Phonograph Record Industry

16 CFR Part 67 · Trade practice rules · in the Code of Federal Regulations 1966-1978 (12 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 These rules and guides are historical: most were rescinded or replaced, so do not assume any is in force.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: 1966 CFR

Text (1978 edition, OCR)

Chapter !—Federal Trade Cammissian

PART 67—PHONOGRAPH RECORD
INDUSTRY

Sec.
67.0 Definitions.

Group A

67.1 Prohibited discriminatory prices, re-
bates, discounts, etc. .

67.2 Prohibited advertising or promotional
allowances, or services or facilities.

67.3 Inducing or receiving an illegal dis-
crimination in price, advertising or pro-
motional allowances, or services or facili-
ties.

67.4 Prohibited brokerage and commis-
sions.

Group B

67.5 Prohibited forms of trade restraints
(unlawful price fixing, etc.).

67.6 Tie-in sales; requiring purchase.of one
product as a prerequisite to the pur-
chase of other products.

67.7 Exclusive dealing.

67.8 Lifting of stocks.

67.9 Inducing breach of contract.

67.10 Unlawful interference with pur-
chases or sales.

67.11 Defamation of competitors or false
disparagement of their products.

67.12 Push money.

67.13 Commercial bribery.

67.14 Unauthorized shipment.

67.15 Aiding or abetting use of unfair trade
practices.

Group C

67.16 Misuse of “stereo” and “stereophon-
ic”.

67.17 Cancellation of membership in com-
mercial club or membership organiza-
tions.

67.18 Misrepresenting products as con-
forming to standard.

67.19 Misrepresentation as to character of
business.

67.20 Deceptive use of trade or corporate
names, trademarks, etc.

67.21 Passing off through imitation or sim-
ulation of trademarks, trade names, etc.

67.22 False invoicing.

67.23 Substitution of products.

67.24 Guarantees, warranties, etc.

67.25 Use of the word “free”.

67.26 Deceptive pricing.

67.27 Misbranding, misrepresentation, and
deceptive selling methods.

AutuHonrirty: Secs. 6, 5, 38 Stat. 721, 719; 15
U.S.C. 46, 45, unless otherwise noted.

Source: 29 FR 13946, Oct. 9, 1964, unless
otherwise noted.

§ 67.1

§ 67.0 Definitions.

As used in this part the following
terms shall have the meanings which
have been assigned to them below:

(a) Industry member. Any person,
firm, corporation or organization en-
gaged in the manufacture, processing,
sale or distribution of industry prod-
ucts as here defined. (Excluded from
the scope of this part are such suppli-
ers as phonograph record pressers,
jacket fabricators, and music publish-
ers.)

(b) Industry products. Phonograph
records, magnetic tapes, and similar
devices upon which sound has been re-
corded. (Specifically excluded are such
commercial recordings as_ electrical
transcriptions and recorded library
services which are neither: (1) Distrib-
uted to the general public; nor (2) dis-
tributed to any industry member in
connection with the sale or promotion
of recordings which are distributed to
the public. Also excluded are phono-
graphs, tape recorders, and other simi-
lar devices and accessories.)

(c) Recording (noun). Any disc
record, magnetic tape, wire, or other
such device upon which sound has
been recorded for subsequent repro-
duction.

(d) Artist. Any performer or other
person, or any group of persons, who
produces sounds which are captured
on a recording (as recording is here de-
fined).

Group A

§ 67.1 Prohihited discriminatory prices,
rebates, discounts, etc.

(a) No meinber of the industry en-
gaged in commerce, in the course of
such commerce, shali grant or allow,
secretly or openly, directly or indirect-
ly, any rebate, refund, discount, credit,
or other form of price differential,
where such rebate, refund, discount,
credit or other form of price differen-
tial, effects 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 substantial-
ly to lessen competition or tend to
create a monopoly in any line of com-
merce, or to injure, destroy, or prevent

395


§ 67.1.

competition with any person who
either grants or knowingly receives
the benefit of such discrimination, or
with customers of either of them: Pro-
vided, 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
section shall prevent differentials
which make only due allowance for
differences in the cost of manufacture,
sale, or delivery resulting from the dif-
fering methods or quantities in which
such commodities are to such purchas-
ers sold or delivered;

