is an unfair trade practice for an industry member to sell or offer for sale any industry product under any representation, description, circum- stance, or condition having the capac- ity and tendency or effect of deceiving purchasers or prospective purchasers thereof as to the type, kind, grade, quality, quantity, metallic content, size, weight, cut, color, character, sub- stance, durability, serviceability, origin, price, value, preparation, pro- duction, manufacture or distribution of such industry product or which has the capacity and tendency or effect of 314 Chapter I—Federal Trade Commission misleading or deceiving the purchas- ing or consuming public in any other material respect. (b) The inhibitions of this section are applicable to all forms of advertis- ing, whether in periodicals, on the radio or television, and whether writ- ten or oral, and to any form of mark- ing or labeling of products or their containers. § 23.2 Misleading illustrations. It is an unfair trade practice, in con- nection with the offering for sale, sale, or distribution of industry products, to use, as part of any packaging material, label, advertisement, or other sales promotion matter, any visual repre- sentation, picture, illustration, dia- gram, or other depiction which, either alone or in conjunction with any ac- companying words or phrases, has the capacity and tendency or effect of mis- leading or deceiving purchasers or prospective purchasers concerning the type, kind, grade, quality, quantity, metallic content, size, weight, cut, color, character substance, durability, serviceability, origin, preparation, pro- duction, manufacture, or distribution of any industry product, or which has the capacity and tendency or effect of misleading or deceiving the purchas- ing or consuming public in any materi- al respect. Note: Among practices inhibited by this section are illustrations and depictions of diamonds in greater than actual size with- out a clear and conspicuous disclosure of the fact that the illustrations or depictions are enlargements, when the failure to make such disclosure has the capacity and tenden- cy or effect of deceiving purchasers or pros- pective purchasers of such diamonds or any products containing same. § 23.3 Misrepresentation as to character of business. It is an unfair trade practice for any member of the industry to represent, directly or indirectly, through the use of any word or term in his corporate or trade name, in his advertising, or otherwise, that he is a producer, man- ufacturer, processor, wholesaler, or im- porter of products of the industry, or that he owns or controls a factory making or processing such products, or has connections abroad through which § 23.4 imports are secured, or maintains of- fices abroad, when such is not the fact, or in any other manner to misrepre- sent the character, extent, volume, or type of his business. § 23.4 Deceptive pricing. (a) It is an unfair trade practice for any member of the industry to repre- sent, directly or indirectly, in advertis- ing or otherwise, that the price of an industry product has been reduced from what is in fact a fictitious price, or that such price is a reduced or a special price when it is in fact the reg- ular selling price of such product, or that the reguler price thereof is higher when such is not the fact, or otherwise falsely or deceptively to rep- resent the past or current price of an industry product. (b) It is an unfair trade practice for any member of the industry, directly or indirectly, to use or to supply to dealers, or to aid or assist in the use of, price tags, labels, or similar devices which are false or fictitious, or which such member has reason to believe are intended to be used or will be used by dealers or salesmen for the purpose of misleading or deceiving the purchas- ing or consuming public in regard to price, or in any other material respect. (c) It is an unfair trade practice for any member of the industry to distrib- ute catalogs to retail outlets in which retail prices for products are specified, or in which any figures, words, letters, or symbols appear in conjunction with the catalog presentation of products which likely would be construed by consumer-purchasers or prospective consumer-purchasers as retail prices specified by the industry member or which would be subject to use by the retail outlet to create such an impres- sion in the minds of consumer-pur- chasers or prospective consumer-pur- chasers, when the industry member knows, or has good reason to believe, that such products customarily will be sold by such retail outlets at lower prices with consequent deception of the consumer-purchasers or prospec- tive consumer-purchasers as to the usual retail price for such products. Note: Except under the limitations and conditions prescribed by the McGuire Act 315 § 23.5 (see footnote to § 23.19), any arrangement between an industry member and others, in- cluding retailer-customers of the industry member, whereby resale prices for products are fixed, maintained, or enhanced, is an un- lawful restraint of trade violative of section 5 of the Federal Trade Commission Act. § 23.5 Misuse of terms “close-outs,” “dis- continued lines,” “special bargains,” 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, which such is not true in fact; or to so offer for sale, sell, advertise, describe, or otherwise repre- sent, industry products where the ca- pacity and tendency or effect thereof is to lead the purchasing or consuming public to believe such products are veing offered for sale or sold at great- ly reduced prices, or at so-called ‘‘bar- gain” prices, when such is not the fact. § 23.6 Substitution of products. It is an unfair trade practice for a member of the industry to make an unauthorized substitution of products, where such substitution has the capac- ity and tendency or effect of mislead- ing or deceiving purchasers or prospec- tive purchasers, by— (a) Shipping or delivering industry products which do not conform to samples submitted, to specifications upon which the sale is consummated, or to representations made prior to se- curing the order, without advising the purchaser of the substitution and ob- taining his consent thereto prior to making shipment or delivery; or (b) Falsely representing the reason for making a substitution. § 23.7 Use of the word “free.” In connection with the sale, offering for sale, or distribution of the industry products, it is an unfair trade practice to use the word “free,” or any other word or words of similar import, in ad- vertisements or in other offers to the public, as descriptive of an article of merchandise, or service, which is not an unconditional gift, under the fol- lowing circumstances: Title 146—Commercial Practices (a) When all the conditions, obliga- tions, or other prerequisites to the re- ceipt and retention of the “free” arti- cle of merchandise or service offered are not clearly and conspicuously set forth at the outset so as to leave no reasonable probability that the terms of the offer will be misunderstood; and, regardless of such disclosure: (bo) When, with respect to any article of merchandise required to be pur- chased in order to obtain the “free” article or service, the offerer (1) in- creases the ordinary and usual price of such article of merchandise, or (2) re- duces its quality, or (3) reduces the quantity or size thereof. Nore: The disclosure required by para- graph (a) of this section shall appear in close conjunction with the word “free” (or other word or words of similar import) wherever such word first appears in each advertisement 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. § 23.8 Guarantees, warranties, etc. (a) In the sale, offering for sale, or distribution of industry products, it is an unfair trade practice for any indus- try member— (1) To represent that any industry product is guaranteed unless, in close conjunction with such representation, the identity of the guarantor, the extent and nature of the guarantee, and any material conditions or limita- tions relating to the liability of the guarantor under the guarantee, are adequately and nondeceptively dis- closed; or (2) To offer or use any guarantee re- specting an industry product under which the guarantor fails to observe his obligations thereunder; or (3) To offer or use any guarantee which is otherwise deceptive or unfair. (b) This section shall be applicable not only to guarantees but also to war- ranties, to purported guarantees and warranties, and to any promise or rep- resentation in the nature of a guaran- tee or warranty. § 23.9 Misuse of term “certified,” etc. It is an unfair trade practice to de- scribe, identify, or refer to an industry 316 Chapter I—Federal Trade Commission product as ‘Certified,’ or to use re- specting it any other word or words of similar meaning or import, unless— (a) The identity of the certifier and the specific matters or qualities certi- fied are clearly disclosed in conjunc- tion therewith; and (b) The certifier has examined such product, has made such certification, and is qualified to certify as to such matters and qualities; and (c) There is available to the purchas- er a certificate setting forth clearly and nondeceptively the name of the certifier and the matters and qualities certified. § 23.10 Misrepresentation as to origin and disclosure of foreign origin. (a) It is an unfair trade practice to misrepresent the place of origin, pro- duction, or manufacture of industry products or their components. (b) 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 part or parts manufactured or produced in a foreign country, without affirmatively and clearly disclosing thereon, or in immediate conjunction therewith, by a truthful and nondeceptive 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. Norte: Nothing in paragraph (b) of this section shall be construed as requiring dis- closure as to the foreign origin of such small and primarily functional parts as rivets, screws, bolts, washers, springs, spring bars and spring rings; or as to the foreign origin of pearls, cultured pearls, diamonds, or any other precious or semi-precious stones, or glass insets which imitate precious or semi- precious stones, when same are primarily obtained from sources outside the United States and its territories and possessions; or as to the foreign origin of any other part or parts which, by reason of further processing in this country, no longer retain the appear- ance and essential characteristics possessed by them at the time of their importation. Disclosure of the foreign origin of imitation pearls which have not been subjected to processing in this country to the extent of § 23.13 losing the appearance and essential charac- teristics possessed by them at the time of their importation must be made though such imitation pearls after importation have been strung and made into necklaces in this country. § 23.11 Misuse of terms “hand-polished,” etc. (a) It is an unfair trade practice to represent, directly or by implication, that any industry product is hand- made or hand-wrought unless the entire shaping and forming of such product from raw materials and its fin- ishing and decoration were accom- plished by hand labor and manually- controlled methods which permit the maker to control and vary the con- struction, shape, design, and finish of each part of each individual product. Note: As used here, “raw materials’ in- clude bulk sheet, strip, wire, and similar items that have not been cut, shaped, or formed into jewelry parts, semi-finished parts, or blanks. (b) It is an unfair trade practice to represent, directly or by implication, that any industry product is hand- forged, hand-engraved, hand-finished, or hand-polished, or has been other- wise hand-processed, unless the oper- ation described was accomplished by hand labor and manually controlled methods which permit the maker to control and vary the type, amount, and effect of such operation on each part of each individual product. “hand-made,” § 23.12 Deceptive use and imitation of trade or corporate names, trade-marks, etc. 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 of misleading or deceiving purchasers or prospective purchasers as to the character, name, nature, or origin of any product of the industry, or of any material used therein, or which is false or misleading in any ma- terial respect. § 23.13 Commercial bribery. It is an unfair trade practice for a member of the industry, directly or in- 317 § 23.14 directly, to give, or offer to give, or permit or cause to be given, money or anything of value to agents, employ- ees, or representatives of customers or prospective customers, or to agents, employees, or representatives of com- petitors’ customers or prospective cus- tomers, without the knowledge of their employers or principals, as an in- ducement to influence their employers or principals to purchase or contract to purchase products imported, manu- factured, or sold by such industry member or the maker of such gift or offer, or to influence such employers or principals to refrain from dealing in the products of competitors or from dealing or contracting to deal with competitors. § 23.14 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 ex- press request of prior consent of the purchasers. (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 outlets and unduly restricting competitors’ use of said trade outlets in getting their products to purchasers through regular channels of distribu- tion, thereby injuring, destroying or preventing competition or tending to create a monopoly or unreasonably to restrain trade. (c) Nothing in this section shall be construed to authorize any under- standing or agreement, combination or conspiracy, or planned common course of action, by and between industry members, mutually to conform or re- strict their practice of shipping goods on consignment with the intent or effect of lessening competition. § 23.15 Inducing breach of contract. (a) Knowingly inducing or attempt- ing to induce the breach of existing lawful contracts between competitors and their customers or their suppliers, or interfering with or obstructing the performance of their contractual Title 16—Commercial Practices duties or services, under any circum- stance having the capacity and ten- dency or effect of substantially injur- ing or lessening present or potential competition, is an unfair trade prac- tice. (b) Nothing in this section is intend- ed to imply that it is improper to solic- it the business of a customer of a com- peting industry member; nor is the section to be construed as in anywise authorizing any agreement, under- standing, 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. § 23.16 Defamation of competitors or false disparagement of their products. The defamation of competitors by falsely imputing to them dishonorable conduct, inability to perform con- tracts, questionable credit standing, or by other false representations, or the false disparagement of competitors’ products in any respect, or of their business methods, selling prices, values, credit terms, policies, or serv- ices, is an unfair trade practice. § 23.17 Enticing away employees of com- petitors. It is an unfair trade practice for any member of the industry wilfully to entice away employees or sales-con- tract personnel of competitors with the intent and effect of thereby unduly hampering or injuring compet- itors in their business and destroying or substantially lessening competition: Provided, That nothing in this section shall be construed as prohibiting such persons from seeking more favorable employment, or as prohibiting employ- ers from hiring or offering employ- ment to employees of a competitor in good faith and not for the purpose of inflicting injury on such competitor. § 23.18 It is an unfair trade practice for any industry member to pay or contract to pay anything of value to a salesperson employed by a customer of the indus- try member, as compensation for, or as an inducement to obtain, special or Push money. 