Poultry Hatching And Breeding Industry
16 CFR Part 36 · Trade practice rules · in the Code of Federal Regulations 1959-1978 (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 These rules and guides are historical: most were rescinded or replaced, so do not assume any is in force.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, 1978 CFR · Earliest edition: 1959 CFR
Text (1978 edition, OCR)
Chapter I—Federal Trade Commission 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. (d) Prohibited discriminatory ser- vices 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 services or facilities connected with the pro- cessing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all com- peting purchasers on proportionally equal terms. (e) Inducing or receiving an illegal discrimination in price. It is an unfair trade practice for any member of the industry engaged in commerce in the course of such commerce, knowingly to induce or receive a discrimination in price which is prohibited by the fore- gomg provisions of this section. (f) Purchases by U.S. Government; applicability of Robinson-Patman Antidiscrimination Act to same. In an opinion submitted to the Secretary of War under date of December 28, 1936, the U.S. Attorney General advised that the Robinson-Patman Antidis- crimination Act “is not applicable to Government contracts for supplies.” (38 Opinions, Attorney General 539.) § 34.23 Aiding or abetting use of unfair trade practices. It is an unfair trade practice for any person to aid, abet, coerce, or induce another, directly or indirectly, to use or promote the use of any unfair trade practice specified in this part. PART 36—POULTRY HATCHING AND BREEDING INDUSTRY Sec. 36.0 The industry and its products defined. Group I 36.1 Misrepresentation of products. Part 36 Sec. 36.2 Deceptive concealment of material facts. 36.3 Deceptive claims relating to National Poultry Improvement Plan or National Turkey Improvement Plan. 36.4 Misrepresentation concerning a breed- er’s name, trade name, strain or combi- nation of strains, or other breeding com- bination, etc. 36.5 Deceptive claims respecting freedom or immunity from disease. 36.6 Deceptive representations as to per- formance earnings, etc. 36.7 Misrepresentation as to yields of eggs, as to chicks from hens with purported high egg-laying records, as to chicks from high-egg-producing stock, etc. 36.8 Misrepresenting chicks as from high- performance stock. 36.9 Misrepresentation as to tcrms ‘cross- bred,” “inbred line,” ‘in-cross-bred,” “hybrid,” etc. 36.10 Misuse of term “dominant white,” new breed of poultry. 36.11 Misrepresentation breed of poultry. 36.12 Deception as to transportation or c.o.d. charges. 36.13 Misrepresenting offer as “special,” etc. respecting new 36.14 Deceptive testimonials. 36.15 Defamation of competitors or false disparagement of their products. 36.16 False or misleading price quotations, ete. 36.17 Deception by means of “bogus mde- pendents,” ‘“‘chick outlets,” etc. 36.18 Misuse of words “hatchery,” “chick- ery,” “chick nursery,” “farm,” ‘“‘poultry farm,” “breeding farm,” and related rep- resentations. 36.19 Guarantees, warranties, etc. 36.20 Fictitious prices. 36.21 Substitution of products. 36.22 Use of the word “free.” 36.23 Prohibited sales below cost. 36.24 Prohibitcd forms of trade restraints (unlawful price fixing, etc.). . 36.25 Tie-in sales; coercing purchase of one product as a prerequisite to the pur- chase of other products. 36.26 Prohibited discrimination. 36.27 Aiding or abetting use of unfair trade practices. Grovp II 36.101 Shipping chicks to fictitious con- signees, etc. AvuTHoRITY: Secs. 6, 5, 38 Stat. 721, 719; 15 U.S.C. 46, 45, unless otherwise noted. Source: 26 FR 1481, Feb. 22, 1961, unless otherwise noted. 331 § 36.0 § 36.0 The industry and its products de- fined. . Members of the industry to which the rules have application are persons, firms, corporations, and organizations engaged in the marketing of any kind or kinds of live poultry for growing or breeding for egg or meat production, and of poultry eggs for hatching use. The live poultry mentioned includes, but is not limited to, chicks, poults, goslings, and ducklings. Nore: As used in these rules, the word “chicks” shall be construed to include all kinds of live poultry. Group I § 36.1 Misrepresentation of products. In the sale, offerings for sale, or dis- tribution of industry products, it is an unfair trade practice for any member of the industry to make or publish, or cause to be made or published, any statement or representation (whether m the form of advertisement, trade promotional literature, mark, stamp, brand, label, depiction, photograph, il- lustration, radio or television broad- cast, or otherwise) concerning: (a) The grade, quality, quantity, breed, strain, cross, pedigree, type, sex, sexing, culling, quick maturity, uni- form development, livability, vigor, strength, character, price, nature, origin, weight, color, size, egg-produc- ing, meat-producing, disease-resisting, or other qualities of such products; or (b) The production, sale, distribu- tion, or delivery thereof, including the terms or conditions of sale; or (c) The supervision, endorsement, or approval of any poultry breeding, hatching, or other operation by Feder- al, State, or other authority, or any of- ficial connection with such Federal, State, or other authority, including random sample, standard laying, or other test results; or (ad) Any other matter relating to the poultry hatching or breeding business or to any of its products—which, di- rectly or by implication, is false, mis- leading, or deceptive in any respect. Note: The inhibitions of this section are to be understood as applicable to represen- tations or implications, such as “A,” “AA,” “AAA,” etc., that any industry product con- forms to the requirements of any grade or Title 16—Commerciol Proctices quality standard when (1) no such grade or quality standard exists, or (2) no disclosure of the identity of such standard, whether private, official, or otherwise, is made, or (3) -when the-member’s product does not con- form to such grade or quality standard. (Rule 1) $36.2 Deceptive concealment of material facts. (a) In advertising, offering for sale, or selling industry products, it is an unfair trade practice for any member of the industry to fail to disclose any material facts relating to such prod- ucts when such failure has the capac- ity and tendency or effect of mislead- ing or deceiving purchasers or prospec- tive purchasers of such products. ’ (b) Among the practices prohibited by this section are the following: . (1) Filling chick orders with chicks ‘which are wholly or predommantly icockerels, or are of a different stock or iquality than offered for sale, without ‘having disclosed this fact to the pur- ‘chaser prior to sale. (2) Shippmg chicks upon dates dif- ‘ferent from those specified or implied in the orders without disclosure or notice of such changes prior to ship- ‘ment. (3) Representing that the parent ‘flocks of chicks contain certain desir- ‘able types of males or females without ‘disclosure of the approximate percent- age or proportion of the flocks ac- counted for by such types. [Rule 2) § 36.3 Deceptive claims relating to Nation- al Poultry Improvement Plan or Na- tional Turkey Improvement Plan. (a) In connection with the sale, of- ‘fering for sale, or distribution of in- dustry products, it is an unfair trade practice for any industry member to represent or imply that he is a partici- pant in the National Poultry Improve- ‘ment Plan' or the National Turkey Improvement Plan,' when such is not the fact. Norte: In order to avoid deception of pur- chasers or prospective purchasers of indus- try products, all industry members discon- ,tinuing participation in the National Poul- try Improvement Plan, or the National 'These Plans have been promulgated by the United States Department of Agricul- ture and are contained in the Code of Fed- eral Regulations, 9 CFR, Parts 445 and 447. 332 Chapter I—Federal Trade Cammissian Turkey Improvement Plan, shall immediate- ly remove and discontinue the use of all signs, promotional literature, labels, and other representations or indications that they are still participating in such Plan or Plans. (b) In connection with the sale, of- fering for sale, or distribution of in- dustry products, it is an unfair trade practice to use any of the terminology of the National Poultry Improvement Plan or the National Turkey Improve- ment Plan (such as “U.S. Approved,” “U.S. Pullorum-Typhoid Clean,” etc.), or any abbreviation or simulation of such terminology, as descriptive of in- dustry products to which such terms are not fully applicable in accordance with the requirements therefor speci- fied in such Plans. (Rule 3] § 36.4 Misrepresentation concerning a breeder’s name, trade name, strain or combination of strains, or other breed- ing combination, etc. (a) It is an unfalr trade practice to make false or deceptive representa- tions, directly or by implication, in ad- vertising or otherwise, concerning a breeder’s name, trade name, strain or combination of strains or other breed- ing combinations, or the progeny or stock of such breeding combination. (b) It is also an unfair trade practice to represent, directly or by implica- tion, through advertising or otherwise, chicks or hatching eggs as being of a particular breeder’s pure strain, strain cross, breed cross, or other breeding combination, unless such chicks