Guides For The Greeting Card Industry Relating To Discriminatory Practices

16 CFR Part 244 · Guides · in the Code of Federal Regulations 1969-1994 (24 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 These rules and guides are historical: most were rescinded or replaced, so do not assume any is in force.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, 1994 CFR · Earliest edition: 1969 CFR

Text (1994 edition, OCR)

Federal Trade Commission

$243.13 Deception as to origin.

(a) Industry members should not
make any direct or indirect representa-
tion which is false or likely to mislead
prospective purchasers concerning the
origin of either domestic or foreign in-
dustry products, or any substantial
parts thereof.

(b) Industry members should clearly
and conspicuously disclose that indus-
try products, or any substantial parts
thereof, were produced or manufac-
tured in an identified foreign country
when the failure to make such disclo-
sure has the capacity and tendency or
effect of deceiving prospective pur-
chasers. Such disclosures should be in
the form of a legible mark, stamp or
label on the product, and any samples
thereof, and should be of such size, con-
spicuousness and permanency as to re-
main noticeable and legible upon cas-
ual inspection until consumer pur-
chase. [Guide 13]

$243.14 Other in this Title 16 ap-
plicable to this industry.

The Commission has adopted Guides
Against Deceptive Pricing, Part 233,
Guides Against Deceptive Advertising
of Guarantees, Part 239, and Guides
Against Bait Advertising, Part 238, all
of which have general application and
furnish additional guidance for mem-
bers of the Decorative Wall Paneling
Industry. Members of this industry
should comply with those parts.

PART 244—GUIDES FOR THE GREET-
ING CARD INDUSTRY RELATING
TO DISCRIMINATORY PRACTICES

Sec.

244.0 Definitions.

244.1 Price discriminations in general.
244.2 Promotional assistance.

AUTHORITY: 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.

SouRcE: 33 FR 16634, Nov. 15, 1968, unless
otherwise noted.

$244.0 Definitions.

For purposes of this part the follow-
ing definitions will apply:

(a) Greeting card means any commer-
cial form of card, sheet, or folder which
conveys a greeting or similar type of

150-055 O—94——3

55

§ 244.0

message by means of printed reading
matter or pictorial matter. The term
includes chromos which contain pic-
tures but no words, and also, cards
which contain words but no pictures.

(b) Publisher means any person, firm,
partnership, corporation, or any other
organization which has greeting cards
printed or packaged, whether in its
own plant or other plant, for sale ex-
clusively by it. It does not include the
printer or packager unless he acts for
his own account.

(c) Distributor means any person,
firm, partnership, corporation, or any
other organization that purchases
greeting cards for resale to parties
other than the ultimate consumer.
This includes wholesalers, jobbers, and
all other intermediaries other than re-
tailers.

(ad) Supplier means any greeting card
publisher or distributor.

(e) Retailer means any seller of greet-
ing cards to the ultimate consumer,
such as card shops, drug stores, dis-
count houses, department stores, etc.

(f) Competing customers means, for
purposes of §244.2 of this part entitled
“Promotional Assistance’’, all busi-
nesses that compete in the resale of the
supplier’s greeting cards at the same
functional level of distribution regard-
less of whether they purchase direct
from the supplier or through some
intermediary (e.g., direct buying re-
tailers and retailers that purchase
through wholesalers and compete with
the direct buying retailers).

(g) Commerce—this has not been pre-
cisely defined in the statute. In gen-
eral, if there is any part of a business
which is not wholly within one State
(for example, sales or deliveries of
products, their subsequent distribution
or purchase, or delivery of supplies or
raw materials), the business may be
subject to section 2 of. the amended
Clayton Act and/or section 5 of the
Federal Trade Commission Act. Sales
in the District of Columbia are also
covered by the Acts.

(h) Promotional assistance! means any
payment, allowance, service, or fa-

1This phrase incorporates any and all
services and facilities covered by subsections
(d) and (e) of section 2 of the amended Clay-
Continued


§ 244.1

cility provided by a supplier whether
direct to a customer or to a third party
for the benefit of a customer in connec-
tion with the processing, handling,
sale, or offering for sale the supplier’s
product, including but not limited to:

(1) Any kind of advertising;

(2) Window and counter displays;

(3) Servicing of greeting card cabi-
nets or racks;

(4) Greeting card cabinets, or a dis-
count thereon;

(5) Rebates or allowances for soiled,
discontinued or leftover cards;

(6) Push money;

(7) Contribution to a customer’s an-
niversary or any other sale.

(i) Proportionally equal terms means
that the promotional assistance is
proportionalized on some basis which is
fair to all competing customers. No
single way to proportionalize is pre-
scribed by law and any method that
treats competing customers on propor-
tionally equal terms may be used.