318 Chapter I—Federal Trade Commission greater effort or service on the part of the salesperson in promoting the resale of products supplied by the in- dustry member to the customer— (a) When the agreement or under- standing under which the payment or payments are made or are to be made is without the knowledge and consent of the salesperson’s employer; or (b) When the terms and conditions of the agreement or understanding are such that any benefit to the salesper- son or customer is dependent on lot- tery or chance; or (c) When any provision of the agree- ment or understanding requires or contemplates practices or a course of conduct unduly and _ intentionally hampering sales of products of com- petitors of an industry member; or (d) When, because of the terms and conditions of the agreement or under- standing, including its duration, or the attendant circumstances, the effect may be to substantially lessen compe- tition or tend to create a monopoly; or (e) When similar payments are not accorded to salespersons of competing customers on proportionally equal terms in compliance with sections 2 (d) and (e) of the Clayton Act. Nore: 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 transferred by the salesperson to the cus- tomer, or is to result in a corresponding de- crease in the salesperson’s salary, are not to be considered within the purview of this sec- tion, but are to be considered as subject to the requirements and provisions of section 2 (a) of the Clayton Act, as amended by the Robinson-Patman Act. § 23.19 Prohibited forms of trade re- straints (unlawful price fixing, etc.).? It is an unfair trade practice for any member of the industry, either direct- ‘The inhibitions of this section are sub- ject to Pub. L. 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 commodity and which it is free and open competition with commodities of the same general class produced or distributed by others, a seller of such a commodity may enter into a contract or agreement with a § 23.20 ly or indirectly, to engage in any planned common course of action, or to enter into or take part in any un- derstanding, agreement, combination, or conspiracy, with one or more mem- bers of the industry, 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 induce 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 understanding, agreement, combination, or conspiracy. § 23.20 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 reason- able 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 con- strued as prohibiting all sales below cost, but only such selling below the seller’s cost as is resorted to and pur- sued with the wrongful intent or pur- pose referred to and where the effect is, or where there is reasonable prob- ability that the effect will be, to sub- stantially injure, supress, or stifle com- petition or to create a monopoly. Among the situations in which the requisite purpose or intent would ordi- narily 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 fide discontinuance of business in the goods concerned. buyer thereof which establishes a minimum or stipulated price at which such commodity may be resold by such buyer when such con- tract or agreement is lawful as applied to in- trastate transactions under the laws of the State, Territory, or territorial jurisdiction 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 agree- ment is not between manufacturers, or be- tween wholesalers, or between brokers, or between factors, or between retailers, or be- tween persons, firms, or corporations in competition with each other. 319 § 23.21 (c) As used in paragraph (b) (1) through (4) of this section, the term “cost’”” means the respective seller’s cost and not an average cost in the in- dustry 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 acquisition, production, and distribution of the products in- volved, and comprises all elements of cost such as labor, material, depreci- ation, 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, manu- . facture, processing, preparation for marketing, sale, and delivery of the products. Not to be included are divi- dends or interest on borrowed or in- vested capital, or nonoperating losses, such as fire losses and losses from the sale or exchange of capital assets. Op- erating cost should not be reduced 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 relieving an industry member from compliance with any of the requirements of the Robinson- Patman Act. § 23.21 Prohibited discrimination. ? (a) Prohibited discriminatory prices, rebates, refunds, discounts, credits, etc., which effect unlawful price dis- crimination. It is an unfair trade prac- tice for any member of the industry engaged in commerce, in the course of such commerce, to grant or allow, se- cretly or openly, directly or indirectly, any rebate, refund, discount, credit, or other form of price differential, where 2As 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 be- tween any insular possessions or other places under the jurisdiction of the United States, or between any such possession or place and any State or Territory of the United States or the District of Columbia or any foreign nation, or within the District of Columbia or any Territory or any insular possession or other place under the jurisdic- tion of the United States.” Title 16—Commercial Practices such rebate, refund, discount, credit, or other form of price differential, ef- fects a discrimination in price between different purchasers of goods of like grade and quality, where either or any of the purchases involved therein are in commerce, and where the effect thereof may be substantially to lessen competition or tend to create a mo- nopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them: Provided, however: (1) That the goods involved in any such transaction are sold for use, con- sumption, or resale within any place under the jurisdiction of the United States, and are not purchased by schools, colleges, universities, public li- braries, churches, hospitals, and chari- table institutions not operated for profit, as supplies for their own use; (2) That nothing contained in this paragraph shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the dif- fering methods or quantities in which such commodities are to such purchas- ers sold or delivered; Nore: 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 paragraph (a)(2) of this section. For example, if a seller regular- ly grants a discount based upon the pur- chase 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 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 fide transactions and not in restraint of trade; (4) That nothing contained in this paragraph shall prevent price changes from time to time where made in re- sponse to changing conditions affect- ing the market for or the marketabil- ity of the goods concerned, such as but not limited to obsolescence of seasonal goods, distress sales under court proc- 320 Chapter |—Federal Trade Commission ess, or sales in good faith in discon- tinuance of business in the goods con- cerned; (5) That nothing contained in this section shall prevent the meeting in good faith of an equally low price of a competitor. Note: See subsection (b) of section 2 of the Clayton Act as amended, which is set forth in the note following paragraph (f) 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 involving goods of like grade and qual- ity which are sold for use, consump- tion, or resale within any place under the jurisdiction of the United States, and which are not purchased by schools, colleges, universities, public li- braries, churches, hospitals, and chari- table institutions not operated for profit, as supplies for their own use, and when— (1) The commerce requirements specified in paragraph (a) of this sec- tion are present; and (2) The price differential has a rea- sonable probability of substantially lessening competition or tending to _ create a monopoly in any line of com- merce, or of injuring, destroying, or preventing competition with the in- dustry member or with customer re- ceiving the benefit of the price differ- ential, or with customers of either of them; and (3) The price differential is not justi- fied by cost savings (see paragraph (a)(2) of this section); and (4) The price differential is not made in response to changing conditions af- fecting the market for or the market- ability of the goods concerned (see paragraph (a)(4) of