the disclosure is of that degree of conspicuity and permanency as will likely be observed by prospective purchasers making a casual inspection of the merchandise prior to, not after, the purchase thereof.

[33 F.R. 7882, May 30, 1968]

§ 15.256

Use of unqualified word "Diamond" to describe abrasive discs containing other materials.

(a) The Commission was requested to render an advisory opinion concerning the legality of describing abrasive discs or laps containing diamond and other abrasives as "Diamond Discs".

(b) The manufacturer presently produces diamond coating laps which are a single layer of diamond held in a plated nickel bond and uses only diamond as the abrasive. It now plans to produce a companion product line and add another abrasive particle as a filler. For example, it would mix aluminum oxide with the diamond, with the ratio of diamond to aluminum oxide being as low as one to ten and, in any event, the filler would be more than 50 percent.

(c) The opinion advised that in the Commission's view such as abrasive disc of lap could not truthfully be described as simply a "Diamond Disc." The opinion further advised that nothing in the law would prevent use of the word "Diamond" as part of a truthful description of the product, but that if the manufacturer did elect to use it, considering the low percentages of diamond which were contemplated, it should only be used as a part of a full disclosure of all the abrasive materials used, including the percentages of each.

[33 F.R. 8539, June 11, 1968]

§ 15.257 Legality of trade association suggesting rental rate for containers in which industry products are sold. (a) The Commission was requested to render an advisory opinion concerning the legality of a trade association suggesting a rental rate for the containers in which the product of the industry is sold if such rate is lower than the standard charge now being made.

(b) The members of the association are engaged in the sale of a product in returnable containers many times the value of the product itself. The practice in the industry today is to charge a daily or monthly rental for the time during which the containers are held beyond 30 days. Some of the members would now

like to go to a straight rental and feel the best way to do this would be through the association.

(c) The Commission advised that implementation of this proposal by the association would be likely to result in a violation of law without regard to the ultimate rental set, whether higher or lower than the existing rate. Even though couched in the form of a suggestion, the natural and probable result of such an action would, the opinion stated, be to persuade substantial numbers of the members to charge the rate suggested, thus leaving an almost inescapable inference of an agreement among competitors to charge a common rate. Such an agreement would be a clear restraint of trade under existing law, the Commission added.

(d) It was the Commission's opinion that the rental rates to be charged by the members should be determined by the natural forces of competition, not by concerted activity on the part of the members acting through their trade association or otherwise.

[33 F.R. 8539, June 11, 1968]

§ 15.258 Promotional assistance plan limited in value to percentage of purchases.

(a) The Commission approved, with modifications, a proposed promotional assistance plan.

(b) The requesting party will be offering cooperative advertising allowances under the program in question for a limited period of time. The dollar value of the allowance offered is to be measured at 12 percent of the dollar value of a particular account's purchases for the calendar year 1967. Certain new accounts will also be able to participate, if they will. The 12 percent limitation for new accounts will be based on an estimate of the annual dollar volume of business reasonably to be expected from such new accounts.

(c) The offer specifically provides for an allowance of 60 cents per unit purchased.

(d) The requesting party will require the following performance from those accepting its offer:

(1) The product must be promoted with an advertised price that is below normal shelf price.

(2) The ad must be at least 3 column inches.

(3) The advertisement must run in all paid circulation newspapers normally

used by the Account, and in no event may those newspapers cover less than 75 percent of the Account's marketing area.

(4) Eligible advertising must be an integral part of the Account's omnibus advertisement and not set apart from the regular advertisement.

(5) Advertisement must run before a specified date.

(6) Advertising placed under this agreement will not be accepted as performance under any other cooperative advertising program for the same period.

(7) If the account is unable to utilize newspaper advertising, a representative should be contacted to arrange for an alternative proportionately equal method of performance.

(e) Proof of performance under the offer will be required from participants.

(f) Notwithstanding the statement of the requesting party that the offer will be made to "certain" new accounts, the Commission understands that the offer will in fact be made to all entitled customers. Furthermore all customers who in fact compete on the same functional level will be afforded an opportunity_to participate whether they buy direct from the requesting party or through an intermediary.