or hatching eggs are from flocks com- posed of birds hatched from eggs pro- duced under the direct supervision of the breeder or a multiplier designated by the breeder. Note: (1) The term “Strain” as used in this section means poultry bearing a given name produced through at least five Senera- tions of closed flock breeding. (2) The term “Stock” is used in this sec- tion to identify the progeny of a specific breeding combination of chickens or tur- keys. These breeding combinations may in- clude pure strains, strain crosses, breed crosses, or other breeding combinations. (Rule 4] § 36.5 § 36.5 Deceptive claims respecting free- dom or immunity from disease. (a) In the sale, offering for sale, or distribution of industry products, it is an unfair trade practice for any indus- try member to advertise, describe, or otherwise represent or imply, that chicks or hatching eggs are free from any or all diseases when such is not the fact. Norte: At present there exist no tests, in- oculations, vaccinations, etc., which poultry pathologists consider adequate to assure that chicks or hatching eggs are completely © and absolutely free from any or all poultry diseases. Accordingly, such claims as “dis- ease free,” “pollorum free,” or “100 percent pullorum free,” must‘not be made by indus- try members. Requirements applicable to claims and representations respecting tests, inocula- tions, vaccinations, and treatments for poul- try disease are set forth in paragraphs (b) and (c) of this section. (b) In the sale, offering for sale, or distribution of industry products, it is an unfair trade practice for any indus- try member to advertise, describe, or otherwise represent or imply, that chicks or hatching eggs come from birds or flocks which have been tested for pullorum, typhoid, and/or other disease or diseases, when: (1). Such birds or flocks have not been tested for the particular disease or diseases during the past 12 months; or (2) The tests applied are not recog- nized by poultry pathologists as effec- tive; or (3) The methods used in making the tests, the number, timing, or manner of applying them, the qualifications of the person or persons making them, or other attendant circumstances, are not such as to assure the effectiveness of the tests. (c) In the sale, offering for sale, or distribution of industry products, it is an unfair trade practice for any indus- try member to advertise, describe, or otherwise represent or imply, that chicks have been vaccinated, inoculat- ed, or treated for any disease or dis- eases, when such is not the fact, or when the vaccination, inoculation, or treatment applied is of a kind not rec- ognized by poultry pathologists as ef- fective, or when the methods used, the 333 § 36.6 timing or the extent thereof, the qualifications of the person or persons making the same, or other attendant circumstances, are not such as to assure their effectiveness. (See the first paragraph of the note following paragraph (a) of this section, and see also paragraph (b) of this section.) [Rule 5] § 36.6 Deceptive representations as to per- formance, earnings, etc. It is an unfair trade practice to make false or deceptive statements or repre- sentations, directly or by implication, in advertising or otherwise, regarding performance, opportunities for making money, or actual or probable earnings, income, profits, etc. Note: In the interest of avoiding decep- tion of purchasers or prospective purchas- ers, industry members desiring to make use, in advertising or otherwise, of any facts or figures published in the official reports con- cerning random sample, standard laying, or other tests shall state or otherwise employ such facts or figures only in a full, adequate and nondeceptive manner. [Rule 6] § 36.7 Misrepresentation as to yields of eggs, as to chicks from hens with pur- ported high egg-laying records, as to chicks from high egg-producing stock, ete. (a) Misrepresentation as to yields of eggs. It is an unfair trade practice to represent, directly or by implication, through advertising or otherwise, that high yields of eggs are received from all or any flocks of a particular seller or producer when such is not the fact. (b) Misrepresentation as to chicks from hens with purported high egg- laying records. It is an unfair trade practice to represent, directly or by implication, through advertising or otherwise, that chicks are produced by hens having certain purported high egg-laying records when the records of such hens have not been adequately established and the period of time and the method used for computation are not clearly disclosed in the advertis- ing. (c) Misrepresenting chicks as from high egg-producing stock etc. It is an unfair trade practice to represent, di- rectly