this section); and (5) The lower price was not made to meet in good faith an equally low price of a competitor (see paragraph (a)(5) of this section). Example No. 1. At the end of a given period an industry member grants a dis- count to a customer equivalent to a fixed percentage of the total of the customer’s purchases during such period and fails to grant such discount to other customers under like conditions. § 23.21 Example No. 2. An industry member sells goods to one or more of his customers at a higher price than ne charges other custom- ers for like merchandise. It is immaterial whether or not such discrimination is ac- complished by misrepresentation as to the grade and quality of the products sold. Norte: As previously indicated, the forego- ing are examples of practices to be consid- ered violative of the prohibitions of para- graph (a) of this section when involving goods of like grade and quality and when not subject to the other exemptions, exclu- sions, or defenses set forth in this para- graph. (c) Prohibited brokerage and com- missions. It is an unfair trade practice for any member of the industry en- gaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any allowance or dis- count in lieu thereof, except for serv- ices rendered in connection with the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction or to an agent, representative, or other intermediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect con- trol, of any party to such transaction other than the person by whom such compensation is so granted or paid. (d) Prohibited advertising or promo- tional allowances, etc. It is an unfair trade practice for any member of the industry engaged in commerce to pay or contract for the payment of adver- tising or promotional allowances or any other thing of value to or for the benefit of a customer of such member in the course of such commerce as compensation or in consideration for any services or facilities furnished by or through such customer in connec- tion. with the processing, handling, sale, or offering for sale of any prod- ucts or commodities manufactured, sold, or offered for sale by such member, unless such payment or con- sideration is available on proportional- ly equal terms to all other customers competing in the distribution of such products or commodities. Norte: Industry members giving advertis- ing allowances to competing customers must exercise precaution and diligence in seeing 321 § 23.22 that all of such allowances are used in ac- cordance with the terms of their offers. When an _ industry member _ gives allowances to competing customers for ad- vertising in a newspaper or periodical, the fact that a lower advertising rate for equiva- lent space is available to one or more, but not all, such customers, is not to be regard- ed by the industry member as warranting the retention by such customer or custom- ers of any portion of the allowance for his or their personal use or benefit. (e) Prohibited discriminatory serv- ices or facilities. It is an unfair trade practice for any member of the indus- try engaged in commerce to discrimi- nate in favor of one purchaser against another purchaser or purchasers of a commodity bought for resale, with or without processing, by contracting to furnish or furnishing, or by contribut- ing to the furnishing of, any service or facilities connected with the process- ing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all competing purchasers on proportionally equal terms. Note: See subsection (b) of section 2 of the Clayton Act as amended, which is set forth in the note following paragraph (f) of this section. (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 the fore- going provisions of this section. Note: Paragraph (f) of this section is a re- statement 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 said Act and not justified under para- graph (a)(2), (4), or (5) of this section. When, in any such proceeding, the issue is limited to the question of whether the price differential involved made only due allow- ance 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 establish a prima facie case in a number of ways, including: Title 16—Commercial Practices (L) 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 differ- ential. Norte: This section is based on the provi- sions 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, which reads as follows, is in amplification of the note to paragraph (a\(5) of this section and the note to para- graph (e) of this section: “Upon proof being made, at any hearing on a complaint under this section, that there has been discrimination in price or services or facilities furnished, the burden of rebutting the prima facie case thus made by showing justification shall be upon the person charged with a violation of this sec- tion, and unless justification shall be affir- matively shown, the Commission is author- ized to issue an order terminating the dis- crimination: Provided, huwever, That noth- ing herein contained shall prevent a seller rebutting the prima facie case thus made by showing that his lower price or the furnish- ing of services or facilities te any purchaser or purchasers was made in good faith to meet an equally low price of a competitor, or the services or facilities furnished by a competitor.” § 23.22 Misrepresentation as to gold con- tent. (a) It is an unfair trade practice to sell or offer for sale any industry prod- uct under any trade or product name or designation or other representation having the capacity and tendency or effect of deceiving purchasers or pros- pective purchasers thereof as to the presence of gold or gold alloy in the product, or as to the quantity or fine- ness of gold alloy contained in the product, or as to the fineness, thick- ness, weight ratio, or manner of appli- cation of any gold or gold alloy plat- ing, covering, or coating on any sur- 322 Chapter |—Federal Trade Commission face of any industry product or part thereof. (b) The following practices are among those to be regarded as inhibit- ed 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 any industry product, or part thereof, which is composed throughout of an alloy of gold, unless a correct designa- tion of the karat finesses of the alloy immediately precedes the word “Gold,” or abbreviation thereof, and such fineness designation is of at least equal conspicuousness 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 non- deceptively to disclose that the prod- uct or part is but surface-plated or coated with an alloy of gold; and, when such plating has been mechani- cally applied, unless such word “Gold,” or abbreviation thereof, is im- mediately 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 descrip- tive of an industry product or part thereof, unless such product or part contains a surface-plating of gold alloy applied by a mechanical process which is of such thickness and extent of sur- face coverage that use of the term as descriptive of the product or part will not have the capacity and tendency of deceiving purchasers or prospective purchasers, and unless the term is im- mediately preceded by a correct desig- nation of the karat fineness of the § 23.22 alloy and such designation is of at least equal conspicuousness as the term used. Note: 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 of deceiving purchasers or prospective purchasers. Note: See acceptable forms of markings and descriptions for such products set out in paragraph (c)(3) of this section. (6) Representing, directly or by im- plication, by use of any name, termi- nology, or otherwise, that an industry product is equal or superior to, or dif- ferent than, a known and established type of industry product with refer- ence to its gold content or method of manufacture, unless the representa- tion is 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 ‘“Dura- gold,” “Diragold,” ‘‘Noblegold,” ‘“‘Goldine,” or any words or terms of similar import. Note: See also § 23.25 entitled “Additional requirements relating to quality marks.” (7) Use of the word ‘‘Gold,”’ or any abbreviation thereof, as descriptive of any industry product, or part thereof, which