(i) This brought the Commission into confrontation with the fact that the defense of cost justification is not available to one charged with a violation of these sections. It followed, in the Commission's view, that there was no way to escape the conclusion that the smaller dealers were not being afforded proportionally equal treatment when they had to pay more for the books than did their larger competitors. The opinion acknowledged it to be true that these prices are equally available to all in that all will be charged the same price for the same quantities. But it is equally true that all will not be able to buy in the same quantities. Since the retailer's profits from this plan will equal the amount by which their payments for redeeming books exceed their cost of purchasing such books, the Commission could not view the plan as being available on proportionally equal terms so long as there is a disparity in the prices they must pay in order to participate.

(j) In this connection, the Commission made it clear that it was only concerned with the prices charged for the books with standard covers since those were the real base of the plan. The purchase of books with individualized covers appeared to be purely optional with the retailer if he cared to spend more in order to more closely identify the plan with his own store.

(k) A second respect in which this proposal was held to be deficient under the law stemmed from the fact that the large retailers were apparently to be offered both the fully completed and the partially completed book plans, while the smaller retailers were to be offered only the latter. In the Commission's view, both plans must be affirmatively offered to and made available to all retailers before the overall plan could be said to be available to all competing customers on proportionally equal terms.

(1) The opinion singled out two additional factors of the proposal which should be borne in mind if it is to be conducted within the law. The first concerned the fact that grocery retailers will be notified by mail and all other customers of the participating suppliers will be notified by advertisement. While the statute prescribes no particular method by which the availability of allowances or services is to be communicated to a seller's customers, it is clear

that the duty rests upon such seller to see that all competing customers are informed. A plan can only be said to be available to a customer if he knows about its existence. If the method of notification chosen actually reaches all competing customers, there could be no objection to the plan on that score. However, the promoter was cautioned to keep in mind that the suppliers could incur liability if it subsequently developed that some did not as a matter of fact receive notice because of the method chosen.

(m) The second factor stemmed from the fact that it was proposed initially to test the program in nine contiguous counties. Even though this is a test area the promoter was advised to be careful here not to discriminate against customers located on the fringes but outside the area selected since they may be actually competing with those who are participating. In such situation, the existence of competition prevails, not geographic or political subdivisions, and the fringe area customers, if any there be, who in fact compete must be afforded an equal opportunity to participate. [32 F.R. 10566, July 19, 1967]

§ 15.136 Selective leasing of shopping center space.

(a) The Federal Trade Commission was asked its views as to the legality of the following proposed course of conduct: A real estate developer plans to develop a new city composed of some 5,000 families. In connection therewith space is to be made available for business and service facilities. Prospective lessees of this space will be accepted, or rejected, in light of a statistical study purporting to show an optimum occupancy mix.

(b) The Commission advised the requesting party that, in the absence of any purpose or intent to create a monopoly, prospective lessees could be accepted or rejected at will provided the action taken was taken independently and as the result of the lessor's individual judgment.

(c) The Commission noted, however, that it expressed no views as to the propriety, under the trade regulation laws, of any agreement between lessor and lessee as to others to whom space might be leased.

[32 F.R. 10567, July 19, 1967]

§ 15.137

Proposed trade association discussion seeking firm price guarantees from suppliers.

(a) The Commission was requested to render an advisory opinion with respect to the legality of a user's trade association discussing and seeking a “guarantee that a quoted price will remain firm for a definite number of days" from individual suppliers or from their national association.

(b) It was represented that the product constitutes about 30 percent of the cost of doing business and that while some users buy direct, others purchase from intermediate suppliers. Regardless of the supply source, product suppliers change prices without notice and will not guarantee firm prices unless the purchase contract calls for a large quantity of the product. As users' customers demand firm price quotations on their needs and because of the normal time lapse between a quotation and actual product purchase, an interim price increase by producers results in a lessening of the users' profit. The Association added that there is no agreement not to do business with those producers who decline to guarantee firm prices, but that individual users will continue to bargain for concessions as they do at present.