Nore: Cost justification under the above
proviso depends upon net savings in cost
based on all facts relevant to the transac-
tions under the terms of paragraph (a)(2) of
this section. For example, if a seller regular-
ly grants a discount based upon the pur-
chase of a specified quantity by a single
order for a single delivery, and this discount
is justified by cost differences, it does not
foilow 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

. section shall prevent price changes
from time to time where made in re-
sponse to changing conditions affect-
ing the market for or the marketabil-
ity of the goods concerned, such as but
not limited to obsolescence of seasonal
goods, distress sales under court pro-
cess, or sales in good faith in discon-
tinuance of business in the goods con-
cerned; .

(5) That nothing contained in this
section shall prevent the meeting in
good faith of an equally low price of a
competitor.

Note: Subsection (b) of section 2 of the
Clayton Act, as amended, reads as foilows:
“Upon proof being made, at any hearing on
a complaint under this section, that there

Title 16—Cammercial Practices

has been discrimination in price or services
or facilities furnished, the burden of 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) The following are examples of
price differential practices to be con-
sidered as subject to the prohibitions
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
Unlted 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 this section are present;
and

(2) The price differential has a rea-
sonable probability of substantially
lessening competition or tending to.
create a monopoly in any line of com-
merce, or of injuring, destroying, or
preventing conipetition 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 was not
justified by cost savings (see para-
graph (a)(2) of this section); and

(4) The price differential was not
made in response to changing condi-
tions affecting the market for or the
marketability 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 coinpetitor (see paragraph
(a)(5) of this section):

Example 1, At the end of a given period an
industry member grants a discount to a cus-
tomer equivalent to a fixed percentage of
the total of the customer’s purchases during
such period and fails to grant a discount of

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Chapter I—Federal Trade Commission

the same percentage to other customers on
their purchases during such period.

Example 2. An industry member sells
goods to one or more of his customers at a
higher price than he charges other custom-
ers for like merchandise. It is immaterial
whether or not such discrimination is ac-
complished by misrepresentation as to the
grade and quality of the products sold. ©

Example 3. An industry member sells
goods directly to a retaller at a lower price
than he charges distributors whose retain
customers compete with the favored retail-
er.

Example 4. An industry member pays
freight on shipments to a customer, or pays
freight on shipments to a distributor's cus-
tomer, and does not pay such freight for all
customers of the industry member, thereby
effecting a difference in price between cus-
tomers of such member.

Example 5. Terms of 2/10 prox. are grant-
ed by an industry member to some custom-
ers on goods purchased by them from the
industry member. Another customer or cus-
tomers are, nevertheless, allowed to take an
additional discount when making payment
to the industry member within the time pre-
scribed.

Note: “Free” records. In the phonograph
record industry, “free” records of a particu-
lar type are customarily offered by sellers to
their customers upon the condition that
such customers purchase specified quanti-
ties of particular phonograph records.

Granting of free records or other mer-
chandise illustrated by examples 6, 7, and 8
is considered violative of section 2(a) of the
Clayton Act, as amended, provided that the
requisites preceding the examples of this
paragraph (b) of this section are met.

Example 6. An industry member invoices
goods to all his customers at the same price
but supplies additional quantities of such
goods at no extra charge to one or more, but
not to all, such customers; or supplies other
goods or premiums to one or more, but not
to all, such customers for which he inakes
no extra charge and which effects an actual
price difference in favor of certain of his
customers.

Example 7. An industry member grants to
some of his customers “free” records based
on a fixed percentage of the custoiner’s pur-
chase of records and fails to grant “free” re-
cords based on the same percentage to other
customers, which effects an actual price dif-
ference in favor of certain of his customers.

Example 8. An industry member grants to
all customers who purchase a specified
“quota” of records a certain quantity of
“free” records, but the “quota” is so high
that some customers cannot attain it and
thus do not receive the “free” records, ef-
fecting an actual price discrimination in
favor of certain of the industry meinber’s
customers.

°

§ 67.2

Note: Functional discounts. Neither this
section, nor section 2(a) of the Clayton Act,
as amended, of which this section is inter-
pretive, expressly permits or prohibits the
granting of functional discounts. The pro-
priety of such discounts is contingent, prin-
cipally, on whether they may substantially
lessen competition or tend to create a mo-
nopoly. All price differentials, whether
“functional” or otherwise, must meet the
same tests.

