Household Furniture Industry
16 CFR Part 75 · Trade practice rules · in the Code of Federal Regulations 1966-1973 (7 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 These rules and guides are historical: most were rescinded or replaced, so do not assume any is in force.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, 1973 CFR · Earliest edition: 1966 CFR
Decisions that mention this industry's rules (2)
Text (1973 edition, OCR)
§ 75.0
allowance is made directly by check, by de-
duction by the buyer from invoice price be-
fore remitting payment therefor, by deduc-
tion from the sales price by the seller, or
otherwise.
In other transactions, however, the above-
described buyer may function, not as a buyer,
but as a bona fide broker for the same seller,
negotiate for him a sale of goods to another
party in accord with the selier’s instructions
and authorization and lawfully receive a
brokerage fee for such service.
Ezample No. 2. In order to make a sale of
a large quantity of products to a particular
buyer who will not pay the seller’s going
price, the seller and his broker agree that the
usual brokerage fee will be reduced and that
the price to such buyer will be less than
otherwise by an amount refiecting all or part
of the brokerage reduction. The sale is made
to such buyer at the reduced price. The
seller, the broker and the buyer have violated
paragraph (a) of this section.
Ezample No. 3. A broker is in fact the
purchasing agent for a large buyer corpora-
tion and he is in all respects subject to such
corporation’s supervision and control. In
connection with negotiation of purchases of
goods and the handling thereof on behalf
of the buyer corporation, the broker per-
forms certain incidental services for the sel-
lers involved and is paid brokerage fees by
the sellers for such services. The payment
of the brokerage fees by the sellers and the
receipt and acceptance thereof by the broker
are violations of paragraph (a) of this sec-
tion, A broker may receive compensation for
negotiating a valid and binding sales con-
tract only from his principal for whom he
has negotiated such contract.
(g) The following are examples of
practices which are not violative of para-
graph (a) of this section.
Ezample No. 1. A broker negotiates a valid
and binding contract for the sale to several
buyers of fresh fruits or vegetables on behalf
of his seller-principal at a price established
by the seller. The seller delivers an invoice
and/or manifest to the broker showing the
name of the broker as “broker” and itemizing
the list of the merchandise together with the
price of each item. The names of the buyers
are not listed. As a service to his seller-prin-
cipal, the broker bills and collects from the
buyers the amount charged by the seller,
remitting the total amount collected, less
prokerage, together with a memorandum of
sale identifying the buyers. There is no viola-
tion of paragraph (a) of this section in thls
example. In such a situation wherein the
names of the buyers are not initially disclosed
by the broker to his seller-principal it is the
broker’s responsibility to provide confirma-
tion and memoranda as will clearly establish
his role as a broker, and it is the seller’s re-
sponsibility to ascertain that the broker is
not the buyer.
Example No. 2. An industry member who
is regularly engaged as a packer and shipper
Title 16—Commercial Practices
of fresh fruits and vegetables has an inade-
quate supply of a particular commodity to
meet his needs at a particular time. He pur-
chases the necessary quantity to meet such
needs from another regularly engaged packer-
shipper operating at the same level of distri-
bution. By prearrangement, the purchaser is
allowed an inter-packing house discount.
Such practice does not violate paragraph (a)
of this section.
Ezample No. 3. An industry member selis
industry products through his broker to
some purchasers and direct, without the
services of his broker, to other purchasers.
In doing so he charges lower prices to some
customers because in making sales to them
he Incurs less selling and delivery expense:
other than savings in brokerage fees and
commissions than he incurs in selling or de-
livering products to the other customers.
' Nore: A price differential which is not vio-
lative of paragraph (a) of this section may
nevertheless be violative of § 74.1.
[Rule 2]
PART 75—-HOUSEHOLD FURNITURE
INDUSTRY .
Sec.
75.0 Definitions.
75.1 Deception (general).
75.2 Wood and wood imitations.
75.3 Deceptive use of wood names.
15.4 Leather and leather imitations.
75.6 Outer coverings. :
75.6 - Stuffing (including filling, padding,
, etc.)
15.7 Deception as to origin.
15.8 Deception as to belng new.
759 Misuse of the terms “floor sample,”
: ° “discontinued model,” etc.
75.10 Deceptive pricing.
75.11 Bait advertising.
75.12 Guarantees, warranties, etc.
75.13 Passing off through imitation or sim-
ulation of trade-marks, trade
names, etc.