or by implication, through ad- Title 16—Commercial Practices vertising or otherwise, that chicks of- fered for sale are from high egg-pro- ducing stock or blood lines when such fact has not been established, or when such representation is otherwise false, misleading, or deceptive. [Rule 7] § 36.8 Misrepresenting chicks high-performance stock. It is an unfair trade practice to ad- vertise, describe, or otherwise repre- sent, directly or by implication, that chicks sold or offered for sale are the progeny of or are descended from high-performance stock, when such is not the fact. [Rule 8] as from § 36.9 Misrepresentation as to “crossbred,” “inbred crosshred,” “hyhrid,” ete. (a) It is an unfair trade practice to make false or deceptive statements or representations, directly or by implica- tion, in advertising or otherwise, rela- tive to the breeding mcident to the production of chicks or hatching eggs, or to use any term or designation as descriptive thereof which conveys or tends to convey an erroneous impres- sion as to the kind or extent of the breeding employed. (b) For the purpose of this section and in its application, the following terms are acceptance when used in ac- cordance with their respective defini- tions: (1) “Crossbred.” The first generation poultry, chicks, or eggs produced by crossing two different breeds or varie- ties, or first-generation combinations of breeds or varieties. (2) “Inbred line.” A group of inbred chicks resulting from breeding closely related poultry and in which the indi- viduals in question have an average co- efficient of inbreeding of 37.5 percent (equivalent to two generations of brother-sister matings). (3) “In-crossbred.”’ The first genera- tion poultry, chicks, or eggs produced by crossing two inbred lines, first-gen- eration combinations of inbred lines, or the crossing of an inbred line with a first-generation combination of inbred lines. terms line,” = “in- Norte: To some purchasers and prospective purchasers of chicks and hatching eggs, the term “hybrid” implies application of genetic principles similar to those employed in the 334 Chapter I—Federal Trade Cammission production of hybrid seed corn, and to others the application of a selective system of breeding dissimilar to that employed in the production of hybrid seed corn. The term is generally regarded as denot- ing a superior quality and vigor resulting from systematic breeding and shall only be used to describe chicks and hatching eggs having such superior quality and vigor. In the interest of avoiding deception of purchasers and prospective purchasers, in- dustry members desiring to use the term “hybrid” as descriptive of such chicks and hatching eggs shall, in addition, confine the use thereof to established industry products obtained by crossing different inbred lines, or by crossing different breeds, varieties, strains, or lines, and shall qualify the word “hybrid” by statmg in immediate conjunc- tion therewith the type of cross used in the production of the industry product, such as “inbred line-cross hybrid” or ‘inbred hybrid,” “line-cross hybrid,” etc. Industry members will be expected to maintain adequate breeding records show- ing the establishment of the advertised product. CRule 9] §36.10 Misuse of term “dominant white,” new breed of poultry. It is an unfair trade practice to rep- resent, through advertising or other- wise, directly or by implication, chick- ens as “dominant white,”’ or by similar expressions, unless such chickens, when used as either male or female parents in combination with any chickens, produce only progeny that is generally predominantly white in color: Provided, however, That when the surface color of such progeny is other than white, the under color must be white. [Rule 10] § 36.11 Misrepresentation respecting new breed of poultry. (a) It is an unfair trade practice to offer for sale, sell, advertise, describe, or otherwise represent, directly or by implication, any chicks or other poul- try as being a new breed or as being the progeny of a new breed, when such is not the fact. (b) This section shall not be con- strued as preventing chicks or other poultry from being described as a new breed if and when they meet the fol- lowing definition or specification for a new breed as proposed by the industry and no deception is practiced in rela- § 36.14 tion to such designation or descrip- tion. New breed. A group of birds which are of similar size, shape, and skin color and differ from existing breeds in these characters or in the combination of these characters, and the varieties within the breed have similar plumage color and pattern, comb type, and other distinguishing physical characteris- tics, all of the characteristics of the breed