Ordinarily, however, a seller may grant a
lower price to wholesalers than to retailers
to the extent that such wholesalers resell to
retallers, without such effects as may sub-
stantially iessen competition or tend to
create a monopoly. But if such wholesalers
also sell at retall, in competition with other
of the seller’s retail customers, they may
not properly be granted a price lower than
the prices granted to competing retailers on
that portion of the goods they sell at retail.

Examples 9 and 10 are illustrative of prac-
tices considered to be violative of section
2(a) of the Clayton Act, as amended, pro-
vided that the requisites preceding the ex-
amples of this paragraph (b) of this section
are met.

Example 9. An industry member sells pho-
nograph records to customers who resell the
records by means of record racks placed in
retail stores which are primarily engaged in
the sale of non-record products and charges
such customers 10 percent less than the
price at which such industry member sells
phonograph records to retall record store
customers.

Example 10. An industry member sells
phonograph records to a customer who re-
sells to juke box operators and to retailers
and who also is in competition with the
latter, and charges such customer a lower
price for the records he resells at retail than
the industry member charges other retall- .
ers. 7

(Rule 1]

§ 67.2 Prohibited advertising or promo-
tional allowances, or services or facili-
ties.

(a) Advertising or promotional
allowances. No member of the indus-
try engaged in commerce shall pay or
contract for the payment of advertis-
ing or promotional allowances or any
other thing of value to or for the bene-
fit of a customer of such member in
the course of such commerce as com-
pensation or in consideration for any
services or facilities furnished by or
through such customer in connection
with the processing, handling, sale, or
offering for sale of any products or
commodities manufactured, sold, or

397


§ 67.2

offered for sale by such member,
unless such payment or consideration
is made known to and is available on
proportionally equal terms to all other
customers competing in the distribu-
tion of such products or commodities.

Note 1: Industry members giving advertis-
ing allowances to competing customers must
exercise precaution and diligence in seeing
that all of such allowances are used in ac-
cordance with the terms of their offers.

Note 2: When an industry member gives
allowances to competing customers for ad-
vertising in a newspaper or periodical, and it
appears after reasonable inquiry that a
lower advertising rate for equivalent space
is avallable to one or more, but not all, such
customers, such fact should not be regarded
by the industry member as warranting the
retention by such customer or customers of
any portion of the allowance for his or their
personal use or benefit.

(b) Services or facilities. No member
of the industry engaged in commerce
shall discriminate in favor of one pur-
chaser against another purchaser or
purchasers of a commodity bought for
resale, with or without processing, by
contracting to furnish or furnishing,
or by contributing to the furnishing
of, any services or facilities connected
with the processing, handling, sale, or
offering for sale of such commodity so
purchased upon terms not accorded to
all competing purchasers on propor-
tionally equal terms.

Note: Subsection (b) of section 2 of the

. Clayton Act, as amended, which is set forth
in the note following paragraph (a)(5) of
§ 67.1 is also applicable to provisions of both
paragraphs (a) and (b) of this section (67.2).

(c) Examples. The following are ex-
amples of discriminations in furnish-
ing advertising or promotional
allowances or services or facilities to
be considered as subject to the prohi-
bitions of this section when involving
goods of like grade and quality, when
the commerce requirements specified
by this section are present, and when
a suitable equivalent alternative
allowance, service or facility is not ac-
corded on proportionally equal terms
to those customers to whom the
allowance, service or facility set forth
in these examples is not available
under reasonable terms and condi-
tions.

Title 146—Commercial Practices

Example 1. An industry member grants an
allowance for advertising to a customer
based on a fixed percentage of that custom-
er’s purchases and fails to make known and
avallable to other customers who are com-
peting with the former an allowance of the
same percentage of their purchases.

Example 2. An industry member furnishes
free merchandise to a customer with the
proviso that it be used for advertising or
that the proceeds of its sale be used for ad-
vertising purposes. Such free merchandise is
not offered and made available on propor-
tionally equal terms to all competing cus-
tomers.

