Guides Against Deceptive Advertising Of Guarantees
16 CFR Part 239 · Guides · in the Code of Federal Regulations 1968-1985 (17 annual editions)
Scanned CFR pages, OCR text may contain errors; the linked Library of Congress PDF is the authority. Not legal advice; not affiliated with the FTC. These rules and guides are historical: most were rescinded or replaced, so do not assume any is in force.
Latest edition: Library of Congress, 1985 CFR · Earliest edition: 1968 CFR
Text (1985 edition, OCR)
§ 239.0
or practices which will be considered
in determining if the initial sale was in
good faith, and not a strategem to sell
other merchandise, are:
(a) Accepting a deposit for the ad-
vertised product, then switching the
purchaser to a higher-priced product,
(b) Failure to make delivery of the
advertised product within a reasonable
time or to make a refund,
(c) Disparagement by acts or words
of the advertised product, or the dis-
paragement of the guarantee, credit
terms, availability of service, repairs,
or in any other respect, in connection
with it,
(d) The delivery of the advertised
product which is defective, unusable
or impractical for the purpose repre-
sented or implied in the advertise-
ment. [Guide 4]
Nore: Sales of advertised merchandise.
Sales of the advertised merchandise do not
preclude the existence of a bait and switch
scheme. It has been determined that, on oc-
casions, this is a mere incidental byproduct
of the fundamental plan and is intended to
provide an aura of legitimacy to the overall
operation.
PART 239—GUIDES AGAINST DECEP-
TIVE ADVERTISING OF GUARAN-
TEES
Sec.
239.0 Determining violations.
239.1 Guarantees in general.
239.2 Prorata adjustment of guarantees.
239.3 “Satisfaction or Your Money Back”
representations.
239.4 Lifetime guarantees.
239.5 Savings guarantees.
‘239.6 Guarantees under which the guaran-
tor does not or cannot perform.
239.7 Guarantee as a misrepresentation.
AvuTHoritTy: Secs. 5, 6, 38 Stat. 719, as
amended, 721; 15 U.S.C. 45, 46, unless other-
wise noted.
Sourcs: 32 FR 15541, Nov. 8, 1967, unless
otherwise noted.
§ 239.0 Determining violations.
In determining whether terminology
and direct or implied representations
concerning guarantees, however made,
i.e., in advertising or otherwise, in con-
nection with the sale or offering for
sale of a product, may be in violation
of the Federal Trade Commission Act,
40
16 CFR Ch. | (1-13-85 Edition)
the following general principles will be
used.
§ 239.1 Guarantees in general.
In general, any guarantee in adver-
tising shall clearly and conspicuously
disclose—
(a) The nature and extent of the
guarantee. This includes disclosure
of—
(1) What product or part of the
product is guaranteed,
(2) What characteristics or proper-
ties of the designated product or part
thereof are covered by, or excluded
from, the guarantee,
(3) What is the duration of the guar-
antee,
(4) What, if anything, any one claim-
ing under the guarantee must do
before the guarantor will fulfill his ob-
ligation under the guarantee, such as
return of the product and payment of
service or labor charges; and
(b) The manner in which the guaran-
tor will perform. This consists primari-
ly of a statement of exactly what the
guarantor undertakes to do under the
guarantee. Examples of this would be
repair, replacement, refund. If the
guarantor or the person receiving the
guarantee has an option as to what
may satisfy the guarantee this should
be set out; and
(c) The identity of the guarantor.
The identity of the guarantor should
be clearly revealed in all advertising,
as well as in any documents evidencing
the guarantee. Confusion of purchas-
ers often occurs when it is not clear
whether the manufacturer or the re-
tailer is the guarantor. [Guide 1]
§ 239.2 Prorata adjustment of guarantees.
(a) Many guarantees are adjusted by
the guarantor on a prorata basis. The
advertising of these guarantees should
clearly disclose this fact, the basis on
which they will be prorated, e.g., the
time for which the guaranteed prod-
uct has been used, and the manner in
which the guarantor will perform.