(g) The plan as above outlined was acceptable to the Commission provided promotional funds are not disbursed in excess of the actual cost of the advertising. Without such a limitation larger participants in the promotion, buying in larger quantity, might enjoy a cash overage not available to smaller competitors thereby occasioning possible violation of sections 2 (a) or (d) of the amended Clayton Act.

[33 F.R. 8539, June 11, 1968]

§ 15.259

Commission has no objection to proposed merger of two noncompeting quarry and building materials companies.

(a) The Commission issued an advisory opinion telling applicants it has no objection to their proposed merger.

(b) According to the information submitted in connection with the application for an advisory opinion, the two companies do not sell to the same customers nor do they sell in the same geographic markets in their distribution of certain building materials. Both companies are of modest size.

[33 F.R. 9287, June 25, 1968]

(a) Responding to a request for an advisory opinion, the Commission took the position that it would be improper to use the term "X Grown Emeralds" as descriptive of synthetic stones.

(b) In expressing the opinion that the proposed phrase would not constitute a proper disclosure of the nature of the product and the fact that it is not a natural stone, the Commission said: "This conclusion is based upon the belief that most consumers would probably ascribe to the word 'grown' its more commonly accepted meaning, namely, one of natural growth, and thus conclude, contrary to fact, that the product is a cultured stone. Under these circumstances, therefore, the Commission is of the opinion that use of the proposed term would not be in compliance with sec. 5 of the FTC Act because the stones are synthetic, not cultured."

[33 F.R. 9287, June 25, 1968] § 15.261

Promotional assistance based on percentage of purchases during a fixed time period.

(a) The Commission was requested to render an advisory opinion with respect to the legality of a supplier's proposed promotional program under an outstanding Commission order which, in pertinent part, prohibits the supplier from making promotional payments to its customers in a discriminatory manner. According to information provided by the supplier, all its sales are made to retailer cutomers-distributors or other intermediaries are not utilized in the distribution of the supplier's products.

(b) Under the proposed program as set forth and explained by the supplier, promotional allowances would be made available to all customers of the supplier and could be applied by the customers to the costs incurred by them in three categories of advertising and promotional activity: Point-of-sale materials, cooperative advertising in daily and Sunday newspapers listed in Standard Rate and Data; and so-called other store promotions, including advertising in newspapers not listed in Standard Rate and Data, catalog and local radio and T.V. advertising, envelope stuffers, and sales incentive programs and contests.

(c) Further, the amounts of such allowances would be determined at the rate of 7 percent of each participating customer's net purchases from the sup

plier in a 6-month period, although this figure could be adjusted within any given trading area (defined by Management Survey of Metropolitan County Areas) as operating experience requires. In the case of Standard Rate and Data newspapers, the allowances could be applied to twothirds the cost of such advertising, and for all other forms of eligible advertising and promotional activity, allowances could be applied to the full cost of the activity. In all cases, and whether any customer chooses to participate in any or all of said categories of advertising and promotional activity, the supplier's total contribution to the customer's costs would be subject to the 7 percent of purchases limit. Allowances earned but not used by any customer in a 6-month period could not be carried forward to the following such period.

(d) Regarding the point-of-sale materials, the supplier would mail or deliver quantities of these materials to all customers, and each customer would be advised in advance that such point-ofsale materials would be charged against his available promotional and advertising allowances, unless returned to the supplier within 10 (ten) days of receipt, by mail or delivery to the supplier's salesman.

(e) The supplier was advised that the proposed promotional program, if implemented in a nondiscriminatory manner, would not be in violation of the Commission's order or section 2(d) of the Clayton Act.

(f) The Commission cautioned that its opinion was predicated upon the supplier's assurance that all provisions of the proposed program, particularly that concerning the availability of cooperative advertising allowances for advertising in non-Standard Rate and Data newspapers, providing only that such newspapers have verifiable costs and circulation, and that concerning the return privilege regarding point-of-sale materials which would be mailed or delivered to the supplier's customers, would be effectively communicated to all customers of the supplier.