Example 3. An industry member provides
cooperative advertising allowances in the
form of credit memoranda to particular cus-
tomers on a negotiated, specific advertise-
ment basis without making advertising
allowances known to and available on pro-
portionally equal terms to all competing
customers.

Example 4. An industry member furnishes
promotional services to a retailer customer
in connection with the resale of the goods
purchased and fails to make such services
known to and available on proportionally
equal terms to other retail customers who
are competing with the former.

Example 5. An industry member provides
racks, browsers, bins, displays, special pack-
aging, and other similar services and facili-
ties to certain of its customers but does not
make such services or facilities known to
and available on proportionally equal terms
to all competing customers.

Example 6. An industry member sponsors
a radio program on which advertising is pro-
vided for certain of its customers. Such ser-
vice is not made known to and available te
all competing customers on proportionally
equal terms.

Example 7. An industry member accords
to one or more customers the privilege of re-
turning for credit, refund or exchange any
or all of the goods purchased by them and
fails to accord the same privilege to another
or other competing customers on propor-
tionally equal terms.

(d) Proportional equality of treat-
ment of competing customers. (The
following is presented for the purpose
of clarifying requirements with re-
spect to the supplying of marketing
services, facilities, or allowances by in-
dustry members to their customers,
but it is not intended to imply that
other methods which assure of propor-
tional equality of treatment of com-
peting customers may not also be
used.) An industry meinber may simul-
taneously offer to each of his custom-
ers competing in the resale of his

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Chapter I—Federal Trade Commission

products the same kind of promotional
service, facility or allowance of a cost
value equal to a uniform percentage of
the sales (or purchases) of the indus-
try member’s products by each cus-
tomer during a specified and identical
period of time: Provided, however,
That where applicable the industry
member complies with the following:

(1) When the service, facility, or
allowance offered is of a type which
under reasonable terms and conditions
is not usable or suitable to the facili-
ties and business of all customers, and
is offered to any one customer, the
member offers each of those custom-
ers to whom the service, facility, or
allowance is not usable or suitable an
alternative type of promotional ser-
vice, facility, or allowance which is of
equivalent measurable cost, is usable
by the customer, and is suitable to his
facilities and business, and promptly
informs all competing customers of
the kind and amount of services, facili-
ties, or allowances which he has of-
fered to each and the respective terms
and conditions under which such ser-
vices, facilities, or allowances are to be
furnished by the industry member;
and ,

(2) When the offer of any service, fa-
cility, or allowance to any customer is
conditioned on such customer supply-
ing some reciprocal service, facility, or
payment, a reciprocal service, facility,
or payment is required in the offers to
all other customers and there is an
equality of ratio among all customers
as to the measurable cost of that
which is supplied by the industry
member and the reciprocal service, fa-
cility, or payment required of any cus-
tomer.

Nore: Where the seller has alternative
promotional plans, his customers inust be
given the opportunity to choose among the
plans.

(Rule 2]

§ 67.3 Inducing or receiving an illegal dis-
crimination in price, advertising or
promotional allowances, or services or
facilities.

(a) No member of the industry en-
gaged in commerce, in the course of
such commerce, shall knowingly
induce or receive a discrimination in
price, advertising, or promotional

§ 67.4

allowances, or services or facilities,
which is prohibited by the provisions
of § 67.1 or § 67.2.

(b) The following are examples of in-
ducing or receiving discriminations in
price, advertising, or promotional

- allowances, or services or facilities, to

be considered as subject to the prohi-
bitions of this section when the requi-
sites established by § 67.1 or § 67.2 for
a violation of those rules on the part
of the seller are present and the party
receiving the discriminations knows or
has reason to know that the discrimi-
nations are illegal.

Example 1. An. industry member pur-
chases records, purportedly for resale to re-
tailers and to juke box operators, and is
charged a lower price than the seller
charges other customers for records which
they resell at retail; but the member then
transfers such records to another part of its
business where they are resold at retail,
théreby receiving a discrimination in price
which is prohibited by § 67.1.