75.14 Misrepresentation as to character of
‘ pusiness.
75.16 Push money.
75.16 Commercial bribery.
75.17 Exclusive dealing.
75.18 Prohibited forms of trade restraints
(unlawful price fixing, etc.)
75.19 Prohibited discrimination.
15. 101 Interpretations. :
AuTHoRITY: The provislons of this Part 75
issued under secs. 6, 5, 38 Stat. 721, 719; 15
U.S.C. 46, 45, unless otherwise noted.
Source: The provisions of this Part 75 ap-
pear at 28 F.R. 13770, Dec. 18, 1963, unless
otherwise noted.
§ 75.0 Definitions.
(a) Industry member. Any person,
firm, corporation or organization en-
gaged in the manufacture, sale or dis-
470
Chapter !--Federal Trade Commission
tribution of industry products as such
products are hereinafter defined.
(b) Industry products. (1) Articles
of utility, convenience or decoration
which are suitable for use as furniture
in house, apartment, or other dwelling
place. Such articles include, but are not
limited to, all kinds and types of chairs,
tables, cabinets, desks, bedsteads and
bureaus.
(2) The following products, covered
by sets of trade practice rules heretofore
promulgated, are not to be considered as
coming within the purview of this defini-
tion: bed mattresses, bedsprings, metal
cots, cedar chests, mirrors, musical in-
struments, radio and television receiving
sets and venetian blinds. Also excluded
from the purview of these rules are pic-
tures, lamps, clocks, rugs, draperies as
well as appliances and fixtures such as
refrigerators and air conditioners.
§ 75.1 Deception (general).
Members of the industry shall not dis-
tribute any industry product under any
representation or circumstance (includ-
ing failure to adequately disclose rele-
vant facts) ? which has the capacity and
tendency or effect of misleading or de-
ceiving purchasers or prospective pur-
chasers with respect to its utility, com-
position, construction, durability, design,
quality, quantity or number of pieces,
model, origin, manufacture, price, grade,
1The Commission, in order to prevent
deception, may require affirmative disclosure
of material facts concerning merchandise
which, if known to prospective purchasers,
would influence their decisions of whether
or not to purchase. The failure to disclose
such information is an unfair trade practice
violative of section 5 of the Federal Trade
Commission Act. Unless otherwise specified,
any disclosure required by this section shall
be on, or on a tag or label attached to, the
industry product and be of such perma-~
nency as to remain on or attached to, the
product until consummation of Its consumer
sale. The disclosure shall also appear in
any advertising relating to an industry prod-
uct irrespective of the media used whenever
statements, representations or depictions are
used in such advertising which in the
absence of such disclosure, serve to create
the false impression that the product, or
any part thereof, is of a certain kind or
composition. In all cases the disclosure
required shall be in close conjunction with
the representation and shail be of sufficient
clarity, conspicuousness and audibility
(when spoken) as to be noted by prospective
purchasers,
§ 75.2
or in any other material respect.
[Rule 1]
§ 75.2 Wood and wood imitations.
(a) In connection with the sale of
furniture having exposed parts or sur-
faces which are wood, or which are not
wood but have the appearance of wood,
members of the industry shall not use
any direct or indirect representation or
sales method which is:
(1) False. Examples would include:
di) Describing as ‘‘maple,” furniture
which is constructed of birch wood;
(ii) Use of the term “solid mahogany”
or the word “mahogany” unqualifiedly
to describe a mahogany veneered table;
(iii) Using the designation ‘Danish
style walnut” to describe a walnut-
stained hackberry chair;
(iv) Describing a non-lumber product
as ‘‘wood.”
Note: Hardboard, although produced from
wood fibers, shall not be unqualifiedly rep-
resented as “wood” but may be designated
as “hardboard,” ‘fiberboard,’ ‘‘wood prod-
uct” or by any nondeceptive descriptive word
or term.