(b) If these guarantees are to be ad-
justed on the basis of a price other
than that paid by the purchaser, this
price should be clearly and conspicu-
ously disclosed.
Federal Trade Commission
Example: “A” sells a tire with list price of
$48 to “B” for $24, with a 12 months guar-
antee. After 6 months use the tire proves
defective. If “A” adjusts on the basis of the
price “B” paid, $24, “B” will only have to
pay one-half of $24, or $12, for a new tire. If
“A” instead adjusts on the basis of list price,
“B” will owe one-half of $48, of $24, for a
new tire. The guarantor would be required
to disclose here the following: That this was
a 12 months guarantee, that a list price of
$48 would be used in the adjustment, that
there would be an adjustment on the basis
of the time that the tire was used, and that
he would not pay the adjusted amount in
cash, but would make an adjustment on a
new tire.
Nore: Guarantees which provide for an
adjustment based on a fictitious list price
should not be used even where adequate dis-
closure of the price used is made. (Guide 2]
$239.3 “Satisfaction or Your Money
Back” representations.
(a) “Satisfaction or Your Money
Back”, ‘10 Day Free Trial”, or similar
representations will be construed as a
guarantee that the full purchase price
will be refunded at the option of the
purchaser.
(b) If this guarantee is subject to
any conditions or limitations whatso-
ever, they shall be set forth as provid-
ed for in § 239.1 of this part.
Example: A rose bush is advertised under
the representation “Satisfaction or Your
Money Back”. The guarantor requires
return of the product within 1 year of pur-
chase date before he will make refund.
These limitations, i.e., “return” and “time”
shall be clearly and conspicuously disclosed
in the ad. (Guide 3]
§ 239.4 Lifetime guarantees.
If the words ‘Life’, “Lifetime”, or
the like, are used in advertising to
show the duration of a guarantee, and
they relate to any life other than that
of the purchaser or original user, the
life referred to shall be clearly and
conspicuously disclosed.
Example: “A” advertised that his carbu-
retor was guaranteed for life, whereas his
guarantee ran for the life of the car in
which the carburetor was originally in-
stalled. The advertisement is ambiguous and
deceptive and should be modified to disclose
the “life” referred to. [Guide 4]
41
§ 239.7
§ 239.5 Savings guarantees.
(a) Advertisements frequently con-
tain representations of guarantees
that assure prospective purchasers
that savings may be realized in the
purchase of the advertiser’s products.
(b) Some typical advertisements of
this type are ‘‘Guaranteed to save you
50%”, “Guaranteed never to be under-
sold”, “Guaranteed lowest price in
town”’. .
(c) These advertisements should in-
clude a clear and conspicuous disclo-
sure of what the guarantor will do if
the savings are not realized, together
with any time or other limitations
that he may impose.
Example: “Guaranteed lowest price in
town” might be accompanied by the follow-
ing disclosure: “If within 30 days from the
date that you buy a sewing machine from
me, you purchase the identical machine in
town for less and present a receipt therefor
to me, I will refund your money”.
Nore: The above guarantees may consti-
tute affirmative representations of fact and,
in this respect, are governed by § 239.7.
[Guide 5]
§ 239.6 Guarantees under which the guar-
antor does not or cannot perform.
(a) A seller or manufacturer should
not advertise or represent that a prod-
uct is guaranteed when he cannot or
does not promptly and scrupulously
fulfill his obligations under the guar-
antee.
(0) A specific example of refusal to
perform obligations under the guaran-
tee is use of “Satisfaction or your
money back” when the guarantor
cannot or does not intend promptly to
make full refund upon request. [Guide
6)
§ 239.7 Guarantee as a misrepresentation.
Guarantees are often employed in
such a manner as to constitute repre-
sentations of material facts. If such is
the case, the guarantor not only un-
dertakes to perform under the terms
of the guarantee, but also assumes re-
sponsibility under the law for the
truth of the representations made.