is composed throughout of an alloy of gold of less than 10 karat fine- ness. (c) Markings and descriptions of in- dustry products or parts thereof will be considered as meeting the require- ments of this section when in con- formity with the following: (1) An industry product or part thereof composed throughout of an alloy of gold of not less than 10 karat fineness may be marked and described as “Gold” when such word “Gold,” whether appearing, is immediately preceded by a correct designation of 323 § 23.22 the karat fineness of the alloy and such karat designation is of equal con- spicuousness as the word “Gold” (as, for example, “14 Karat Gold,” and ‘14 K. Gold,” and “14 Kt. Gold’). Such product may also be marked and de- scribed by a designation of the karat fineness of the gold alloy unaccompan- ied by the word “Gold” (as, for exam- ple, ‘14 Karat,” “14 Kt.,” and ‘14 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 its abbreviation shall also be im- mediately accompanied by a disclosure of the fact that the product or part contains a hollow center or interior (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 purchas- ers or prospective purchasers. Such prod- ucts must not be marked or described as “solid” or as be 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 be described or marked as either “14 Kt. Solid Gold” or as “Solid 14 Kt. Gold.” (2) An industry product or part thereof on which there has been af- fixed on all significant surfaces, by sol- dering, brazing, welding, or other me- chanical 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,” ‘‘Rolled Gold Plate,” or adequate abbreviations thereof, when such plating constitutes at least Yoth of the weight of the metal in the entire article, and when the term is immediately preceded by a designation 5As here used, the term “substantial thickness” 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 af- fixed. Since industry products embrace items having surfaces and parts of surfaces which are subject to different degrees of wear, this requirement of substantial thick- ness may not necessitate uniformity of thickness of plating for all items or for dif- ferent areas of the surface or surfaces of in- dividual items. Title 146——-Commercial Practices 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. G. F.,” “14 Kt. Gold Plated,” “14 Kt. G. P.,” and “14 Kt. Gold Overlay”). When con- forming to all such requirements except the specified minimum of “oth 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 im- mediately 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 fraction is of equal conspicuousness as the term used (as, for example, ““%o 12 Kt. Rolled Gold Plate,” and ‘““%o 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 plat- ing of gold, or of a gold alloy of not less than 10 karat fineness, the mini- mum thickness throughout of which is equivalent to 7/1,000,000ths of an inch of fine gold, may be marked or de- scribed as “Gold Electroplate’” or “Gold Electroplated.” When the coat- ing or plating meets the minimum fin- eness, but not the minimum thickness, above specified, the marking or de- scription 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 inch of fine gold, the marking or description may be “Heavy Gold Electroplate” or “Heavy Gold Electroplated.” When coatings or platings qualify for the term “Gold Electroplate’” (or “Gold Electroplat- ed”), or the term “Heavy Gold Elec- troplate” (or “Heavy Gold Electroplat- ed”’), and have been applied by use of a special kind of a electrolytic process, the designation for which the coating or plating is qualified may be accom- panied by an identification of the process used, as for example, “Gold Electroplated (X Process)”; ‘Heavy Gold Electroplated (Y Process).” 324 Chapter I—Federal Trade Commission (d) The requirements of this section relating to markings and descriptions of industry products and parts thereof are subject to the tolerances applica- ble thereto under the National Stamp- ing Act (15 U.S. Code, sections 294, et seq.) and to the exemptions applicable thereto under section 10 of Commer- cial Standard CS 67-38, relating to marking articles made of karat gold, and under section 12(a) of Commercial Standard CS 47-34 (including supple- ment thereof effective February 25, 1939), relating to marking of gold filed and rolled gold plate articles other than watch cases. (e) The exemption provisions of Commercial Standard CS 67-38, men- tioned in paragraph (d) of this section, are as follows: 10. Exemptions recognized in the jewelry trade and not to be considered in any assay for quality include springs, posts, and sepa- rable backs of lapel buttons, posts, and nuts for attaching interchangeable ornaments, and wire pegs or rivets used for applying mountings and other ornaments, which mountings or ornaments shall be of the quality marked. (f) The exemption provisions of Commercial Standard CS 47-34, men- tioned in paragraph (d) of this section, are as follows: 12(a). Exemptions recognized in the jewel- ry trade and not to be considered in any assay for quality include joints, catches, screws, pin stems, pins of scarf pins, hat pins, etc., field pieces and bezels for lockets, posts and separate backs of lapel buttons, springs, and metallic parts completely and permanently encased in a nonmetallic cover- ing. Field pieces of lockets are those inner portions used as frames between the inside edges of the locket and the spaces for hold- ing pictures. Bezels are the separable inner metal rings used to hold the pictures in place. (22 FR 4568, June 28, 1957, as amended at 24 FR 9581, Dec. 1, 1959; 43 FR 30538, July 17, 1978) § 23.23 Misrepresentation as to silver con- tent. (a) It is an unfair trade practice to misrepresent in any way the silver content or fineness of silver content of any industry product, or to represent such product as having a silver con- § 23.23 tent, plating, electroplating, or coat- ing, when such is not the fact.‘ (b) It is an unfair trade practice to mark, describe, or otherwise represent, any industry product, or part thereof, as “silver,” “solid silver,” “Sterling,” or “Sterling Silver,” unless it is at least 925/1,000ths pure silver. (c) It is an unfair trade practice to mark, describe, or otherwise represent, any industry product, or part thereof, as “coin” or “coin silver,” unless it is at least 900/1,000ths pure silver. (d) It is an unfair trade practice to apply the term “Sterling” or “coin,” either alone or in conjunction with any other word or words, in any manner to a silver-plated article or to the plating thereon. (e) It is an unfair trade practice to mark, describe, or otherwise represent, any industry product, or part thereof, as being plated or coated with silver, unless all significant surfaces of the ‘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, sec- tion 294, et seq.) and to the exemptions ap- plicable thereto under section 8 of Commer- cial Standard CS 118-44 (Marking of Jewel- ry and Novelties of Silver), and section 8(a) of Commercial Standard CS 51-35 (Marking Articles Made of Silver in Combination with Gold). The exemption provisions of Commercial Standard CS 118-44, above mentioned, are as follows: 8. Exemptions: The only exemptions rec- ognized and not to be included in any assay for quality include screws, rivets, springs, spring pins for wrist watch straps; posts and separable backs of lapel buttons; wire pegs, posts and nuts used for applying mountings or other ornaments, which mountings or or- naments shall be of the quality marked; pin stems of badges, brooches, emblem pins, hat pins, and scarf pins; levers for belt buckles; and blades and skeletons of pocket knives. The exemption provisions of Commercial Standard CS 51-35, above mentioned, are as follows: 8a). Unless otherwise required by the Na- tional Stamping Act, exemptions recognized in the jewelry trade and not to be consid- ered in any assay for quality include joints, catches, screws, pin stems, pins of scarf pins, hat pins, etc., posts and separable backs of lapel buttons, springs, and metallic parts completely and permanently encased in a nonmetallic covering. 