(j) Cost justification is an affirmative
defense which may be undertaken by a
supplier charged with price discrimina-
tion, by establishing that his price dif-
ferential was based solely on dif-
ferences in the cost of manufacture,
sale or delivery resulting from the dif-
fering methods or quantities in which
his products are sold or delivered. This
defense depends upon savings in cost
based on all the facts relevant to the
transactions. It is a technical defense
and some items, such as savings in bro-
kerage, may not be included in deter-
mining savings in cost. (This defense is
not available to a supplier charged
with discrimination in the furnishing
of promotional assistance.) ;

(k) Meeting competition in good faith is
an affirmative defense which may be

undertaken by a supplier charged with

a violation of subsection 2 (a), (d), or
(e) of the amended Clayton Act who
can defend his actions by establishing
that his lower price or granting of dis-
proportionate promotional assistance
was made in good faith to meet an
equally low price or greater pro-
motional assistance paid for or fur-
nished by a competitor. This defense,
however, is subject to important limi-

ton Act, including those which technically
may not be promotional in nature.

16 CFR Ch. I (1-1-94 Edition)

tations. For instance, it is insufficient
to defend a charge of violating sub-
section (a), (d), or (e) of section 2 of the
amended Clayton Act solely on the
basis that competition in a particular
industry is very keen, requiring that
special prices or allowances be given to
some customers if a seller is ‘‘to be
competitive’’.

§244.1 Price discriminations in gen-
eral.

(a) Publishers and distributors in the
Greeting Card Industry should not, in
the course of commerce, grant, secretly
or openly, directly or indirectly, any
rebate, refund, discount, credit, or
other form of price differentia) which
effects a discrimination in price be-
tween different purchasers of greeting
cards of like grade and quality, where
the effect thereof may be substantially
to lessen competition or tend to create
@ monopoly in any line of commerce, or
to injure, destroy, or prevent competi-
tion with the publisher or distributor
granting the discrimination or with
the purchaser receiving its benefit or
with customers of either of them.

Nore: This section is not applicable to
greeting cards purchased by the U.S. Govern-
ment, State and local government entities or
by schools, colleges, universities, public 1i-
braries, hospitals, churches, and charitable
institutions not operating for profit, as sup-
plies for their own use. Also, this section is
not to be construed as preventing price
changes from time to time where made in re-
sponse to changing conditions affecting the
market for or the marketability of the goods
concerned, such as, obsolescence of seasonal
goods, distress sales under court process or
sales in good faith in discontinuance of busi-
ness in the goods concerned.

(b) The following are examples of
practices involving price differentials
to be avoided in commerce, when in-
volving goods of like grade and quality,
where the effect thereof may have the
reasonable probability of adversely af-
fecting competition and the seller is
unable to establish either the ‘cost
justification’ or ‘meeting competition
in good faith’’ defense:

(1) A supplier sells to retailers at 50
percent off list but grants an extra 5
percent discount to chain store cus-
tomers. It is immaterial that such 5
percent discount is given under the


Federal Trade Commission

guise of or labeled as a promotional al-
lowance.

(2) A supplier sells direct to retailers
at 50 percent off list and at the same
time, sells to a retail buying group al-
lowing the latter an additional 5 per-
cent discount.

(3) A supplier grants discounts of 2
percent on first $1,000 of purchases, 4
percent on the next $1,000 of purchases,
and 6 percent on all purchases there-
after during a specified period of time.

(4) A supplier grants a 5 percent re-
bate on the increased amount of greet-
ing cards purchased over purchases in
the preceding year.

(5) A supplier pays freight on ship-
ments to one or more customers but
does not pay such freight for all cus-
tomers, thereby effecting a difference
in price between customers.

(6) A supplier invoices goods to all
customers at the same price but sup-
plies additional quantities of such
goods at no extra charge to one or
more, but not to all, such customers.

NOTE 1: As previously indicated, the fore-
going are examples of practices involving
price differentials to be avoided in com-
merce, when involving goods of like grade
and quality, where the effect thereof may
have the reasonable probability of adversely
affecting competition and when not subject
to the other exemptions, exclusions, or de-
fenses set forth in this section.

NOTE 2: While this section concerns viola-
tions of the Clayton Act, as amended, per-
taining to price discriminations granted by
publishers and distributors it should not be
overlooked that section 2(f) of such Act
makes it unlawful for any person engaged in
commerce, in the course of such commerce,
knowingly to induce or receive a discrimina-
tion in price prohibited by the Act.

[Guide 1)

§244.2 Promotional assistance.

(a) Publishers and distributors of
greetings cards, providing promotional
assistance in the course of commerce
to competing customers, should do so
under a plan which takes into account
the following:

(1) The promotional assistance must
be made available on proportionally
equal terms to all competing cus-
tomers.

(2) The competing customers must be
made aware that the promotional as-
sistance is available. It is not abso-

57

§ 244.2

lutely necessary that the offer be in
writing for it may be made in any man-
ner the supplier chooses including let-
ter, telegram, conspicuous notice on
invoice, by salesmen, etc. However, if
the supplier wants to be able to show
later that the offer was made to a cer-
tain customer, he is in a better posi-
tion to do so if the offer was made in
writing.

(3) The supplier must not adopt a
plan which is of use to only one cus-
tomer or to only one favorite class of
customers. The plan must be either re-
alistically available to all competing
customers in a practical business
sense, or reasonable alternatives must
be made available on proportionally
equal terms.

