Environmental Testing Equipment Manufacturing Industry
16 CFR Part 40 · Trade practice rules · in the Code of Federal Regulations 1959-1978 (13 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 These rules and guides are historical: most were rescinded or replaced, so do not assume any is in force.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 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
§ 40.3
ment, to publish or circulate, in adver-
tising or otherwise, false or misleading
price quotations, price lists, or lists
stating terms or conditions of the sale
or installation of industry equipment,
which have the capacity and tendency
or effect of thereby misleading or de-
ceiving purchasers or prospective pur-
chasers in any material respect.
(b) Among the practices inhibited by
this section are:
(1) Misrepresenting the total cost
price or expense of the complete, final,
and efficient installation.
(2) Misrepresenting the need for
extra parts, gadgets, or devices re-
quired for the satisfactory and effi-
cient performance of the installation.
(3) Misrepresenting the need for
maintenance or replacement of parts
of such equipment after such installa-
tion has been made, or with respect to
any services offered concerning main-
tenance of such equipment or installa-
tion.
§ 40.3 Misrepresentation as to experience
and production capacity.
In connection with the sale, offering
for sale, or distribution of environmen-
tal testing equipment, it is an unfair
trade practice for any industry
member to represent, directly or indi-
rectly, that the member has special
knowledge, experience, or facilities for
designing, manufacturing, installing,
or maintaining any such equipment, or
has engaged in specialized study or re-
search relating thereto, when such is
not the fact.
§ 40.4 Misrepresentation of performance
of equipment.
In the sale, offering for sale, or dis-
tribution of environmental testing
equipment, it is an unfair trade prac-
tice to misrepresent the performance
capabilities of any such equipment.
§ 40.5 Defamation of competitors or false
disparagement of their equipment.
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’
equipment in any respect, or of their
business methods, selling prices, value,
Title 16—Cammercial Practices
credit terms, policies, or services, is an
unfair trade practice.
840.6 Substitution of equipment.
It is an unfair trade practice to make
an unauthorized substitution of equip-
ment, where such substitution has the
capacity and tendency or effect of mis-
leading or deceiving the purchasing or
consuming public, by:
(a) Shipping, delivering, or installing
industry equipment that does not con-
form to descriptions submitted, to
specifications upon which the sale is
consummated, or to representations
made prior to securing the order, with-
out advising the purchaser of the sub-
stitution and obtaining his consent .
thereto prior to making shipment or
delivery; or
(b) Falsely representing the reason
for making a substitution.
§ 40.7 Misrepresenting equipment as con-
forming to standard.
In connection with the sale or offer-
ing for sale of industry equipment, it
is an unfair trade practice to repre-
sent, through advertising or otherwise,
that such equipment conforms to any
standards recognized in or applicable
to the industry when such is not the
fact.
§ 40.8 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 any such contractual
duties or services, under any circum-
stances 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 for any
industry member to solicit the busi-
ness of a customer of a competing in-
dustry member; nor is the section to
be construed as in anywise authorizing
any agreement, understanding, 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 the customers
of any other industry member.
342
Chapter I—Federal Trade Commission
§ 40.9 Commercial bribery.
It is an unfair trade practice for a
member of the industry, directly or in-
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 equipment sold by such
industry member or the maker of such
gift or offer, or to influence such em-
ployers or principals to refrain from
dealing in the equipment of competl-
tors or from dealing or contracting to
deal with competitors, or to effect any
other advantage in favor of the indus-
try member making such gift or offer
with respect to the sale of industry
equipment to such employers or prin-
cipais. .
Norte: Section 40.9 will be construed to em-
brace both direct and indirect bribery of
elected or appointed public officials and em-
ployees or agents of municipal, county,
parish, or State governments, or of the Fed-
eral Government, or of any branch or divi-
sion thereof, by any industry member in
connection with the sale or offering for sale
of industry equipment, but it cannot and
does not limit the application of any other
pertinent Federal or State law.
§ 40.10 Probibited forms of trade re-
straints.)
It is an unfair trade practice, either’
directly 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 indus-
'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
others, a selier 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-
§ 40.12
try members, 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, com-
bination, or conspiracy.
§ 40.11 Guarantees, warranties, etc.
(a) It is an unfair trade practice to
represent, in advertising or otherwise,
that any industry equipment is “guar-
anteed’’ unless the nature and extent
of such guarantee is conjunctively dis-
closed and without deceptively mini-.
mizing the terms and conditions relat-
ing to the obligation of the guarantor.
(b) It is also an unfair trade practice
to use, or cause to be used, any guar-
antee in which the obligations of the
guarantor are impracticable of fulfill-
ment, or in respect to which the guar-
antor fails or refuses to observe his li-
abilities thereunder.
(c) 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.
§ 40.12 Enticing away employees of com-
petitors.