325 § 23.24 product or part contain a plating or coating of silver which is of substan- tial thickness. NotE: See also § 23.25 entitled “Additional requirements relating to quality marks.’ (22 FR 4568, June 28, 1957, as amended at 24 FR 9581, Dec. 1, 1959] § 23.24 Misuse of words “platinum,” “iri- dium,” “palladium,” “ruthenium,” “rhodium,” and “osmium.” It is an unfair trade practice to use the words “platinum,” “iridium,” ‘‘pal- ladium,” “ruthenium,” ‘‘rhodium,” or “osmium,” or any abbreviations there- of, as a marking on, or as descriptive of, any industry product or part there- of, under any circumstance or condi- tion having the capacity and tendency or effect of deceiving purchasers or prospective purchasers as to the true composition of such product or part. Note: Commercial Standard CS66-38, issued by the National Bureau of Standards of the U.S. Department of Commerce, covers the marking of articles made wholly or in part of platinum. Markings on indus- try products which are in compliance with the requirements of CS66-38 will be regard- ed as among those fulfilling the require- ments relating thereto whicn are contained in this section. Nore: See also § 23.25 entitled “Additional requirements relating to quality marks.” § 23.25 Additional requirements relating to quality marks. 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, in- scribed, or otherwise placed, on any in- dustry product and which indicates or suggests that any such product is com- posed throughout of any precious metal or any alloy thereof or has a surface or surfaces on which there has been plated or deposited any precious metal or alloy thereof. Included are the words “gold,” “karat,” “carat,” “silver,” “sterling,” “platinum,” “iri- dium,” “palladium,” “ruthenium,” “rhodium,” or “osmium,” or any ab- breviation thereof, whether used alone or in conjunction with the word “filled,” “plated,” “overlay,” “electro- plated,” or any abbreviation thereof. Title 146—Commercial Practices Requirements of this section are addi- tional to those provided for in §§ 23.22, 23.23, and 23.24. (a) Deception as to applicability of marks. (1) It is an unfair trade prac- tice to sell, offer for sale, or distribute any industry product on which a qual- ity mark appears when by reason of the location of such mark, the failure to conjunctively identify the part or portion of the product to which same is applicable for part or portion to which same is inapplicable), or other- wise, such mark has the capacity and tendency or effect of deceiving pur- chasers or prospective purchasers as to the metallic composition of the prod- uct or any part thereof. (2) When a quality mark has proper application but to one or more parts of an industry product and not to an- other part or parts thereof which are of similar surface appearance, each quality mark should be closely accom- panied by an identification of the part or parts to which the mark is applica- ble. (b) Deception by reason of difference in the size of letters or words in a marking or markings. It is an unfair trade practice to sell, offer for sale, or distribute any industry product on which there appears a quality mark in which words or letters appear in great- er size than other words or letters of the marking, or when different mark- ings placed on the product have differ- ent applications and are in different sizes, when any such marking has the capacity, tendency, or effect of deceiv- ing purchasers or prospective purchas- ers of the product as to the metallic composition of such product or any part thereof. (an example of improper marking subject to the inhibitions of this paragraph would be the marking of a gold electroplated product with the word “‘electroplate” in small type and the word “gold” in larger type, with the result that purchasers and prospective purchasers of the product would observe the word “gold” of the marking and unlikely observe the word “electroplate’’.) Nore: Legibility of markings. Quality markings on industry products should be of sufficient size type as to be legible to per- sons of normal vision, and be so placed as 326 Chapter |—Federal Trade Commission likely to be observed by purchasers or pros- pective purchasers thereof. When such size marking cannot be achieved without injury to the appearance of the article, a tag or label on which the marking appears in type which is readable by persons of normal vision should be attached to the product and remain thereon until consumer pur- chase. Note: Disclosure of identity of manufac- turers, processors, or distributors. It is the consensus of the members of this industry that all quality markings on industry prod- ucts should be accompanied by the name, or other adequate identification, of the manu- facturer, processor, or distributor responsi- ble for such marking. Quality markings in- clude those in which the words or terms “gold,” “karat,” “silver,” “platinum” (or platinum related metals), or their abbrevia- tions, are included, either separately or as suffixes, prefixes, or syllables.) § 23.26 Misuse of the word “diamond.” (a) In the sale, offering for sale, or distribution of industry products, it is an unfair trade practice for any indus- try member to use the unqualified word “diamond” as descriptive of, or as an identification for, any object or product not meeting the requirements specified in the definitions of diamond hereinabove set forth, or which, though meeting such requirements, has not been symmetrically fashioned with at least seventeen (17) polished facets. (b) The foregoing provisions of this section have application to the un- qualified use of the word “diamond.” They are not to be construed as inhib- iting: (1) The use of the words “rough dia- mond” as descriptive of, or as a desig- nation for, uncut or unfaceted objects or products meeting the requirements specified in the mentioned definition of diamond; or (2) The use of the word “diamond” as descriptive of, or as a designation for, objects or products meeting the requirements of said definition of dia- mond but which have not been sym- metrically fashioned with at least sev- enteen (17) polished facets when in immediate conjunction with the word “diamond” there is either a disclosure of the number of facets and shape of the diamond or the name of a type of diamond which denotes shape and § 23.28 which usually has less than seventeen (17) facets (e.g., ‘rose diamond’’). Nore: Additional requirements relating to imitation and synthetic diamond represen- tations and misuse of words “reproduction,” “replica,” “gem,” “real,” “genuine,” “natu- ral,” etc., are set forth in §§ 23.37, 23.38 and 23.39. § 23.27 Misuse of word “perfect,” etc. (a) It is an unfair trade practice to use the word “perfect,” or any other word, expression, or representation of similar import, as descriptive of any diamond which discloses flaws, cracks, carbon spots, clouds, or other blem- ishes or imperfections of any sort when examined in norm.:] daylight, or its equivalent, by a trained eye under a ten-power, corrected diamond eye loupe or other equal magnifier. Note: The use, with respect to a stone which is not perfect, of any phrase (such as “commercially perfect’) containing the word “perfect” or “perfectly” is regarded as misleading and in violation of this section. Paragraph (a) of this section shall not be construed as approving the use of the word “perfect,” or any word or representation of like import, as descriptive of any diamond that is of inferior color or make. Nothing in this section is to be construed as inhibiting the use of the word “flawless” as descriptive of a diamond which meets the requirements for “perfect” set forth in para- graph (a) of this section. (b) It is an unfair trade practice, in connection with the offering of any ring or rings or other articles of jewel- ry having a perfect center stone or stones, and side or supplementary stones which are not of such quality, to use the word “perfect” without clearly disclosing that such description applies only to the center stone or center stones. § 23.28 Misuse of term “blue white.” It is an unfair trade practice to use the term “blue white,” or any other term, expression, or representation of similar import, as descriptive of any diamond which under normal, north daylight or its equivalent, shows any color or any trace of any color other than blue or bluish. Note: For additional requirements re- specting artificially colored diamonds, see the note immediately following § 23.36. 