or
(2) Likely to mislead because of tell-
ing a half-truth. Examples would in-
clude:
(i) Describing as “maple,” a table
consisting of a solid maple top with
pecan legs. Such product may be de-
scribed as “maple top—pecan legs;’’
(ii) Designating as “walnut” or “in
walnut,” a desk top made of walnut
veneered plywood. A proper description
would be “walnut veneered top;”
Gii) Describing as “solid mahogany”
or “mahogany,” a product made with
laminations of mahogany plies. A proper
Gesignation would be “all mahogany
plywood;”
(iv) Describing a table top unquali-
fiedly as “mahogany veneered top” when
such products, although mahogany
veneered, has been finished by means of
decalcomania, printing or otherwise to
simulate a different mahogany grain or
figure such as crotch mahogany. Such
product could be properly described as
“mahogany veneer—imitation mahogany
crotch figure,” or
(3) Likely to deceive by failure to ade-
quately disclose* facts concerning the
composition, of plywood having the ap-
pearance of solid wood, or of simulated
finishes on wood or wood imitations. Ex-
1 See footnote to § 75.1.
471
§ 75.3
amples would include failure to disclose
when an item of furniture or part
therof:
G) Has an exposed surface of plastic,
metal, hardboard, or other material not
possessing a natural wood growth struc-
ture but has the appearance of being
wood (eg. “hardboard — mahogany
grained” or “walnut finished particle
board”);
(ii) Which is wood finished by means
of decalcomania, printing or other proc-
ess so as to have the appearance of a dif-
ferent kind of wood, is not the kind of
wood which it resembles (e.g., “mahog-
any finished gum” or “alder—maple
finished’’) ;
(iii) Is veneered so as to have the ap-
pearance of solid wood (e.g., “mahogany
veneered plywood”).
(b) Whenever disclosure is required
by this section it may be accomplished
by stating either the true composition
(e.g., “mahogany-grained hardboard”),
or a disclaimer of composition (e.g., “im-
itation wood”). [Rule 2]
§ 75.3 Deceptive use of wood names.
(a) Industry members shall not use
any direct or indirect representation
concerning the identity of the wood in
items of furniture which is false or which
is likely to.mislead purchasers as to the
actual wood composition of furniture.
(b) The unqualified word “walnut,”
shall not be used as the name or desig-
nation of wood other than genuine wal-
nut (Juglans).
(ec) The word “mahogany” shall not
be used unqualifiedly as the name or des-
ignation of wood unless the wood so de-
scribed is genuine mahogany (Swie-
tenia). In naming or designating the
Philippine woods Tanguile, Red Lauan,
White Lauan, Tiaong, Almon, Mayapis,
and Bagtikan, the word “mahogany”
may be used but only when prefixed by
the word “Philippine” (e.g., “Philippine
mahogany table’). Examples of im-
proper use of the word “mahogany” un-
der this section would include reference
to Red Lauan as “Lauan mahogany” or
White Lauan as “Blonde Lauan mahog-
any.” Such woods, however, may be de-
scribed unqualifiedly as “Red Lauan’” or
“Lauan” or “White Lauan,” respec-
tively.
(ad) The word “mahogany” may be
used to name or designate wood of the
genus Khaya, but only when prefixed by
the word “African” (e.g., “African ma-
hogany desk”).
47
Title 16—-Commercial Practices
(e) The word “mahogany”,. with or
without qualification, shall not be used
to name or designate any wood except as
provided above.
Nore 1: The term “Philippine mahogany”
wili be accepted as a name or designation
of the seven Philippine woods named above.
Such terms shall not be applied to any other
wood, whether or not grown on the Philip-
pine Islands.
Nore 2: Nothing in this section shouid be
construed as prohibiting the nondeceptive
use of wood names to describe the color, fin-
ish or appearance of items of furniture (e.g.,
“Piastic-oak grained” or “Mahogany finished
[Rule 3]
§ 75.4. Leather and leather imitations.
(a) Members of the industry shall not
make any direct or indirect representa-
tion concerning furniture or parts there-
of covered with leather or other mate-
rial which simulates leather, which is
false or misleading.
(b) Prohibited by this section is the
use of any trade name, coined name,
trade-mark, or other word or term, or
any depiction or device, which has the
capacity and tendency or effect of mis-
leading prospective purchasers into be-
lieving that furniture is covered in whole
or in part from the skin or hide of an
animal or that the covering of furniture
is leather, top grain leather, or split
leather, when such is not the case. When
a furniture covering is made from
bonded, shredded, pulverized or powdered
leather, industry members shall con-
spicuously disclose* such fact. | ,
(c) In the case of non-leather mate-
rial having the appearance of leather, in-
dustry members shall conspicuously dis-
close facts concerning the composition
thereof either by identifying the compo-
sition of the product (e.g., “vmyl cover-
ing,” “upholstered m plastic”) or by a
disclaimer that the product is not leather
(e.g., “imitation leather,” “not leather”).