Example 2. An industry member induces
suppliers to contribute sums of money to
defray some or all of the costs of radio pro-
grams sponsored by such member and de-
signed to promote the sale of records in its
place of business, and which feature records
distributed by the contributing suppliers,
when the industry member knows or has
reason to believe that allowances for such
Purpose are not made available on propor-
tionally equal terms by the same suppliers
to other customers competing with the fa-
vored member, thereby receiving a discrimi-
nation in promotional allowances which is
prohibited by § 67.2.

(Rule 3]

§ 67.4 Probibited brokerage and commis-
sions.

No member of the industry engaged
in commerce, in the course of such
commerce, shall pay or grant, or re-
ceive or accept, anything of value as a
commission, brokerage, or other com-
pensation, 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

399


§ 67.5

compensation is so granted or paid.
(Rule 4]

Group B

§ 67.5 Prohibited forms of trade restraints
(unlawful price fixing, ete.).*

Members of the industry, either di-
rectly or indirectly, shall not engage in
any planned common course of action,
or enter into or take part in any un-
derstanding, agreement, combination,
or conspiracy, with one or more mem-
bers of the industry, or with any other
person or persons, to fix or maintain
the price of any industry products or
otherwise unlawfully to restrain trade;
or use any form of threat, intimida-
tion, 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. [Rule 5]

§ 67.6 Tie-in sales; requiring purchase of
One product as a prerequisite to the
purchase of other products.

No member of the industry shall re-
quire the purchase of one or more
products as a prerequisite to the pur-
chase of one or more other products,
where the effect may be substantially
to lessen competition or tend to create

'The prohibitions of this section are sub-
ject to Pub. L. 542, approved July 14, 1952—
66 Stat. 632 (the McGuire Act, commonly
referred to as the Fair Trade Amendment),
which provides that with respect to a-com-
modity which bears, or the label or contain-
er of which bears, the trademark, 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 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
competition with each other.

Title 16—Commercial Practices

a monopoly or unreasonably to re-
strain trade. [Rule 6]

§ 67.7 Exclusive dealing.

Members of the industry shall not
contract to sell or sell industry prod-
ucts, or fix a price charged therefor, or
discount from, or rebate upon, such
price, on the condition, agreement, or
understanding that the purchaser
thereof shall not use or deal in the
products of a competitor or competi-
tors of such industry member, where
the effect of such sale or contract for
sale, or of such condition, agreement;
or understanding, may be substantial-
ly to lessen competition or tend to
create a monopoly in any line of com-
merce. [Rule 7]

§67.8 Lifting of stocks.

No member of the industry shall
purchase the stock of a distributor or
dealer which has been supplied by a
competitor or competitors when such
practice is used as an inducement to
the distributor or dealer to discontin-
ue handling competitive products and
to handle such member’s products ex-
clusively, and where the effect of such
act or practice may be substantially to
lessen competition or tend to create a
monopoly in any line of commerce.
(Rule 8]

§ 67.9 Inducing breach of contract.

Members of the industry shall not
knowingly induce or attempt to induce
the breach of existing lawful contracts
between competitors and their custom-
ers or between competitors and their
suppliers, or interfere with or obstruct
the performance of any such contrac-
tural duties or services, under any cir-
cumstances having the capacity and
tendency or effect of substantially in-
juring or lessening competition. [Rule
9]

§ 67.10 Unlawful interference with pur-
chases or sales.

No member of the industry, by
means of any monopolistic practices or
through combination, conspiracy, co-
ercion, boycott, threats, or any other
unlawful means, directly or indirectly,
shall interfere with any industry mem-
ber’s right to purchase his industry
products and supplies from whomsoev-

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Chapter I—Federal Trode Commission

er he chooses, or to sell his products to
whomsoever he chooses. [Rule 10]

§ 67.11 Defamation of competitors or false
disparagement of their products.

Members of the industry shall not
defame competitors by falsely imput-
ing to them dishonorable conduct, in-
ability to perform contracts, question-
able credit standing, or by other false
representations, or falsely disparage
competitors’ products in any respect,
or their business methods, selling
prices, values, credit terms, policies, or
service.

NorE: Nothing in this section shall be con-
strued as preventing full, fair, and nonde-
_ ceptive comparison, by demonstration or
otherwise, of competitors’ products with the
products of another industry member
before purchasers or prospective purchas-
ers.

(Rule 11]

§ 67.12 Push money.