327 49-035 O—79—-—22 § 23.29 § 23.29 Misuse of the term “properly cut,” ete. It is an unfair trade practice to use the terms, ‘properly cut,” “proper cut,” “modern cut,” ‘well made,” or expressions of similar import, to de- scribe any diamond that is lopsided, or so thick or so thin in depth as materi- ally to detract from the brilliance of the stone. Norte: This section prohibits the common- ly called “fisheye” or “old mine” stone from being offered as “properly cut,” “modern cut,” etc. § 23.30 Misuse of the words “brilliant” and “full cut.” It is an unfair trade practice to use the unqualified expressions ‘‘bril- liant,” “brilliant cut,’ or “full cut’ to describe, identify, or refer to any dia- mond except a round diamond which has at least thirty-two facets plus the table above the girdle and at least twenty-four facets below. Norte: Such terms should not be applied to single or rose-cut diamonds, either with or without qualification. They may be applied to emerald- (rectangular) cut, pear-shaped, heart-shaped, oval-shaped, and marquise- (pointed oval) cut diamonds meeting the above-stated facet requirements when, in immediate conjunction with the term used, disclosure is made of the fact that the dia- mond is of such form. § 23.31 Misuse of term “clean,” etc. It is an unfair trade practice to use the term “clean,” ‘eye clean,” ‘‘com- mercially clean,” “commercially white,” or any other term, expression, or representation of similar import, in advertising, labeling, representing, or describing any diamond, when such terms are used for the purpose, or with the capacity and tendency or effect, or misleading or deceiving pur- chasers, prospective purchasers, or the consuming public. § 23.32 Misrepresentation of weight, “total weight.” (a) It is an unfair trade practice to misrepresent the weight of any dia- mond or to deceive purchasers or pros- pective purchasers as to the weight of any diamond. Title 16—Commercial Practices Note: The standard unit for designation of the weight of a diamond is the carat, which is equivalent to two hundred mili- grams (¥% gram). While advertisements may state the range of weights of a group of products, all weight representations regard- ing individual products shall be subject to a 1/200th of a carat (one-half ‘“‘point”) toler- ance. (b) It is an unfair trade practice to state or otherwise represent the weight of all diamonds contained in a ring or other article of jewelry unless such weight figure is accompanied with equal conspicuity by the words “total weight,” or words of similar import, so as to indicate clearly that the weight shown is that of all stones in the article and not that of the center or largest stone. § 23.33 Misuse of word “pearl.” (a) It is an unfair trade practice to use the unqualified word “pearl,” or any other word or phrase of like meaning or connotation, to describe, identify, or refer to any object or product which is not in fact a pearl! as defined hereinabove. (b) It is an unfair trade practice to use the word “‘pearl’’ to describe, iden- tify, or refer to a cultured pearl unless it is immediately preceded, with equal conspicuity, by the word “cultured” or “cultivated,” or by some other word or phrase of like meaning and connota- tion, so as to indicate definitely and clearly that the product is not a pearl. (c) It is an unfair trade practice to use the word “pear!” to describe, iden- tify, or refer to an imitation pearl unless it is immediately preceded, with equal conspicuity, by the word ‘“‘imita- tion” or “simulated,” or by some other word or phrase of like meaning and connotation, so as to indicate definite- ly and clearly that the product is not a pearl. Note: The placing of an asterisk next to the word “pearl,’’ which asterisk makes ref- erence to a footnote explanation of the fact that the product is an imitation or cultured pearl, is not regarded as compliance with the requirements of this section. 328 Chapter |—Federal Trade Commission § 23.34 Misuse of terms “cultured pearl,” “cultivated pearl,” “seed pearl,” “Ori- ental pearl,” “Oriental,” “natura,” and “kultured.” (a) It is an unfair trade practice to use the term “cultured pearl,” “culti- vated pearl,” or any other word, term, or phrase of like meaning or connota- tion, to describe, identify, or refer to any imitation pearl. (b) It is an unfair trade practice to use the term ‘seed pearl,” or any word, term, or phrase of like meaning or connotation, to describe, identify, or refer to any cultured pearl or imita- tion pearl. (ec) It is an unfair trade practice to use the term ‘Oriental pearl,” or any word, term, or phrase of like meaning or connotation, to describe, identify, or refer to any product of the industry other than a pearl taken from a salt water mollusk and of the distinctive appearance and type of pearls ob- tained from mollusks inhabiting the Persian Gulf and recognized in the jewelry trade as Oriental pearls. (d) It is an unfair trade practice to use the word “Oriental” to describe, identify, or refer to any cultured or imitation pear). (e) It is an unfair trade practice to use the word “natura,” or any word, term, or phrase of like meaning or connotation, to describe, identify, or refer to a cultured or imitation pearl. (f) It is an unfair trade practice to use the word “‘kultured,” or any word, term, or phrase of like meaning or connotation, to describe, identify, or refer to an imitation pearl. § 23.35 Misrepresentation as to cultured pearls. It is an unfair trade practice, in con- nection with the distribution, sale, or offering for sale of industry products, to make, publish, or disseminate, or cause to be made, published, or dis- seminated, any false, misleading, or deceptive statement, representation, or illustration concerning the matter in which cultured pearls are produced, the size of the nucleus artificially in- serted in the oyster and included in cultured pearls, the length of time that such products remained in the oyster, the thickness of the nacre coat- § 23.37 ing, the value and quality of cultured pearls as compared with the value and quality of pearls and imitation pearls or concerning any other material matter relating to the formation, structure, properties, characteristics, and qualties of cultured pearls. Nore: Additional requirements relating to misuse of the words “real,” “genuine,” ‘“‘nat- ural,” “reproduction,” “replica,” “synthet- ic,” “gems,” etc., are set forth in §§ 23.38 and 23.39. § 23.36 Deception as to precious and semi- precious stones. It is an unfair trade practice, in con- nection with the offering for sale, sale, or distribution of precious or semi-pre- cious gems stones, to use or cause or promote the use of any trade promo- tional literature, advertising matter, mark, brand, label, trade name, pic- ture, design or device, or other type of oral or written representation, howev- er, disseminated or published, which has the capacity and tendency of effect of misleading or deceiving the purchasing or consuming public in any other material respect. Note: One of the practices to be consid- ered as inhibited by this section is as fol- lows: The sale, or offering for sale, of any diamond or other natural precious or semi- precious stone which has been artificially colored or tinted by coating, irradiating, or heating, or by use of nuclear bombardment, or by any other means, without disclosure of the fact that such natural stone is col- ored, and disclose that such artificial color- ing or tinting is not permanent if such is the fact. § 23.37 Misuse of words “ruby,” “sap- phire,” “emerald,” “topaz,” “stone,” “birthstone,” ete. (a) It is an unfair trade practice to use the unqualified words “ruby,” “sapphire,” ‘emerald,’ ‘‘topaz,’”’ or the name of any other precious or semi- precious stone, as descriptive of any product which is not in fact a natural stone of the type described. (b) It is an unfair trade