(c) The Commission advised that it could neither approve nor sanction the proposed industry discussions. Though such discussion might be motivated by a purpose to remove evils affecting the industry, it appears to go further than is reasonably necessary to accomplish the desired result. Even if the discussions were accompanied by disclaimers, there is implicit therein too grave a danger that it would serve as advice whereby the concerted power of members of the local association, and even of the national association, might be brought to bear to coerce the producers, or their association, to conform pricing policies to the standard desired, or at the very least as an invitation to enter into agreements among themselves to do so.

[32 F.R. 12176, Aug. 24, 1967]

§ 15.138 Use of symbols and names having fur-bearing animal connotations in labeling textile fiber products. (a) The Commission was requested to render an opinion with respect to the labeling of textile fiber products manu

factured so as to simulate a fur or fur product.

(b) The requesting party proposed using a label which would bear the depiction of a fur-bearing animal commercially used in fur products, a trade name and trademark having a fur-bearing animal connotation, and the required fiber content disclosures.

(c) The Commission pointed out that the rules and regulations promulgated under authority of the Textile Fiber Products Identification Act provide, in Rule 9, that the label of a textile fiber product shall not contain a name, word, depiction, descriptive matter, or other symbol which connotes or signifies a furbearing animal, unless such product is a fur product within the meaning of the Fur Products Labeling Act. Subject to this proviso, a textile fiber product may not be described on the label with the name or part of a name of a fur-bearing animal, whether as a single or combination word similar to a fur-bearing animal name, for example, "Broadtail".

(d) The rules permit the nondeceptive use on textile fiber products of fur-bearing animal names but only where the animal fur is not commonly or commercially used in fur products, as for example, "Bear". Further, the rules do not prevent nor prohibit the nondeceptive use of a trademark or trade name containing the name, symbol, or depiction of a fur-bearing animal unless "the textile fiber product in connection with which such trademark or trade name is used simulates a fur or fur product."

(e) The Commission advised that it would not be proper, in the labeling of textile fiber products, to use a label bearing the depiction of a fur-bearing animal nor a trademark and trade name having fur-bearing animal connotations. Such labeling, with or without the required fiber content disclosures, of a textile fiber product manufactured so as to simulate the fur of an animal commonly or commercially used in fur products would have the tendency and capacity of inducing prospective customers into the mistaken belief that the textile fiber product to which such label is affixed contains the fur of the animal depicted or fur fibers from such animal.

(72 Stat. 1717; 15 U.S.C. 70; 65 Stat. 175; 15 U.S.C. 69) [32 F.R. 12176, Aug. 24, 1967]

an

(a) The Commission rendered advisory opinion in regard to some proposed advertising claims for a personal deodorant spray.

(b) Specifically, the Commission considered the propriety of the following two claims: (1) That the product meets the U.S. Government requirements for safety and effectiveness and (2) that no other medicated personal deodorant spray equals its safety and effectiveness.

(c) In regard to the first claim, the Commission said there were no specific standards or requirements officially recognized by the U.S. Government relating to the safety and effectiveness of personal deodorant sprays. Under these circumstances, therefore, the Commission said it would be improper to claim that such requirements exist and that the product meets those requirements.

(d) With respect to the second claim, the Commission said that opinion evidence indicated there are other medicated deodorant sprays on the market which are equally as safe and effective as the product in question. In view of this opinion evidence, and in the absence of reports of properly controlled studies establishing the validity of the claim, the Commission said that it could not give its approval to the second claim. [32 F.R. 12557, Aug. 30, 1967]

§ 15.140 Advertising allowances by book publishers.

(a) The Commission rendered an advisory opinion in regard to the legality of a book publisher's promotional plan calling for the payment of advertising allowances. Specifically, the Commission ruled that the proposed plan would be in compliance with section 2(d) of the Clayton Act, as amended.

(b) Under the terms of the proposed plan, the book publisher proposes to offer to retailers, wholesalers and retailers who purchase through wholesalers advertising allowances equal to 75 percent of the actual cost for newspaper and magazine advertisements at local rates, but not to exceed 10 percent of the net value of confirmed orders for the advertised titles. Additionally, allowances will be paid for the use of stuffers, circulars and catalogs, but not to exceed 10 percent of the dealer's net purchases. Regardless of which method of adver

tising is used, promotional payments will not exceed 10 percent of the buyers' total net purchases.