An industry member shall not pay or
contract to pay anything of value to a
salesperson employed by a customer of
the industry member, as compensation
for, or as an inducement to obtain,
special or greater effort or service on
the part of the salesperson in promot-
ing the resale of products supplied by
the industry member to the custom-
er—

(a) When the agreement or under-

standing under which the payment or .

payments are made or are to be made
is without the knowledge and consent
of the salesperson’s employer; or

(b) When the terms and conditions
of the agreement or understanding are
such that any benefit to the sales
person or customer is dependent on
lottery; or

(c) When any provision of the agree-
ment or understanding requires or

contemplates practices or a course of -

conduct unduly and _ intentionally
hampering sales of products of com-
petitors of an industry member; or

(d) When, because of the terms and
conditions of the understanding or
agreement, including its duration, or
the attendant circumstances, the
effect may be substantially to lessen
competition or tend to create a mo-
nopoly; or

. § 67.15

(e) When similar payments are not

accorded to salespersons of competing

customers on proportionally equal

terms in compliance with sections 2(d)
and (e) of the Clayton Act.

Nore: Payments made by an industry
member to a salesperson of a customer
under any agreement or. understanding that
all or any part of such payments is to be
transferred by the salesperson to the cus-
tomer, or is to result in a corresponding de-
crease in the salesperson’s salary, are not to
be considered within the purview of this sec-
tion, but are to be considered as subject to
the requirements and provisions of section
2(a) of the Clayton Act.

(Rule 12]

§ 67.13 Commercial bribery. ©

Members of the industry shall not
give, or offer to give, or permit or
cause to be given, directly or indirect-
ly, money or anything of value to
agents, employees, or representatives
of customers or prospective customers,
or to agents, employees, or representa-
tives of competitors’ customers or pro-
spective customers, without the know)-
edge of their employers or principals,
as an inducement to influence their
employers or principals to purchase or
contract to purchase products manu-
factured or sold by such industry
member, or to influence such employ-
ers or principals to refrain from deal-
ing in the products of competitors or
from dealing or contracting to deal
with competitors. [Rule 13]

§ 67.14 Unauthorized shipment.

No member of the industry shall
engage in shipping industry products
to customers or prospective customers,
for the purpose of inducing purchase
or acceptance on consignment of such
products, without the express request
or prior consent of the proposed con-
signee or purchaser. (Rule 14]

§ 67.15 Aiding or abetting use of unfair
trade practices.

No person, firm, or corporation,
being a member of this industry, shall
aid, abet, coerce, or induce another, di-
rectly or indirectly, to use or promote
the use of any unfair trade practice
specified in the rules in this part.
CRule 15]

401


§ 67.16

Group C

§ 67.16 Misuse of “stereo” and “stereo-
phonic.”

(a) No member of the industry shall
use the words “stereo” or ‘‘stereophon-
ic,” or any other word or phrase of
like meaning, to describe or refer to a
recording that does not have two dis-
tinctly separate modulations derived
from an original live recording in
which a minimum of two separate
channels were employed; except that
such words or phrase may be used in
connection with a recording having
two distinctly separate modulations
derived from an original monophonic
recording if a clear and conspicuous
disclosure is made, m immediate con-
junction therewith, that the recording
has been altered, changed, or re-re-
corded to simulate stereophonic repro-
duction.

(b) No.industry member shall use
the words “true” or “genuine,” or any
other-word or phrase of like meaning,
in conjunction with the word ‘“‘stereo”’
or “stereophonic,” or any other word
or phrase of like meaning, to describe
or refer to a recording that was not de-
rived from an original live recording in
which a minimum of two separate
channels were employed. [Rule 16]

§67.17 Cancellation of membership in
commercial club or memhership orga-
nizations.

In the operation or management of
any commercial phonograph record
club or membership organization, in-
dustry members shall not:

(a) Represent, directly or by implica-
tion, that persons may cancel member-
ship if, in fact, cancellation is not
always permitted without any condi-
tions or limitations, unless a full and
clear disclosure of all conditions, limi-
tations or prerequisites to cancellation
are made in immediate conjunction
with all such representations; or

(b) Ship merchandise and attempt to
collect the price of such merchandise
when the right of cancellation of
membership has been exercised and
proper notification of cancellation has
been given. [Rule 17]

Title 16—Cammercial Practices

§ 67.18 Misrepresenting products as con-
forming to standard.