[Rule 4] ,
§ 75.5 Outer eoverings.’
(a) In connection with the sale of
furniture, members of the industry shall
1 See footnote to § 75.1.
2Section 12(a)(2) of the Textile Fiber
Products Identification Act (72 Stat. 1717; 15
US.C. 70) specifically exempts “outer cover-
ings of furniture * * *” from the applica-
tion of the Act. Section 14 of the same Act
provides that the Act “shaii be held to be in
addition to, and not in substitution for or
2
2
Chapter I—Federal Trade Commission
not use any direct or indirect represen-
tation concerning the outer covering
thereof which:
(1) Is false (e.g., using the term “Mo-
hair’ to describe a fabric not produced
from fibers derived from the angora
goat); or
(2) Has the capacity and tendency or
effect of deceiving furniture purchasers
by telling a half-truth (e.g., using the un-
qualified word “Nylon” to describe a
blend of nylon and other fibers).
(b) When any identifying reference is
made in advertising to an outer covering
made of a mixture of different kinds of
fibers, each constituent fiber present in
substantial quantity (at least 5 percent)
shall be designated! in the order of its
predominance by weight (e.g., “cotton
and nylon”). If a fiber so designated is
not present in a substantial quantity
dess than 5 percent) the percentage
thereof shall be stated (e.g., “cotton,
rayon, 3 percent nylon”).
(c) When any identifying reference is
made on a tag or label to an outer cover-
ing made of a mixture of different kinds
of fibers, each and every kind of fiber
present in such outer covering shall be
identified by showing the fiber content
with percentages of the respective fibers
in order of their predominance by weight
(e.g., “55 percent Cotton 45 percent
Rayon”). In the case of pile fabrics,
identification of the fiber content shall
be made by stating:
(1) The fiber content of the face or
pile and of the back or base, with per-
centages of the respective fibers in or-
der of their predominance by weight and
the respective percentages of the face
and back showing the ratio between face
and back (e.g., “Face 60% Rayon, 40%
Nylon—Back 100% Cotton; Back consti-
tutes 80% of fabric and pile 20%”); or
(2) The percentages of the fibers of
the face or pile and the back or base in
relation to the total weight of the fabric
(e.g., “40% Cotton, 40% Rayon, 20%
Nylon” to describe a fabric having an all
nylon pile constituting 20 percent of the
total weight backed by a 50 percent-50
limitation of, the provisions of any other
Act of the United States.” Therefore, cor-
rective action involving deceptive practices
in the sale of furniture would be initiated
under the Authority of section 5 of the Fed-
eral Trade Commission Act which prohibits
“unfair methods of competition in commerce,
and unfair or deceptive acts or practices in
commerce.”
84-058—73——31
§ 75.7
percent blend of cotton and rayon).
[Rule 5]
§ 75.6 Stuffing (including filling, pad-
ding, etc.).
(a) Members of the industry shall not
inake any direct or indirect representa-
tion relating to the stuffing of furniture
which is:
(1) False (e.g., describing cotton stuff-
ing as “wool,” or urethane foam as “foam
rubber”) ; or
(2) Likely to mislead because of
telling a half-truth (eg., describing
shredded or flaked foam rubber stuffing
as a ‘foam rubber” cushion without dis-
closing’ that it is shredded or flaked, or
describing any non-rubber foam cushion
as “foam” without disclosing the kind of
foam such as “urethane foam’).
Nore: The unqualified terms “Latex,”
“Foam Rubber,” “Latex Foam Rubber,” or
other terms of similar import, shall not be
used as descriptive of any part of the filling
of an upholstery which does not consist of
one or more homogeneous pads of latex.
When the upholstery of an industry prod-
uct has filling material consisting of a top
layer of homogeneous latex which is of sub-
stantial thickness, and a lower layer or layers
of other material, such terms may be used
as descriptive thereof, if in immediate con-
junction therewith, nondeceptive disclosure
is made of the fact that only a part of such
filling is of latex.
When the filling is composed, in whole or
In part, of latex which has been shredded,
flaked, or ground, full and nondeceptive dis-
closure shall be made of such fact in im-
mediate conjunction with any such term,
irrespective of whether the pieces or shreds
of latex are in loose form or are held together
by glue or some other adhesive agent.
Nore: This section is promulgated under
the Federal Trade Commission Act for the
purposes of interpreting requirements of
such Act and to assist in the general enforce-
ment of the Act. The section is not to be
construed as relieving industry members from
full compliance with applicable State and
local legal requirements.