practice to use the words “ruby,” “sapphire,” “emerald,” “stone,” ‘birthstone,’ or the name of any other precious or semi-precious stone, as descriptive of a synthetic stone or an imitation or sim- ulated stone unless such word or name 329 § 23.38 is immediately preceded, with equal conspicuity, by the word “synthetic,” or by the word “imitation” or “simu- lated,” whichever is applicable, or by some other word or phrase of like meaning, so as clearly to disclose the nature of such product and the fact that it is not a natural stone. Note: The placing of an asterisk next to the word “stone” or “birthstone,” or the name of any natural stone referring to a footnote explanation that the product is a synethetic or imitation is not to be regarded as compliance with the requirements of this section. § 23.38 Misuse of words “real,” “genuine,” “natural,” ete. It is an unfair trade practice to use the words “real,” “genuine,” ‘“natu- ral,”’ or similar terms, as descriptive of any article or articles which are manu- factured or produced synthetically or artificially, or artificially cultured or cultivated, with the capacity and ten- dency or effect of misleading or de- ceiving purchasers, prospective pur- chasers, or the consuming public. § 23.39 Misuse of words “gem,” “reproduc- tion,” “replica,” “synthetic,” ete. (a) It is an unfair trade practice to use the word “gem” or similar terms to describe, identify, or refer to a pearl, cultured pearl, diamond, ruby, sap- phire, emerald, topaz, or other product of the industry, which does not pos- sess the beauty, symmetry, rarity, and value necessary for qualification as a gem. (b) It is an unfair trade practice to use the word “gem” as descriptive of any synthetic industry product unless the product meets the requirements of paragraph (a) of this section and unless such word is immediately ac- companied, with equal conspicuity, by the word “synthetic,” or by some other word or phrase of like meaning, so as clearly to disclose the fact that it is not a natural gem. Norte: Use of the word “gem” with respect to cultured pearls and synthetic stones should be avoided since few cultured pearls or synthetic stones possess the necessary qualifications to properly be termed “gems.” Imitation pearls, imitation diamonds, and other imitation stones cannot be described as “gems” under any circumstances. Not all Title 16—Commercial Practices diamonds or natural stones, including those classified as precious stones, possess the nec- essary qualifications to properly be termed “gems.” (c) It is an unfair trade practice to use the words “reproduction,” “repli- ca,’”’ or similar terms, to describe, iden- tify, or refer to a cultured or imitation pearl, or to any imitation of precious or semi-precious stones. (d) It is an unfair trade practice to use the word “synthetic” as descrip- tive of cultured or imitation pearls, or to use the word “synthetic” with the name of any natural stone as descrip- tive of any industry product, unless such industry product has essentially the same optical, physical, and chemi- cal properties as the stone named. APPENDIX—LISTING AND CLASSIFICATION OF RULES FOR CONVENIENT REFERENCE BY IN- DUSTRY MEMBERS Category I. Rules in this part having ap- plication to all industry products regardless of their composition: Sec. 23.1 Deception (General). 23.2 Misleading Illustratiuns. 23.3. Misrepresentation as to Character of Business. 23.4 Deceptive Pricing. 23.5 Misuse of Terms “Close-Outs,” ‘Dis- continued Lines,” “Special Bargains,” Etc. 23.6 Substitution of Products. 23.7 Use of the Word “Free.” 23.8 Guarantees, Warranties, Etc. 23.9 Misuse of Term “Certified,” Etc. 23.10 Misrepresentation as to Origin and Disclosure of Foreign Origin. 23.11 Misuse of Terms ‘“Hand-Made,” “Hand-Polished,” Etc. 23.12 Deceptive Use and Imitation of Trade or Corporate Names, Trade- Marks, Etc. 23.13 Commercial Bribery. 23.14 Consignment Distribution. 23.15 Inducing Breach of Contract. 23.16 Defamation of Competitors or False Disparagement of Their Products. 23.17 Enticing Away Employees of Com- petitors. 23.18 Push Money. 23.19 Prohibited Forms of Trade Re- straints (Unlawful Price Fixing, Etc.) 23.20 Prohibited Sales Below Cost. 23.21 Prohibited Discrimination. Category II. Rules ir, this part having ap- plication to industry products composed in whole or in part of a precious metal or metals: 330 Chapter I—Federal Trade Commission Sec. 23.22 Misrepresentation as to Gold Con- tent. 23.23 Misrepresentation as to Silver Con- tent. 23.24 Misuse of Words “Platinum,” “TIri- dium,” “Palladium,” “Ruthenium,” “Rhodium,” and “Osmium.” 23.25 Additional Requirements Relating to Quality Marks. Category III. Rules in this part having ap- plication to industry products containing diamonds or imitations thereof: 23.26 Misuse of the Word “Diamond.” 23.27 Misuse of Word ‘‘Perfect,” Etc. 23.28 Misuse of Term “Blue White.” 23.29 Misuse of the Term ‘Properly Cut,” Etc 23.30 Misuse of the Word “Brilliant”? and “Full Cut.” 23.31 Misuse of Term “Clean,” Etc. 23.32 Misrepresentation of Weight, “Total Weight.” Note: These rules also have application to diamonds which are sold in the loose and unset state. Category IV. Rules in this part having ap- plication to industry products containing pearls, cultured pearls, or imitations there- of: 23.33 Misuse of Word “Pearl.” 23.34 Misuse of Terms ‘‘Cultured Pearl,” “Cultivated Pearl,” “Seed Pearl,” “Ori- ental Pearl,’ “Oriental,” “Natura,” and “Kultred.” 23.35 Misrepresentation as to Cultured Pearls. Note: These rules also have application to pearls, cultured pearls, and imitation pearls sold in the loose (unstrung and unset) state. Category V. Rules in this part having ap- plication to industry products containing rubies, sapphires, and emeralds and other precious or semi-precious stones, and syri- thetic and imitation stones: 23.36 Deception as to Precious and Semi- Precious Stones. 23.37 Misuse of Words “Ruby,” ‘Sap- phire,” “Emerald,” “Topaz,” ‘‘Stone,” “Birthstone,” Etc. 23.38 Misuse of Words ‘‘Real,” “Genuine,” “Natural,” Etc. 23.39 Misuse of Words “Gem,” “Reproduc- tion,” “Replica,” “Synthetic,” Etc. Norte: Industry products covered by the rules in Categories II through V are also subject to the rules in Category I. § 34.0 PART 34—NURSERY INDUSTRY Sec. 34.0 34.1 34.2 34.3 Definitions. Deception (general). Deception through use of names. Substitution of products. 34.4 Size and grade designations. 34.5 Deception as to blooming, fruiting, or growing ability. 34.6 Misrepresenting products as conform- ing to standards, etc. 34.7 False claims of membership, deceptive use of seals, etc. 34.8 Plants collected from the wild state. 34.9 Misrepresentation as to character of business. 34.10 Deceptive guarantees. 34.11 Deceptive ‘“selesmen wanted” adver- tisements. 34.12 Misrepresentation with respect to collection of accounts. 34.13 Deception as to origin or source of in- dustry products. 34.14 Exclusive deals. 34.15 Tie-in sales; coercing purchase of one product as a prerequisite to the pur- chase of other products. 34.16 Deceptive pricing. 34.17 Enticing away employees of competi- tors. 34.18 Use of the word “free.” 34.19 Use of lottery schemes. 34.20 Defamation of competitors or false disparagement of their products. 34.21 Prohibited forms of trade restraints (unlawful price fixing. etc.). 34.22 Prohibited discrimination. 34.23 Aiding or abetting use of unfair trade practices. AvutTHoRITY: Secs. 6, 5, 38 Stat. 721, 719; 15 U.S.C. 46, 45, unless otherwise noted. Source: 23 FR 4804, June 28, 1958, unless otherwise noted. § 34.0 Definitions. (a) Industry products. As used in this part, the term “industry prod- ucts” includes all types of trees, small fruit plants, shrubs, vines, ornamen- tals, herbaceous annuals, biennials and perennials, bulbs, corms, rhizomes, and tubers which are offered for sale or sold to the general public. Included are products propagated sexually or asexually and whether grown in a commercial nursery or collected from the wild state. Such products are cus- tomarily used for outdoor planting. Not included are florists’ or green- house plants solely for inside culture or use and annual vegetable plants. 331