[32 F.R. 12557, Aug. 30, 1967]

§ 15.141

Proposed advertising for mink oil skin lotion.

(a) The Commission was requested to render an advisory opinion with respect to proposed advertising for a skin lotion containing mink oil, which would represent that the product will relieve the scaling, itching, and redness of psoriasis and eczema.

(b) The opinion advised the advertiser that while the Commission has no objection to representations that the product will afford temporary relief of itching and scales of psoriasis, any mention of eczema or representations in advertising that the product will relieve redness would appear to have the capacity and tendency to deceive. [32 F.R. 12750, Sept. 6, 1967]

§ 15.142 Information required on label affixed to textile fiber products.

(a) The Commission was requested to render an opinion with respect to the labeling of textile fiber products manufactured so as to simulate a fur or fur product.

(b) The requesting party proposed using two labels on his products. The first would bear his trademark and trade name and would be affixed inside the neck of the garment in the conventional manner. The second, bearing the required fiber content disclosures, would be a separate tag hung elsewhere on the garment.

(c) The Commission pointed out that the rules and regulations promulgated under authority of the Textile Fiber Products Identification Act (Part 303 of this chapter) define "required information" as that which must appear on labels, and "label" as the means of identification required to be affixed on textile fiber products and on which the "required information" is to appear (§ 303.1 (e) and (f) of this chapter). The "required information" includes "the generic names and percentages by weight of the constituent fibers present" which shall be "conspicuously and separately set out on the same side of the label in such a manner as to be clearly legible and readily accessible" to a prospective purchaser (§ 303.16 of this chapter). The name to be used on such labels "shall be the name under which

the person is doing business" or his word trademark if registered (§ 303.19 of this chapter).

(d) The opinion pointed out that § 303.16(b) of this chapter provides that the required name or registered identification number may be conspicuously set out on a separate label which is prominently displayed in close proximity to the label containing the other required information. However, in this instance, the Commission believed that it would not be proper, in the labeling of a textile product, to identify the product with one label bearing a trademark and trade name including fur terminology and to make the fiber content disclosure on another label or tag hung elsewhere on the product. It was the Commission's opinion that the proposed labeling of a textile fiber product manufactured so as to simulate the fur of an animal commonly or commercially used in fur products would have the tendency and capacity of inducing prospective purchasers into the mistaken belief that such product was a fur or fur product.

(72 Stat. 1717; 15 U.S.C. 70) [32 F.R. 12750, Sept. 6, 1967]

§ 15.143 Promotional allowances by fabric supplier.

(a) In an advisory opinion the Commission ruled that a fabric supplier who makes advertising allowances available to one or more resellers of a finished product, irrespective of the fact that an intermediary performs work on the raw material which transforms it into the finished product, thereby adopts those resellers of the finished product as his customers and must comply with section 2(d) of the Robinson-Patman Act.

(b) Commenting further upon the customer relationship, the Commission said: "We think Congress clearly intended to ban discriminations in the form of advertising allowances, regardless of the fact that intermediaries might be interposed, where the grantor deliberately contacts hundreds of retailers directly with the purpose of expending thousands of dollars for advertising purposes. Thus where a supplier initiates such a promotional plan with retailers and has primary, if not the sole, responsibility over the control and administration of the plan, we think the customer relationship has been established and the plan must be tested in the light of the requirements of section 2(d) of the Act."

(c) Under the terms of the proposed plan, the fabric supplier would pay 50 percent of retailers' advertising costs if the retailer sells and advertises wearing apparel manufactured from a certain line of fabric, up to a total cost of 1,200 lines published in Advertising Checking Bureau (ACB) newspapers. Retailers who use non-ACB rated newspapers, radio, television, handbills, or mail stuffers will be paid an equivalent measurable cost. The plan will be made available to all retailers located in selected trading areas of all wearing apparel manufacturers who purchase and produce the finished product from the fabric in question. Only dealers who purchase apparel at regular wholesale prices will be eligible to participate.