{Rule 6]
§ 75.7 Deception as to origin.
(a) Industry nembers shall not wnake
any direct or indirect representation
which is false or likely to receive pro-
spective purchasers of furniture as to the
origin, either domestic or foreign, of such
furniture. For example, furniture man-
ufactured in the United States shall not
be unqualifiedily described as ‘Danish”
or “Scandinavian” or “Swedish Mod-
ern.” Such furniture may, when appro-
priate, be described as “Danish Style,”
473
$75.8
“Swedish Modern Style” or by any other
word or term which nondeceptively
characterizes its style. Also furniture
shall not be represented by trade name
or otherwise as being manufactured in
the Grand Rapids, Michigan area or in
any other furniture. producing area,
when such is not the fact,
Notre: Terms such as “French Provincial”
or “Chinese Chippendale,” because of long
usage and general understanding by the fur-
niture buying public, are considered to have
acquired a secondary meaning as descriptive
of the style of furniture so described. Thus,
the unqualified use of such terminology,
when appropriate, would not be considered
to be violative of this section.
(b) In connection with the sale of
furniture of foreign manufacture, mem-
bers of the industry shall clearly and
conspicuously disclose the fact that such
furniture was manufactured in an iden-
tified foreign country, when the failure
to make such disclosure has the capacity
and tendency or effect of deceiving pro-
spective purchasers of such products.
The disclosure of foreign origin, when
required under this section shall be in
the form of a legible marking, stamping,
or labeling on the furniture, and shall be
of such size, conspicuousness and degree
‘of permanency, as to be and remain no-
ticeable and legible upon casual inspec-
tion until consumer purchase. [Rule 7]
§ 75.8 Deception as to being new.
(a) Industry members shall not make
any direct or indirect representation that
an industry product is new unless such
product is composed entirely of unused
materials and parts.
(b) In connection with the sale of
furniture which has the appearance of
being new but which contains used ma-
terials or parts, such as springs, foam
rubber stuffing, or hardware, members of
the industry shall conspicuously dis-
close* such fact (e.g., “cushions made
from reused shredded foam rubber”).
Nore: See also § 75.9.
[Rule 8]
§ 75.9 Misuse of the terms “floor
sample,” “discontinued model,” etc.
(a) Representations that furniture is a
“floor sample,” ‘‘demonstration piece,”
etc., shall not be used to describe “‘trade-
in,” repossessed, rented or any furniture
used other than by prospective pur-
chasers at the place of sale for the pur-
1 See footnote to § 75.1.
a
Title 16—Commercial Practices
pose of determining their preference and
its suitability for their use.
(b) Furniture shall not be described as
“discontinued” or ‘‘discontinued model”
unless the manufacturer has in fact dis-
continued its manufacture or the in-
dustry member offering it for sale will
discontinue offering it entirely after
clearance of his existing inventories of
furniture so described. [Rule 9]
§ 75.10 Deceptive pricing.
Members of the industry shali not rep-
resent directly or indirectly in advertising
or otherwise that an industry product
may be purchased for a specified price, or
at a saving, or at a reduced price, when
such is not the fact; or otherwise deceive
purchasers or prospective purchasers
with respect to the price of any product
offered for sale; or furnish any means or
instrumentality by which others engaged
in the sale of industry products may
make any such representation.
Nore: Guides Against Deceptive Pricing
adopted by the Commission October 2, 1958,
are now in the process of revision. The new
guides will supplement this section by af-
fording additional guidance on the subject.
When approved, the new guides will be pub-
lished in the FEDERAL REGISTER and copies
thereof will be furnished upon request.
(Rule 10]
§ 75.11 Bait advertising.
(a) Industry members shall not offer
for sale any industry product when the
offer is not a bona fide effort to sell the
product so offered as advertised and at
the advertised price.
Note: In determining whether there has
been a violation of this section, considera-
tion will be given to acts or practices in-
dicating that the offer was not made in good
faith for the purpose of selling the advertised
product, but was made for the purpose of
contacting prospective purchasers and selling
them a product or products other than the
product offered. Among acts or practices
which will be considered in making that de-
termination are the following:
(1) The creation, through the initial offer
or advertisement, of a false impression of the
grade, quality, make, value, currency of
modei, size, usability, or origin of the product
offered;
(2) The refusal to show, demonstrate, or
sell the product’ offered in accordance with
the terms of the offer;
(3) The disparagement, by acts or words,
of the product offered;
(4) The showing, demonstrating, and in
the event of sale, the delivery, of a product
which is unusable or impractical for the pur-
pose represented or implied in the offer;
+
Chapter |—Federal Trade Commission
(5) The refusal, in the event of sale of the
product offered, to deliver such product to
the buyer within a reasonable time there-
after.