and variety being demonstrated as having been reproduced with a high degree of uni- formity. (Rule 11] § 36.12 Deception as to transportation or c.o.d. charges. (a) It is an unfair trade practice to sell or offer to sell chicks, through ad- vertising or otherwise, in such manner as to have the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers into the belief that the prices quoted _for such chicks are the prepaid or de- livered prices when such is not the fact. (b) It is an unfair trade practice, by failing correctly to inform customers, or by other deception, to cause pur- chasers to believe that transportation costs will not be charged against them in c.o.d. charges or otherwise, when ‘such is.not true in fact. [Rule 12] § 36.13 Misrepresenting offer as “special,” ete. ? It is an unfair trade practice to rep- resent an offer as “special” with refer- ence to price, terms, or otherwise, when it is in fact a regular offer; or otherwise to use the term “special” or any term or word of similar import, as descriptive of any offer, in a manner, or under conditions, having the capac- ity and tendency or effect of inislead- ing or deceiving purchasers or prospec- tive purchasers as to the true nature of the offer. [Rule 13] § 36.14 Deceptive testimonials. In the sale, offering for sale, or dis- tribution of industry products, it is an 2The Commission on October 2, 1958, adopted “Guides Against Deceptive Pric- ing,’”’ copies of which will be mailed to indus- try members upon request. Such Guides supply specific guidance respecting pricing representations and are to be considered as supplementing this section. 335 § 36.15 unfair trade practice for any industry member to use or cause to be used, any testimonial which is false or mis- leading in any material respect. Among the kinds of testimonials pro- hibited by this section are the follow- ing: (a) Testimonials containing inaccu- rate statements as to results obtained from industry products of any certain kind or type; or (b) Testimonials regarding results obtained from industry products pur- chased from a certain seller or sellers which, by reason of inaccurate state- ments therein contained, or absence of disclosure of relevant facts, have the capacity and tendency or effect of re- ceiving purchasers or prospective pur- chasers of industry products. [Rule 14] § 36.15 Defamation of competitors or false disparagement of their products. The defamation of competitiors by falsely imputing to them dishonorable conduct, inability to perform con- tracts, questionable credit standmg, or by other false representations, or the false disparagement of the products of competitors in any respect, or of their business methods, _ selling prices, values, credit terms, policies, or ser- vices, is an unfair trade practice. [Rule 15] § 36.16 False or misleading price quota- tions, ete. It is an unfair trade practice for any member of the industry to publish or circulate price quotations, price lists, or terms or conditions of sale or pur- chase, which directly, or by reason of concealment of any material limita- tions, have the capacity and tendency or effect of deceiving purchasers or prospective purchasers. [Rule 16] § 36.17 Deception hy means of “bogus in- dependents,” “chick outlets,” etc. It is an unfair trade practice for any member of the mdustry: (a) To represent, directly or by im- plication, that a certain chick outlet is independent of, or in competition with, said member, when such is not the fact; or (b) To fail to disclose that any such outlet is not independent of, or not in Title 146—Commercial Practices competition with, said member, under circumstances where the failure to make such disclosure has the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers. [Rule 17] §36.18 Misuse of words “hatchery,” “chickery,” “chick nursery,” “farm,” “poultry farm,” “hreeding farm,” and related representations. In the sale, offering for sale, or dis- tribution of chicks, it is an unfair trade practice for any member of the industry, by trade or corporate name, through advertising or otherwise: (a) To hold himself out as owning or operating a hatchery, chickery, chick nursery, poultry farm, poultry breed- ing business, or as being the producer of chicks, or as operating incubators or producmg chicks under claimed or specified conditions, when such is not the fact; or (b) To use the terms “hatchery,” “farm,” “poultry farm,” ‘breeding farm,” or similar representations, in such manner as to have the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers mto the belief that the chicks have been produced in a hatch- ery or on a farm, poultry farm, or breeding farm, of said industry member, when such is not the fact. Nore: Nothing in this