(4) The supplier must take reasonable
precautions to see that the customers
receiving promotional assistance are
performing what is required of them
under the plan, and that he is not pay-
ing any amount in excess of that actu-
ally used by the customers.

(b) The following are examples of
practices involving discriminations in
the furnishing of promotional assist-
ance to be avoided in commerce when
involving products of like grade and
quality and when the seller is unable to
establish a defense of “meeting com-
petition in good faith.”’

(1) A supplier grants allowances only
for radio, television, and newspaper ad-
vertising when he has some competing
customers, such as small card shops,
which are unable to advertise in these
media, even with the promotional as-
sistance offered.

(In the above circumstances, and in
order to satisfy legal requirements, the
supplier must make usable and suitable
alternatives available on proportion-
ally. equal terms to all other customers
competing in the distribution of the
supplier’s greeting cards, such as, but
not limited to, advertising in the
neighborhood paper or buying guide,
in-store advertising, envelope stuffers,
handbills, etc.)

(2) A supplier grants as a service to
department stores or other customers a
rebate of 50 percent on all Christmas
cards purchased from the supplier and
left over after Christmas, but does not
make the offer to all of its customers


§ 245.3

competing with those to whom this
service is accorded.2

(3) A supplier furnishes greeting card
cabinets without cost or with a special
discount to one or more customers, but
does not make the same offer available
on proportionally equal terms to all
other competing customers, or in the
event he does make such offer, he does
not offer usable and suitable alter-
natives of equivalent measurable .cost
to those competing customers to whom
cabinets are not usable and suitable.

(4) A supplier accords to one or more
customers the privilege of returning
for credit, refund, or exchange, any or
all of the greeting cards purchased
from the supplier but fails to offer the
same privilege to all other customers
competing in the distribution of the
supplier’s greeting cards.

(In the above circumstances, the sup-
plier need not offer alternatives to re-
turns for credit, refund, or exchange
because they would appear to be usable
by all customers in a practical business
sense.)

(5) A supplier furnishes promotional
assistance based on increased amounts
of purchases, such as 2 percent coopera-
tive advertising allowance on yearly
purchases up to $1,000, and 4 percent co-
operative advertising allowance on pur-
chases over $1,000.

(Generally, using as a basis for pro-
motional assistance a percentage of
dollar volume or quantity of goods pur-
chased during a specified period of time
will insure that the promotional assist-
ance is furnished on proportionally
equal terms: Provided, however, That
when promotional assistance is fur-
nished on this basis, the percentage re-
mains constant regardless of the
amount of purchases.)

NOTE 1: As previously indicated, the fore-
going are examples of practices involving
discriminations the furnishing of pro-
motional assistance to be avoided in com-
merce when involving products of like grade
and quality and when the seller is unable to
establish a defense of “meeting competition
in good faith.”

NOTE 2: While this section concerns viola-
tions of the Clayton Act, as amended, per-

2 A rebate on leftover greeting cards may,
under some circumstances, be cognizable
under § 244.1, as a price discrimination.

58

16 CFR Ch. I (1-1-94 Edition)

taining to discriminations in the furnishing
of promotional assistance by publishers or
distributors, it should not be overlooked
that a customer who induces, or receives
promotional] assistance that he knows, or
should know, is not available on proportion-
ally equal terms to his competitors engaged
in the resale of the supplier’s greeting cards,
may be proceeded against by the Commis-
sion for violation of section 5 of the Federal
Trade Commission Act, which prohibits un-
fair methods of competition.

{Guide 2)

NOTE: 3. Nothing contained in this part re-
lieves any party subject to a Commission
cease and desist order or other requirement
from complying with the specific provisions
of such order or requirement. The Guides in
this part do not constitute a finding in and
will not affect the disposition of any formal
or informal matter now pending with the

Commission.

PART 245—GUIDES FOR THE
WATCH INDUSTRY

Sec.

245.1 Definitions.

245.2 Misrepresentation in general.

245.3 Misrepresentation of metallic com-
position of watchcases and certain watch
bands.

245.4 Misrepresentation as to durability or
suitability.

245.5 Misrepresentation of protective fea-
tures.

245.6 Deception as to jewels.

245.7 Misrepresentation of accessories.

245.8 Deceptive selling of used, rebuilt, or
secondhand products.

245.9 Deceptive imitation, obliteration, or
concealment of trade names, trademarks,
and marks.

245.10 Disclosure of foreign origin of watch
movements, movement parts, and related

parts.

245.11 Deceptive pricing.

245.12 Commercial bribery.

245.13 Coercing purchase of one product as a
prerequisite to the purchase of other
products.

245.14 Misrepresentation of the character
and size of business, extent of testing,
ete.

245.15 Guarantees, warranties, etc.

245.16 Use of the word “free”.

APPENDIX TO PART 245

AUTHORITY: Secs. 5, 6, 38 Stat. 719, as
amended, 721; 15 U.S.C. 45, 46.

SouncE: 33 FR 10332, July 19, 1968, unless
otherwise noted.