In the sale, offering for sale, or dis-
tribution of any industry products;
members of the industry shall not rep-
resent or imply, through advertising
or otherwise, that such products con-
form to any standards recognized in or
applicable to the industry when such
is not the fact. [Rule 18]

§ 67.19 Misrepresentation as to character
of business.

Members of the industry shall not
represent, directly or by implication,
in advertising, by trade or corporate
name, or otherwise, that they produce
or manufacture products of the indus-
try, or that they own or control a
plant making such products, when
such is not the fact, or that they are a
manufacturer, wholesale distributor,
or a wholesaler when such is not the
fact, or in any other manner misrepre-
sent the character, extent, or type of
their business. [Rule 19]

§ 67.20 Deceptive use of trade or corporate
names, trademarks, etc.

Members of the industry shall not
use any trade name, trademark, or
other trade designation, which has the
capacity and tendency or effect of mis-
leading or receiving purchasers or pro-
spective purchasers as to the name,
nature, or origin of any product of the
industry, or of any material used
therein, or which is false, deceptive, or
misleading in any other material re-
spect. [Rule 20]

§ 67.21 Passing off through imitation or
simulation of trademarks, trade names,
etc. .

Members of the industry shall not
mislead or deceive purchasers by pass-
ing off the products of one mdustry
member as and for those of another
through the imitation or simulation of
trademarks, trade names, brands, or
labels. [Rule 21]

§ 67.22 False invoicing.

No industry members shall withhold
from or insert in invoices or sales tick-
ets any statements or information by
reason of which omission or insertion
a false record is made, wholly or. in

402


Chapter I—Federal Trade Commission

part, of the transactions represented
on the face of such invoices or sales
tickets, with the capacity and tenden-
cy or effect of thereby misleading or
deceiving purchasers, prospective pur-
chasers, or the consuming public in
any material respect. [Rule 22]

§ 67.23 Substitution of products.

No inember of the industry shall
make an unauthorized substitution of
products, where such substitution has
the capacity and tendency or effect of
misleading or deceiving purchasers,
by:

(a) Shipping or delivering industry
products which do not conform to
samples submitted, to specifications
upon which the sale is consummated,
or to representations made prior to se-
curing the order, without advising the
purchaser of the substitution and ob-
taining his consent thereto prior to
making shipment or delivery; or’

(b) Falsely representing the reason
for making substitutions. [Rule 23]

§ 67.24 Guarantees, warranties, etc.

(a) Industry members shall not rep-
resent in advertising or otherwise that
a product is “guaranteed” without a
clear and conspicuous disclosure in
close conjunction with such represen-
tation of:

(1) The nature and extent of the
guarantee; and

(2) Any material conditions or limi-
tations in the guarantee which are im-
posed by the guarantor; and

(3) The manner in which the guar-
antor will perform thereunder; and

(4) The identity of the guarantor.

(b) Representations that a product is
“guaranteed for life’ or has a “life-
time guarantee,” in addition to meet-
ing the above requirements, shall con-
tain a conspicuous disclosure of the
meaning of “life” or “lifetime” as used
(whether that of the purchaser, the
product or otherwise).

(c) Guarantees shall not be used
which under normal conditions are im-
practical of fulfillment or which are
for such a period of time or are other-
wise of such nature as to have the Cca-
pacity and tendency of misleading pur-
chasers or prospective purchasers into
the belief that the product so guaran-
teed has a greater degree of service-

§ 67.26

ability, durability or performance ca-
pability in actual use than is true in
fact. .
(d) This section has application not
only to “guarantees” but also to ‘“‘war-
ranties,” to purported ‘‘guarantees”
and “warranties,” and to any promise
or representation in the nature of a
“guarantee” or “warranty.” [Rule 24]

§ 67.25 Use of the word “free.”