section, however, shall be construed as prohibiting an indus- try member, who actually owns and oper- ates a farm primarily devoted to the produc- tion of chicks, from selling, offering for sale, or distributing, under a trade, corporate, or other name containing the word ‘farm,” chicks produced from flocks of cooperating farms along with chicks produced on such member’s own farm, if and when the indus- try member has and exercises direct super- vision and control over all operations and conditions material to the quality, health, and vigor of all said chicks, including selec- tion of the breeding stock of which such chicks are the progeny, and all breeding and disease-control practices. [Rule 18] § 36.19 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: 336 Chapter I—Federal Trade Commission (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; or (3) To offer or use any guarantee which is otherwise deceptive or unfair. (bo) 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. Note: The Commission on April 26, 1960, adopted “Guides Against Deceptive Adver- tising of Guarantees,” copies of which will be mailed to industry members upon re- quest. Such Guides supply specific guidance respecting guarantee representations and are to be considered as supplementing this section. (Rule 19] § 36.20 Fictitious prices. * It is an unfair trade practice to sell or offer for sale industry products at prices purported to be reduced from what are in fact fictitious prices, or to sell or offer for sale such products at a purported reduction in price when such purported reduction is in fact fic- titious or is otherwise misleading or deceptive. [Rule 20] § 36.21 Suhstitution of products. (a) 1t is an unfair trade practice to advertise, describe, or otherwise repre- sent, directly or by implication, any in- dustry product as being of a certain stock, grade, sex, trade name, or qual- ity, and, upon receipt of orders for it, filling the same with any other indus- try product of a different stock, grade, sex, trade name, or quality, without first obtaining the consent of the pur- chasers to such substitution. (b) It is also an unfair trade practice, upon receiving orders for industry products of a certain stock, grade, sex, See footnote to § 36.13. § 36.23 trade name, or quality, to fill such orders with a different stock, grade, sex, trade name, or quality, without first obtaining the consent of the pur- chasers to such substitution. [Rule 21] § 36.22 Use of the word “free.” In connection with the sale, offering for sale, or distribution of 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 pur- chasers or prospective purchasers, as descriptive of any product or service, which is not an unconditional gift, under the following circumstances: (a) When all the conditions, obliga- tions, or other prerequisites to the re- ceipt and retention of the “free” prod- uct 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: (b) When, with respect to any prod- uct required to be purchased in order to obtain the “free” product or service, the offerer (1) increases the ordinary and usual price of such industry prod- uct, or (2) reduces its quality, or (3) re- duces 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. [Rule 22] § 36.23 Prohibited sales helow cost. (a) The practice of selling industry products at a price less than the cost thereof to the seller, with the purpose or intent, and where the effect is, or where there is a reasonable probabil- ity that the effect will be, to substan- tially injure, suppress, or stifle compe- tition 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 337 § 36.24 is, or where there is reasonable prob- ability that the effect will be, to sub- stantially injure, suppress, or stifle competition 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) or perishable goods in respect to: which deterioration is imminent; (3) of obsolescent goods; (4) made under ju- dicial process; or (5) made in bona fide discontinuance of business in the goods concerned. (c) As used in paragraphs (a) and (b) of this section, the term “cost” means the respective seller’s cost and not an average cost in the industry whether such average cost be determined by an industry cost survey or some other method. It consists of the total outlay or expenditure by the seller in the ac- quisition, production, and distribution of the products involved, and com- prises all elements of cost such as labor, material, depreciation, taxes (except taxes on net income and such other taxes as are not properly appli- cable to cost), and general overhead expenses, incurred by the seller in the acquisition, manufacture, processing, preparation for marketing, sale, and delivery of the products. Not to be in- cluded