Example 1: “Guaranteed for 36 months”
applied to a battery is a representation that
the battery can normally be expected to last
for 36 months and should not be used in
connection with a battery which can nor-
§ 240.1
mally be expected to last for only 18
months.
Example 2: “Guaranteed to grow hair or
money back” is a representation that the
product will grow hair and should not be
used when in fact such product is incapable
of growing hair.
Example 3: “Guaranteed lowest prices in
town” is a representation that the advertis-
er’s prices are lower than the prices charged
by all others for the same products in the
same town and should not be used when
such is not the fact.
Example 4: “We guarantee you will earn
$500 a month” is a representation that pro-
spective employees will earn a minimum of
$500 each month and should not be used
unless such is the fact. [Guide 7]
PART 240—GUIDES FOR ADVERTIS-
ING ALLOWANCES AND OTHER
MERCHANDISING PAYMENTS AND
SERVICES
Sec.
240.1
240.2
240.3
240.4
240.5
240.6
240.7
When does the law apply?
Who is a seller?
Who is a customer?
What is interstate commerce?
What are services or facilities?
Need for a plan.
Proportionally equal terms.
240.8 Seller’s duty to inform.
240.9 Availability to all competing custom-
ers.
240.10 Need to understand terms.
240.11 Checking customer’s use of pay-
ments.
240.12 Competing customers.
240.13 Wholesaler or third party perform-
ance of seller’s obligations.
240.14 Customer’s liability.
240.15 Third party liability for double bill-
ing.
240.16 Meeting competition.
240.17 Cost justification.
AutTHoriTy: Secs. 5, 6, 38 Stat. 719, as
amended, 721; 15 U.S.C. 45, 46; 49 Stat. 1526;
15 U.S.C. 13, as amended, unless otherwise
noted.
Source: 34 FR 8285, May 29, 1969, unless
otherwise noted.
§ 240.1 When does the law apply?
Sections 2 (d) and (e) apply to a
seller of products in interstate com-
merce, if he either directly or through
an intermediary (a) pays for services
or facilities furnished by a customer in
connection with the distribution of his
products [section 2(d)], or (b) fur-
nishes such services or facilities to a
customer [section 2(e)] who competes
42
16 CFR Ch. I (1-1-85 Edition)
with any other customer in the resale
of the seller’s products of like grade
and quality.
[Guide 1]
§ 240.2 Who is a seller?
“Seller” includes anyone (manufac-
turer, wholesaler, distributor, etc.)
who sells products for resale, with or
without further processing. Selling
candy to a retailer is a sale for resale
without processing. Selling corn syrup
to a candy manufacturer is an exam-
ple of a sale for resale with processing.
{Guide 2]
§ 240.3 Who is a customer?
(a) A “customer” is someone who
buys for resale directly from the
seller, the seller’s agent or broker; and,
in addition, a “customer” is any buyer
-of the seller’s product for resale who
purchases from or through a wholesal-
er or other intermediate reseller. In
this part, the word ‘‘customer” which
is used in section 2(d) of the Act in-
cludes “purchaser” which is used in
section 2(e).
Norte: In determining whether a seller has
fulfilled his obligations toward his custom-
ers, the Commission will recognize that
there may be some exceptions to this gener-
al definition of “customer.” For example,
the purchaser of distress merchandise
would not be considered a ‘customer’
simply on the basis of such purchase. Simi-
larly, a retailer who purchases solely from
other retailers, or one who makes only spo-
radic purchases, or one who does not regu-
larly sell the seller’s product or who is a
type of retail outlet not usually selling such
products (e.g., a hardware store stocking a
few isolated food items) will not be consid-
ered a “customer” of the seller unless the
seller has been put on notice that such re-
tailer is selling his product.
(b) “Competing customers’ are all
businesses that compete in the resale
of the seller’s products of like grade
and quality at the same functional
level of distribution regardless of
whether they purchase direct from
the supplier or through some interme-
diary.
Example 1: A manufacturer sells to some
retailers directly and to others through
wholesalers. Retailer ‘“X’’ purchases the
manufacturer’s product from a wholesaler