It is an unfair trade practice wilfully
to entice away employees or sales rep-
resentatives of competitors with the
intent and effect of thereby unduly
hampering or injuring coinpetitors in
their business and destroying or sub-
stantially lessening competition: Pro-
vided, That nothing in this section
shall be construed as prohibiting em-
ployees from seeking more favorable
employment, or as prohibiting employ-
ers from hiring or offering employ-
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.
343
30-034 © - 78 - 23
§ 40.13
ment to employees of competitors in
good faith and not for the purpose of
injuring, destroying, or preventing
competition.
§ 40.13 Prohihited sales helow cost.
(a) The practice of selling industry
equipment 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 restored to and pur-
sued with the wrongful intent or pur-
poses referred to and where the effect
is, or where there is a 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)
of perishable goods in respect to which
deterioration is imminent; (3) of obso-
lescent goods; (4) made under judicial
process; or (5) made in bona fide dis-
continuance 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 whethei
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 equipment 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, deliv-
ery, and installation of the equipment.
Not to be included are dividends or in-
terest on borrowed or invested capital,
or nonoperating losses, such as fire
losses and losses from the sale or ex-
Title 16—Commercio! Practices
change of capital assets. Operating
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.
§ 40.14 Prohihited 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
lother form of price differential, where
‘such rebate, refund, discount, credit,
or other form of price differential, ef-
‘fects a discrimination in price between
ldifferent 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
idiscrimination, 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;
"As 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.”
344
Chapter I|—Federal Trade Commission
(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;
Note: 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 proviso (2). For ex-
ample, if a seller regularly grants a discount
based upon the purchase of a specified
quantity by a single order for a single deliv-
ery, and this discount is justified by cost dif-
ferences, 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 condltions affect-
ing the market for or the marketabil-
ity of the goods concerned, such as but
not limited to obsolescence of seasonal
goods, actual or imminent deteriora-
tion of perishable goods, distress 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: See subsection (b) of section 2 of
the Clayton Act as amended, which is set
forth in the note following paragraph (e) of
this section.
(b) 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, for any allowance or
discount 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,
§ 40.14
representative, or other intermediary
therein where such intermedlary 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.
(c) 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 facilitles furnished by
or through such customers 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.
(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
of facilities connected with the pro-
cessing, handling, sale, or offering for
sale of such commodlty so purchased
upon terms not accorded to all com-
peting 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 foliowing paragraph (e) of
this section.
(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-
going provisions of this section.
Nore: Paragraph (e) of this section is a re-
statement of section 2(f) of the Clayton Act
345
§ 40.15
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-
graphs (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
allowance for differences in cost of manu-
facture, sale, or delivery resulting from the
differing methods or quantities in which the
goods were sold and delivered, the Commis-
slon may establish a prima facie case in a
number of ways, including: °
(1) By showing that the buyer paying the
lower price knew that the methods by, and
quantities in, which the goods were sold and
delivered to him by the selier, were the
same as in the case of the competing buyer
or buyers paying the higher price or prices;
or
(2) By showing, when there is a 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: Section 40.14 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
(a5) of this section and of the note to
paragraph (d) of § 40.14:
“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 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 the 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.
Title 16—Commercio! Practices
§ 40.15 Exclusive deals.
It is an unfair trade practice for any
member of the industry to contract to
sell or sell any industry equipment, or
fix a price charged therefor, or dis-
count from, or rebate upon, such price,
upon the condition, agreement, or un-
derstanding that the purchaser there-
of shall not use or deal in the equip-
ment of a competitor or competitors of
such industry member, where the
effect of such sale or contract for sale,
or of such condition, agreement, or un-
derstanding, may be substantially to
lessen competition or tend to create a
monopoly in any line of commerce.
§ 40.16 Aiding or abetting use of unfair
trade practices.
It is an unfair trade practlce 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 the rules of this part.
COMMITTEE ON TRADE PRACTICES
§ 40.201 Industry committee.
The provisions of §16.1 of this sub-
chapter shall be applicable to an in-
dustry committee established under
this part.
PART 41—METAL AWNING
INDUSTRY
Sec.
41.0
41.1
41.2
41.3
Definitions.
Deception in general.
Misuse of term “windproof,” etc.
Misuse of the term “stormproof,” etc.
41.4 Misuse of the term “rustproof,” etc.
41.5 Deception as to temperature reduction
or control resulting from use of industry
products.
41.6 Deceptive pricing.
41.7 Bait advertising.
41.8 Misuse of terms “close-outs,” “discon-
tinued lines,” “special bargains,” etc.
41.9 Misrepresentation as to character of
business.
41.10 Deception as to nature of sales trans-
actions.
41.11 Deception as to agency status and au-
thority.
41.12 Deception as to identity of manufac-
turer. or seller.
41.13 Deceptive testimonials or depictions.
41.14 Deceptive use of seals.
346