are dividends or interest on borrowed or invested capital, or nono- perating losses, such as fire losses and losses from the sale or exchange of capital assets. Operating cost should not be reduced by items of nonoperat- ing income, such as income from in- vestments, and gain on the sale of cap- ital assets. . (da) Nothing in this section shall be construed as relieving an industry member from compliance with any of the requirements of the Robinson- Patinan Act. [Rule 23) § 36.24 Prohihited forms of trade re- straints (unlawful price fixing, etc.) ‘4 ‘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 is in free and open competition with commodities of the same general class produced or distributed by Title 146—Commerciol Practices It is an unfair trade practice for any member of the industry, either direct- ly or indirectly, to engage in any planned common course of action, or to enter into or take part in any un- derstanding, agreement, combimation, 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 products 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. [Rule 24] § 36.25 Tie-in sales; coercing purchase of one product as a prerequisite to the purchase of other products. The practice of coercing the pur- chase of one or more products as a prerequisite to the purchase of one or more other products, where the effect may be substantially to lessen compe- tition or tend to create a monopoly or unreasonably to restrain trade, is an unfair trade practice. [Rule 25] § 36.26 Prohibited discrimination. * others, a seller of such a commodity may enter into a contract or agreement with a buyer thereof which establishes a minimum or stipulated price at which such commodity may be resold by such buyer when such 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 coinpetition with each other. 5As 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.” 338 Chapter |[—Federal Trade Commissian “(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 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 products are to such purchasers sold or delivered. Nore: Cost justification to be based on net savings in cost of manufacture, sale or de- livery. Cost justification under paragraph (a)(2) of this section depends upon net sav- ings in cost based on all facts relevant to the transactions under the terms of paragraph (a)(2) of this section. For example, if a seller regularly grants a discount based upon the purchase of a specified quantity by a single order for a single delivery, and this discount is justified by cost differences, 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 § 36.26 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, actual or imminent deterioration of perishable goods, dis- tress sales under court process, or sales in good faith in discontinuance of business in the goods concerned; (5) That nothing contained in this section shall prevent the meeting in good faith of an equally low price of a competitor. Nore: Subsection (b) of Section 2 of the Clayton Act, as amended, reads as follows: “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 or rebut- ting 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 autho- rized to issue an order terminating the dis- crimination: Provided, however, 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 to 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.”’ : (b) Examples of prohibited price dif- ferential practices. The following are examples of price differential prac- tices to be considered as subject to the prohibitions of paragraph (a) of this section when involving goods of like grade and quality which are sold for use, consumption, or resale within any place under the jurisdiction of the United States, and which are not pur- chased by schools, colleges, universi- ties, public libraries, churches, hospi- tals, and charitable 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 339 § 36.26 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 the customer receiving the benefit of the price dif- ferential, 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. The granting of a percent- age discount on a purchase made by a cus- tomer which is not granted on purchases made by all other customers, or which is not granted in the same percentage on the pur- chases of all other custoiners. Example No, 2. At the end of a given period an industry member grants a dls- count to a customer equivalent to a fixed percentage of the total of such customer’s purchases during the period and fails to grant a discount of the same percentage to all other customers on their purchases during such period. Example No. 3. An industry member sells goods to one or more of his customers at a higher price than he charges other custom- ers for like products. It is immaterial wheth- er or not such discrimination is attended by mlsrepresentation as to the grade and qual- ity of the product sold. ; Example No. 4. Terms of 2 percent, if pay- ment is made by the 10th of the following month, are granted by an industry member to some customers on products purchased by them from the industry meinber. An- other customer or customers are, neverthe- less, allowed to take an additional discount when making payment to the industry member within the time prescribed. 