(g) The Commission further cautioned that a customer who is located on the periphery of a particular trading area and who competes in fact with a customer located within such trading area, should be offered the particular promotional plan available to the customer within the trading area so as to preclude discrimination between cus

tomers competing in the resale of the supplier's products.

[33 F.R. 9605, July 2, 1968]

sug

§ 15.262 Use of manufacturers' gested retail prices accompanied by a disclaimer.

(a) The Commission was recently requested to render an advisory opinion as to the propriety of an advertisement referring to a product as "$1.09 size, for 69¢" accompanied by a statement that "All regular prices are the manufacturers' suggested retail prices and are furnished here to help you identify the size being offered for sale."

(b) The opinion advised that the answer to this question depended wholly upon whether or not the prices used as the basis for comparison complied with Guide III of the Guides Against Deceptive Pricing, since, in the Commission's view, the use of the phrase "$1.09 size" in the body of the advertisement and the reference to "manufacturers' suggested retail prices" in the statement place the representation in the category of a trade area price comparison. Therefore, the opinion added, unless the higher prices used do in fact represent the prices at which substantial sales are made by the principal retail outlets in the area, their use would be deceptive.

(c) The Commission further stated that it was of the opinion that the capacity of such advertisements to deceive would not be relieved or removed by the statement or disclaimer proposed in situations where the prices used do not meet the test of the guides. At best, such a statement would simply render the advertisement ambiguous and leave it subject to two interpretations, one of which is false. It would still leave substantial numbers of consumers under the impression that the higher prices used were in fact the actual trade area prices within the meaning of the guides. [33 F.R. 9606, July 2, 1968] § 15.263

ers.

Lower price to “stocking” deal

(a) The Commission rendered an advisory opinion in which it said that it could not give its approval to a plan whereby manufacturers would give a lower price to "stocking" dealers who compete with "non-stocking" dealers. The opinion was given to a trade association which represents manufacturers of a household product.

(b) As justification for the variance in the proposed pricing schedules, the association pointed out that "stocking" dealers experience a higher cost of doing business and, therefore, must sell at higher prices than their competing "non-stocking" dealers. It was also contended that such a price differential would stimulate the purchase of the product in question for inventory.

(c) Expressing the view that it could not give its approval to such two price schedules if the "stocking" and "nonstocking" dealers compete and if the pricing differentials are of sufficient magnitude to adversely affect competition, the Commission concluded that the proposed plan could result in illegal price discrimination under section 2(a) of the Clayton Act, as amended. In its opinion, the Commission went on to point out that such price differences would be illegal unless they could be justified on the basis of one of the specific defenses provided in sections 2 (a) and (b) of the statute. (d) "For example," the Commission said, "the law permits price differences which can be justified by provable cost differences in the manufacture, sale, or delivery of such products resulting from the differing methods or quantities in which the products are sold or delivered. Accordingly, section 2(a) does not preclude prices reflecting less costly and, therefore, more efficient methods of distribution provided that the standards inherent in the statute's cost justification proviso are met."

*

(e) Although the party seeking the advisory opinion did not raise the question, the Commission's opinion touched upon another point of interest in this type of a situation. Specifically, the Commission said: "* it is conceivable that certain members may wish to compensate their customers for services which the customers may render for them in connection with the handling or resale of products manufactured by such members. The law provides a means by which this may be done, but if it is done, the manufacturer must comply with the requirements of section 2(d) of the Act. This requirement is simply that compensation for such services, if made by a manufacturer to one customer, must be made available on proportionally equal terms to other customers of that manufacturer who compete with the favored customer in the sale of the manufacturer's products. This means, among other things, that any plan or program,

under which the payments are made must, if necessary, provide for alternative services or facilities which, as a practical matter, can be provided by all competing customers."

(f) Concluding its opinion, the Commission cautioned as follows: "It should be noted, however, that payments by manufacturers to their customers 'to stimulate the purchase of their goods for inventory,' are not payments of the type contemplated by section 2(d). Such a payment would merely be a reduction in price to induce the purchase of the manufacturer's goods and, if given to some but not all of the manufacturer's customers, might be unlawful price discrimination within the meaning of section 2(a)."