(6) The failure to have available a quan-
tity of the advertised product at the adver-
tised price sufficient to meet reasonably an-
ticipated demands;
(7) The use of a sales plan or method of
compensation for salesmen or penalizing
salesmen designed to prevent or discourage
them from selling the advertised product.
(b) It is not necessary that each act
or practice set forth in paragraph (a)
of this section be present in order to
establish that a particular offer is vio-
lative of this section. {Rule 11]
§ 75.12 Guarantces, warranties, etc.
(a) Industry meinbers shail not repre-
sent in advertising or otherwise that a
product is “guaranteed” without clear
and conspicuous disclosure 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 meeting
the above requirements, shall contain a
conspicuous disclosure of the meaning of
“life” or “lifetime” as used (whether that
of the purchasers, the product or other-
wise).
(c) Guarantees shall not be used
which under normal conditions are im-
practical of fulfilment or which are for
such a period of time or are otherwise of
such nature as to have the capacity and
tendency of misleading purchasers or
prospective purchasers into the belief
that the product so guaranteed has a
greater degree of serviceability, dura-
bility or performance capability in actual
use than is true in fact.
(da) This section has application 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.” [Rule 12]
§ 75.13 Passing off through imitation or
simulation of trade-marks, trade
names, etc.
Members of the industry shall not mis-
lead or deceive purchasers by passing
-off the products of one industry member
§ 75.15
as and for those of another through the
imitation or simulation of trade-marks,
trade names, brands, or labels. (See also.
§ 75.14.) {Rule 13]
§ 75.14. Misrepresentation as to charac-
ter of business.
Members of the industry shall not
represent, directly or by implication, in
advertising or otherwise, that they pro-
duce or manufacture products of the
industry, or that they own or control
a factory 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 misrepresent the
character, extent, or type of their busi-
ness. [Rule 14] .
§ 75.15 Push money.
Industry members 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 promoting the
resale of products supplied by the in-
dustry member to the customer—
(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 salesperson
or customer is dependent on lottery; or
(c) When any provision of the agree-
ment or understanding requires or con-
templates practices or a course of con-
duct unduly and intentionally hamper-
ing sales of products of competitors 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 monopoly; or
(e) When similar payments are not
accorded to salespersons of competing
customers on proportionally equal terms
in compliance with section 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 trans-
ferred by the salesperson to the customer, or
is to result in a corresponding decrease in
the salesperson’s salary, are not to be con-
475
§ 75.16
sidered within the purviéw of this section,
but are to be considered as subject to the
requirements and provisions of section 2(a)
of the Clayton Act.
[Rule 15]
Ԥ 75.16 Commercial bribery.
Members of the industry shall not give,
-or offer to give, or permit or casue to be
given, directly or indirectly, money or
anything of value to agents, employees,
or representatives of customers or pro-
spective customers, or to agents, em-
ployees, or representatives of coinpeti-
tors’ customers or prospective customers,
without the knowledge of their em-
ployers or principals, as an inducement
to influence their employers or principals
to purchase or contract to purchase prod-
ucts manufactured or sold by such in-
dustry member or the maker of such
gift or offer, or to influence such em-
ployers or principals to refrain from
dealing in the products of competitors or
from dealing or contracting to deal with
competitors. [Rule 16]
§ 75.17 Exclusive dealing.
Members of the industry shall not con-
tract to sell or sell industry products 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
competitors of such industry member,
where the effect of such sale or contract
for sale, or of such condition, agreement,
or understanding, may be substantially
to lessen competition or tend to create a
monopoly in any line of commerce.