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 Title 16—Commerciol Proctices 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 ser- vices 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. (e) Prohibited discriminatory ser- vices 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 services or facilities connected with the pro- cessing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all com- petmg purchasers on proportionally equal terms. Nore: See subsection (b) of section 2 of the Clayton Act, as amended, which is set forth in the note concluding paragraph (a) of this section. - 340 Chapter I—Federal Trade Commissian (f) Inducing or receiving an illegal, discrimination in price. It is an unfair trade practice for any person engaged in commerce, in the course of such commerce, knowingly to induce or re- ceive a discrimination in price which is prohibited by the foregoing provisions of paragraphs (a) to (e) of this section. (Rule 26) § 36.27 Aiding or abetting use of unfair trade practices. It is an unfair trade practice for any person, firm, or corporation to aid, abet, coerce, or induce another, direct- ly or indirectly, to use or promote the use of any unfair trade practice speci- fied in this part. [Rule 27] Group II § 36.101 Sbipping chicks to fictitious con- signees, etc. The industry condemns the practice of disposing of chicks by shipping them to fictitious consignees or with- out an order from, or consent of, the consignee, necessitating the sale of such undeliverable shipments at public auction by agents of the common carrier in order to secure pay- ment for transportation costs. Such practice is deemed by the industry to be harmful to the chicks and to facili- tate the spread of disease. [Rule A] PART 40—ENVIRONMENTAL TESTING EQUIPMENT MANUFACTURING IN- DUSTRY Sec. 40.0 The industry defined. Group I 40.1 Misrepresentation and deception in general. 40.2 Deceptive pricing. 40.3 Misrepresentation as to experience and production capacity. 40.4 Misrepresentation of performance of equipment. 40.5 Defamation of competitors, or false disparagement of their equipment. 40.6 Substitution of equipment. 40.7 Misrepresenting equipment as con- forming to standard. 40.8 Inducing breach of contract. 40.9 Commercial bribery. 40.10 Prohibited forms of trade restraints. 40.11 Guarantees, warranties, etc. § 40.2 Sec. 40.12 Enticing away employees of competi- tors. 40.13 Prohibited sales below cost. 40.14 Prohibited discrimination. 40.15 Exclusive deals. 40.16 Aiding or abetting use of unfair trade practices. . . COMMITTEE ON THE PRACTICES 40.201 Industry committee. AuTHority: Secs. 6, 5, 38 Stat. 721, 719; 15 U.S.C. 46, 45 unless otherwise noted. Source: 22 FR 4441, June 25, 1957, unless otherwise noted. § 40.0 The industry defined. The industry for which trade prac- tice rules are established through this Proceeding consists of persons, firms, corporations, and organizations en- gaged in the sale of equipment de- signed to test the reaction and perfor- mance of products under varying de- grees of temperature, shock, noise, combustion, gravity, and other envi- ronmental conditions, and which is manufactured in whole or substantial part at factories maintained and oper- ated by them. Not included are per- sons, firms, corporations, or organiza- tions who merely install and/or repair such equipment. Group I § 40.1 Misrepresentation and deception in general. In connection with the distribution, sale, or offering for sale of industry equipment, it is an unfair trade prac- tice to use, or cause or promote the use of, any trade promotional litera- ture, advertising matter, guarantee, warranty, mark, brand, label, trade name, picture, design or device, desig- nation, or any other type of oral or written representation, however dis- seminated or published, or to fail to disclose any material fact, when such representation or failure to disclose has the capacity and tendency or effect of misleading or deceiving pur- chasers or prospective purchasers in any material respect. § 40.2 Deceptive pricing. (a) It is an unfair trade practice for any industry member, in the course of or in connection with the offering for sale or distribution of industry equip- 341