[33 F.R. 9815, July 9, 1968]

§ 15.264

Stocking, quantity, and cumulative discounts.

(a) The Commission rendered an advisory opinion to a manufacturer of food serving equipment which involved a proposal to use stocking, quantity, and cumulative price discounts.

(b) Under the first category, a discount of 50 percent and 15 percent would be given to stocking dealers who continually order in large quantities and maintain a regular stock of the product in question for local delivery to restaurants, hospitals, etc.

(c) The second category involves the following quantity discount schedule to dealers based upon each order:

dealers could get a price advantage of as much as 15 percent over nonstocking dealers, and nonstocking dealers could also receive up to 15 percent price advantage over their nonstocking competitors.

(f) After making a brief explanation of the requirements of section 2(a) of the amended Clayton Act, the Commission advised the requesting party as follows: "It is, of course, impossible to reach a definitive conclusion as to the economic impact of such a pricing proposal without an investigation. However the Commission has given your request careful consideration, and it has concluded that it cannot give its approval to the proposal because it believes that the necessary ingredients are present from which it can reasonably infer that such a proposal would likely result in the anticompetitive effects proscribed by the statute. A pricing schedule which results in a price advantage of as much as 15 percent under the facts outlined in this case would therefore probably be illegal, unless it can be justified by provable cost differences in the manufacture, sale, or delivery of such products or unless the lower price is made in good faith to meet an equally low price of a competitor." [33 F.R. 9815, July 9, 1968]

§ 15.265

Personal deodorant spray.

(a) The Commissioner rendered an advisory opinion to a manufacturer of a personal deodorant spray concerning the legality of some proposed advertising.

(b) Specifically, the Commission advised the requesting party that the product was not a drug but a cosmetic, nor had it been cleared, approved, or endorsed by the Food and Drug Administration. Therefore, any claims which represent the product as a drug, or that it has been cleared, approved, or endorsed by the Government agency in question would be improper.

(c) Based upon all the facts and scientific information available to it, the Commission also advised the requesting party thaat any advertising representations which go beyond the claim that the product inhibits the growth of body odor causing bacteria would violate sections 5 and 12 of the FTC Act.

(d) Finally, the Commission stated that, as a general rule, it would be inclined to question the use of any claim that a product is "new" for a period of time longer than 6 months.

[33 F.R. 9816, July 9, 1968]

§ 15.266 Magazine sponsored contest to win a house.

(a) The Commission rendered an advisory opinion advising a magazine publisher that there would be no objection to a proposal to give purchasers or readers the opportunity to participate in a contest to win a house if implemented in the manner outlined below.

(b) The plan as presented was to give the reader, whether a purchaser or not, the opportunity to participate in a competitive contest to win a house. The contestant was to send in a numbered coupon clipped from the magazine with a written answer of 50 words or less to a question as, for example, "Why do I believe in democracy?" The answer was to be judged by an independent panel, with the best essay being declared the winner. The contest was to take place every 3 months, at a prefixed date, in a public community event. The purpose of the number was to identify the contestant, with the judges knowing only the numbers of the participants and not their names.

[33 F.R. 10205, July 17, 1968]

§ 15.267 Legality of describing green tourmaline as "Emerald Green Tourmaline" or "Precious Tourmaline”. (a) The Commission was requested to render an advisory opinion as to the legality of describing green tourmaline as "Emerald Green Tourmaline" or as "Precious Tourmaline". The stone involved in the request was said to contain chromium, the same coloring agent which produces emerald when it occurs in beryl, and the stone resembled emerald in appearance.

(b) The Commission advised that it was of the opinion that the words "emerald" and "precious" may not be used in connection with the word "tourmaline" to describe the stone in question.

[33 F.R. 10205, July 17, 1968]

§ 15.268 Agreement not to advertise prices.

(a) The Commission rendered an advisory opinion in which it stated that a joint agreement among competitors to refrain from price advertising would constitute a violation of section 5 of the Federal Trade Commission Act.

(b) The request which prompted the Commission's opinion stemmed from a proposal to use the following language in an association's standards of ethics: "Ad