[Rule 17]
§ 75.18 Prohibited forms of trade re-
straints (unlawful price fixing, etc.).°
Members of the industry, either di-
rectly or indirectly, shall not engage in
3The prohibitions of this section are sub-
ject to Public Law 542, approved July 14,
1952, 66 Stat. 632 (The McGuire Act, com-
monly referred to as the Fair Trade Amend-
ment) which provides that with respect to a
commodity which bears, or the label or con-
tainer 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
py 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
Title 16—Commercial Practices
any planned common course of action, or
enter into or take part in any under-
standing, agreement, combination, or
conspiracy, with one or more members of
the industry, or with any other person or
persons, to fix or maintain the price of
any industry products or otherwise un-
lawfully to restrain trade; or 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 become a party to any such under-
standing, agreement, combination, or
conspiracy. [Rule 18]
§ 75.19 Prohibited discrimination.
(a) Prohibited discriminatory prices,
rebates, discounts, etc. No member of
the industry engaged in commerce, in the
course of such commerce, shall grant or
allow, secretly or openly, directly or in-
directly, any rebate, refund, discount,
credit, or other form of price differential,
where such rebate, refund, discount,
credit, or other form of price differential,
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 substantially to lessen competi-
tion or tend to create a monopoly 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: 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 libraries,
churches, hospitals, and charitable insti-
tutions not operated for profit, as sup-
plies for their own use;
(2) That nothing contained in this
paragraph shall prevent differentials
may be resold by such buyer when such con-
tract or agreement is lawful as applied to
intrastate transactions under the laws of
the State, Territory, or territorial Jurisdiction
in which the resale is to be made or to which
the commodity 1s to be transported for such
resale, and when such contract or agreement
1s not between manufacturers, or between
wholesalers, or between brokers, or between
factors, or between retailers, or between per-
sons, firms, or corporations in competition
with each other.
476
Chapter |—Federal Trade Commission
which make only due allowance for dif-
ferences in the cost of manufacture, sale,
or delivery resulting from the differing
methods or quantities in which such com-
modities are to such purchasers sold or
delivered;
Nore: Cost justification under the abov2
proviso depends upon net savings in cost
based on all facts relevant to the transactions
under the terms of subparagraph (2) of this
paragraph. For example, if a seller regularly
grants a discount based upon the purchase of
@ specified quantity by a single order for a
single delivery, and this discount is justi-
fied by cost differences, it does not follow
that the same discount can be cost justified
if granted to a purchaser of the same quan-
tity by multiple orders or for multiple
dellveries.
(3) That nothing contained in this
section shall prevent persons engaged in
selling goods, wares, or merchandise in
commerce from selecting their own cus-
tomers 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 affecting
the market for or the marketability of
the goods concerned, such as but not
limited to obsolescence of seasonal
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,
Note: Subsection (b) of sectlon 2 of the
Clayton Act, as amended, reads as follows:
“Upon proof being made, at any hearing on
@ complaint under this section, that there
has been discrimination in price or services
or facilities furnished, the burden of rebut-
ting the prima facie case thus made by show-
ing justification shall be upon the person
charged with a violation of this sectlon, and
unless justification shall be affirmatively
shown, the Commission is authorized to
issue an order terminating the discrimina-
tion: Provided, however, That nothing herein
contained shall prevent a seller rebutting the
prima facle case thus made by showlng that
his lower price or the furnishing 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.”
Norte 2: Nothing in this section should be
construed as prohibiting the granting of
different prices which are not otherwise vio-
lative of the foregolng provisions of thls
section, to customers in different functlonal
categories. For example, a seller may grant
§ 75.19
a lower price to wholesalers than to retailers
to the extent that such wholesalers resell to
retailers. If such wholesalers also sell at
retail in competition with their 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.
(b) Prohibited brokerage and com-
missions. No member of the industry
engaged in commerce, in the course of
such commerce, shall pay or grant, or
receive or accept, anything of value as
a commission, brokerage, or other com-
pensation, or any allowance or discount
in lieu thereof, except for services ren-
dered in connection with the sale or pur-
chase of goods, wares, or merchandise,
either to the other party to such trans-
action 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 in-
direct control, 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. No member of the
industry engaged in commerce shall pay
or contract for the payment of adver-
tising 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 compensa-~
tion or in consideration for any services
or facilities furnished by or through such
customer in connection with the process-
ing, handling, sale, or offering for sale of
any products or commodities manufac-
tured, sold, or offered for sale by such
inember, unless such payment or con-
sideration is made known to and is avail-
able on proportionally equal terms to all
other customers competing in the dis-
tribution of such products or com-
modities.
Note: Subsection (b) of section 2 of the
Clayton Act, as amended, which is set forth
in the note concluding paragraph (a) of this
section 1s applicable to this paragraph (c).