(d) In its opinion, the Commission concluded that the plan complies with section 2(d) of the Robinson-Patman Act with two reservations. In commenting upon the first reservation, the Commission said: "The statute requires one who gives advertising allowances to make those payments available to all competing customers. Availability means that the grantor of the allowance must notify all competing customers of their right to participate in the plan. Thus the provision of the plan which requires a retailer located just outside one of the selected areas to show that he competes with one or more of the favored retailers in order to have the offer made available to him would appear to shift the responsibility of notification required under the statute. For this reason, the Commission cannot approve this particular provision of the plan should it result in discrimination against retailers located on the periphery of the selected trading areas.

(e) With respect to its second reservation, the Commission said that its opinion should not be construed as implying approval of the phrase “at regular wholesale prices" if the practical effect of that language is to procure resale price maintenance.

[32 F.R. 12941, Sept. 12, 1967]

§ 15.144 Proposed license agreement for process patent.

(a) The Commission rendered an advisory opinion in which it informed the owner of patented process for preparing food that it could see no objection to the form of a proposed licensing agreement with the food processing industry.

(b) The proposed agreement, which was the only form of agreement to be

used, was described as nonexclusive in nature and provided for the licensees to use the process and machinery at one uniform rental rate regardless of the physical location of the licensee. Although the process patent contemplates the use of the machinery and the agreement contemplates use by the licensees of that machinery, there is no absolute requirement that the licensees use any particular machinery in connection with the process.

(c) The hourly rental to be charged all licensees was to be measured by a meter attached to the machine and the licensor reserved the right to cancel the license if the annual rental due from operation of the machinery fell below a stated minimum amount, unless the licensee paid the difference between the actual rental due and the required minimum. The duration of the agreement was to be for a period of 5 years.

(d) The Commission advised that while it did not purport to pass upon the purely contractual aspects of the agreement, it could see no objection to the form of the agreement from the standpoint of the laws it administered, as distinguished from matters pertaining to the implementation thereof.

[32 F.R. 13635, Sept. 29, 1967]

§ 15.145 Aggregating purchases of multi-unit organizations.

(a) The Commission rendered an advisory opinion in which it concluded that it would not be permissible under section 2(a) of the amended Clayton Act to aggregate the purchases of three centrally owned retail grocery stores for the purpose of cost justifying a lower price to those stores.

(b) "The reason for this," the Commission said, "is that discounts to multiunit purchasers must be cost justified on a store-by-store basis where, as here, each store orders separately, receives separate delivery and is invoiced separately."

(c) Concluding its opinion, the Commission said: "Since independent and singly owned retail stores are served in identically the same manner, it would confer an advantage on the multiunit store, not by virtue of any savings in cost to the store but solely by reason of its membership in the centrally owned organization. Combining or aggregating purchases, therefore, for the purpose of determining costs of a multiunit orga

nization is not related to the realities of the market since the independent or singly owned store competes with the individual stores of the chain organization."

(d) The particular facts in the advisory opinion involved three centrally owned retail grocery stores. Each store placed separate orders with the wholesaler, had its goods delivered separately and was invoiced separately. In addition, some singly owned stores bought in larger volume than the smallest store which belonged to the centrally owned organization.

[32 F.R. 14323, Oct. 17, 1967]

§ 15.146 Request for revision of advisory opinion pertaining to use of the word "new".

(a) The Commission was requested to reconsider and revise its advisory opinion as to the permissible period of time during which an advertiser may continue to describe a new product as being "new". The opinion in question was announced in Advisory Opinion Digest No. 120 (§ 15.120) and took the position that until such time as later developments may show the need for a different rule, the Commission would be inclined to question use of any claim that a product was new for a longer period of time than 6 months.

(b) The request was that the Commission revise this opinion to omit specifying any time limit or, in the alternative, to specify a period of at least 1 year, with the same proviso as was written into the present opinion that exceptional circumstances may warrant a longer or shorter period. In response to this request, the Commission stated its basic conclusion that the general rule announced in the opinion, which was announced as the rule which would be followed until later developments might show the need for a different rule, has not been in existence long enough for the accumulation of any additional experience which would indicate the need for a change at this time.

(c) However, the Commission did take note of the argument that 6 months is not adequate time for test marketing new products, which are usually tested in areas representing between 1 percent and 15 percent of the population and run for an average of 6 months to 2 years. In this regard, the Commission advised that the 6 months rule announced in its pre