In connection with the sale, offering
for sale, or distribution of industry
products, industry members shall not
use the word “free,” or any other word
or words of similar import, in adver-
tisements or in other offers to the
public, as descriptive of an article of
merchandise, or service, which is not

_ an unconditional gift, under the fol-

lowing circumstances:

(a) When all the conditions, obliga-
tions, or other prerequisites to the re-
ceipt and retention of the “free” arti-
cle of merchandise or service offered
are not clearly and conspicuously set
forth at the outset so as to leave no
reasonable probability that the terms
of the offer will be misunderstood;
and,

(b) When, with respect to any article
of merchandise required to be pur-
chased in order to obtain the ‘‘free”
article or service, the offerer (1) In-
creases the ordinary and usual price of
such article of merchandise, or (2) re-
duces its quality, or (3) reduces the
quantity or size thereof.

Note: 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 ordi-
narily be regarded as compliance.

(Rule 25]

§ 67.26 Deceptive pricing.

Members of the industry shall not
represent directly or indirectly in ad-
vertising or otherwise that an industry
product may be purchased for a speci-
fied price, or at a saving, or at a re-
duced price, when such is not the fact;
or otherwise deceive purchasers or
prospective purchasers with respect to

403


§ 67.27

the price of any product offered for
sale; or furnish any means of instru-
mentality by which others engaged in
the sale of industry products may
make any such representation.

Notre: The Commission promulgated
Guides Against Deceptive Pricing effective
January 8, 1964, superseding the Guides
adopted October 2, 1958. The 1964 Guides
are appended to these rules for additional
guidance with respect to price savings repre-
sentations.

CRule 26]

§ 67.27 Misbranding, misrepresentation,
and deceptive selling methods.

Members of this industry, in the
course of the marketing or distribu-
tion of industry products, shall not:

(a) Use, or cause or promote the use
of, any trade promotional literature,
advertising matter, mark, brand, label,
designation, depiction, or other type of
oral or written representation, howev-
er disseminated or published, which
directly or by implication, or through
failure to disclose material informa-
tion, has the capacity and tendency or
effect of mnisleading or deceiving pur-
chasers or prospective purchasers with
respect to—

(1) the type, grade, quality, quantity,
use, size, weight, nature, condition, du-
rability, performance, serviceability,
origin, manufacture, distribution, or
price of any industry product; or,

(2) the identity of a performing
artist as to either part or all of a re-
cording, the recorded content of any
recording, the name or commonly
known title of a recording or a selec-
tion or tract of a recording, or the fact
that a recording has been previously
issued under a different title, or in any
other material respect;

and shall not

(b) Offer for sale, sell, distribute, or
promote the sale or distribution of,
products of the industry under any
other conditions or selling practices
which have the capacity and tendency
or effect of misleading or deceiving
the purchasing or consuming public in
any material respect. [Rule 27]

Title 16—Commerciol Proctices

PART 74—FRESH FRUIT AND
VEGETABLE INDUSTRY

Sec.

14.0 The industry and its products defined.
14.1 Prohibited price discrimination.

14.2 Prohibited brokerage.

AutTHoRITy: Sec. 2, 49 Stat. 1526; sec. 6, 38
Stat. 721; 15 U.S.C. 13, 46, unless otherwise
noted.

Source: 30 FR 5331, Apr. 15, 1965, unless
otherwise noted.

§74.0 The industry and its products de-
fined.

(a) Members of the industry are per-
sons, firms, corporations and organiza-
tions engaged in selling, marketing or
distributing in commerce any of the

-products or goods of the industry as

defined in paragraph (b) of this sec-
tion.

(b) Products or goods of this indus-
try consist of all varieties of fresh
fruits and vegetables grown in the
United States or imported from other
countries.

§74.1 Prohibited price discrimination.

(a) It is unlawful for any member of
the industry engaged in commerce, in
the course of such commerce, to grant
or allow, secretly or openly, directly or
indirectly, any rebate, refund, dis-
count, credit, or other form of price
differential, where such rebate,
refund, discount, credit, or other form
of price differential, effects a discrimi-
nation in price between different pur-
chasers of goods of like grade and
quality, where either or any of the
purchases involved therein are in com-
merce, and where the effect thereof
may be substantially to lessen compe-
tition or tend to create a monopoly in
any line of commerce, or to injure, de-
stroy, or prevent competition with any.
person who either grants or knowingly
receives the benefit of such discrimi-
nation, 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-

404 ‘