(d) Prohibited discriminatory services
or facilities. No member of the industry
engaged in commerce shall discriminate
in favor of one purchaser against another
purchaser or purchasers of a commodity
bought for resale, with or without proc-
essing, by contracting to furnish or fur-
nishing, or by contributing to the fur-
nishing of, any services or facilities in-
cluding, but not limited to, displays, ex~
hibits, and promotional material con-
477
§ 75,101
nected with the processing, handling,
sale, or offering for sale of such com-
modity so purchased upon terms not ac-
corded to all competing purchasers on
proportionally equal terms.
Note: Subsection (b) of section 2 of the
Clayton Act, as amended, which is set forth
in the note concluding paragraph (a) of this
section is applicable to this paragraph (qd).
(e) Inducing or receiving an illegal
discrimination in price, advertising or
promotional allowances, or ‘services or
facilities. No member of the industry en-
gaged in cominerce, in the course of such
commerce, shall knowingly induce or re-
ceive a discrimination in price, adver-
tising or promotional allowances, or serv-
ices or facilities, which is prohibited by
the foregoing provisions of this section.
(Rule 19]
§ 75.101 Interpretations.
(a) The Federal Trade Commission
imterprets paragraph (a) and the con-
cluding Note in § 75.3 of the trade prac-
tice rules for the Household Furniture
Industry as requiring that when a wood
name is used in advertising or labeling to
describe the grain design and/or color of
a stain finish or other type of simulated
finish which has been applied to a sur-
face composed of something other than
solid wood of the type named, it must be
made clear that the wood name used is
merely descriptive of the grain design
and/or color or other simulated finish.
(b) Under this interpretation, unqual-
ified phrases such as “walnut finish”
and “mahogany finish” will not satisfy
this requirement. But statements such
as “walnut grained plastic top,” “walnut
color,” “walnut stain,” “maple stained
finish,” “mahogany finish on gum” and
“walnut finished hardwoods” (or “soft-
woods,” as the case may be) will satisfy
this requirement if such statements are
factually correct and appear in contexts
which are otherwise nondeceptive.
(c) Section 75.2(3) (ii) which relates
to similar representations will be inter-
preted consistently with the foregoing.
[31 F.R. 5069, Mar. 29, 1966]
PART 76—SCRAP IRON AND STEEL
INDUSTRY
. Group I
Sec.
76.1 Substitution. .
16.2 Defamation of competitors.
76.3 Inducing breach of contract.
16.4 Commercial bribery,
Title 16—Commercial
Practices
Grovp IT
‘Sec.
76.101
76.102
76.103
76.104
False billing.
Credit for overweight.
Repudiation of contracts.
False invoicing.
76.105 Arbitration.
76.106 Cost accounting.
COMMITTEE ON TRADE PRACTICES
76.201 Industry committee.
AuvutTHoriry: The provislons of this Part 76
issued under secs. 6(g), 5, 38 Stat, 722, 719;
15 U.S.C. 46, 45, unless otherwise noted.
Source: The provisions of this Part 76
contained in trade practice rules, Scrap Iron
and Steel Industry, FTC, May 20, 1932, unless
otherwise noted.
Group I
§ 76.1 Substitution.
The practice of delivering inferior
products against contracts to supply
scrap iron and steel according to certain
specifications by so arranging the ship-
ments in the cars that the inferior prod-
ucts will not be readily discovered on
surface inspection, without the consent
of the consumer and/or purchasers to
such substitutions and with the effect of
receiving or misleading consumers
and/er purchasers, is an unfair trade
practice.
§ 76.2. Defamation of competitors.
The defamation of competitors to
falsely imputing to them dishonorable
conduct, inability to perform contracts,
questionable credit standing, or by other
false representations, or the false dis-
paragement of the grade or quality of
their goods, with the tendency and'capac-
ity to mislead or deceive purchasers or
prospective purchasers, is an unfair trade
practice.
§ 76.3 Inducing breach of contract.
Maliciously inducing or attempting to
induce the breach of existing contracts
between competitors and their customers
by any false or deceptive means whatso-
ever, or interfering with or obstructing
the performance of any such contractual
duties or services by any such means with
the purpose and effect of unduly ham-
pering, injuring, or embarrassing com-
petitors in their businesses, is an unfair
trade practice.
§ 76.4 Commercial bribery.
- Directly or indirectly to give or permit
to be given or offer to give money or any-
478