vertising of rates or comparison of competitor's rates or charges, is prohibited on the basis that such advertising demeans the profession."

(c) The present code now in effect uses the word "discouraged" in lieu of the word "prohibited."

(d) In ruling that such a provision would be illegal, the Commission said: since price difference and price comparison may be valuable stimulants to competition, any agreement to suppress the advertising of the two would constitute an agreement in restraint of trade violative of section 5 of the Federal Trade Commission Act."

(e) "Moreover, as to the present use of the word 'discouraged' in the code now in effect, you are informed that any agreement to 'discourage' advertising of rates or rate comparison would also be in restraint of trade and violative of section 5 of the Federal Trade Commission Act. The Commission is aware that you have not requested this advice, and indeed under the Commission's rules an advisory opinion is usually considered inappropriate because the practice is one which is already engaged in; however, since your adoption of this rule has come to the attention of the Commission, the Commission would be remiss in not suggesting its discontinuance."

[33 F.R. 10206, July 17, 1968]

§ 15.269 Pooling of allowances for purposes of joint advertising.

(a) The Commission was requested to render an advisory opinion concerning the legality of a proposal by a group of independent retailers to pool the advertising allowances due the members for purposes of joint advertising.

(b) Under the proposal, all money earned by the members under the suppliers' cooperative advertising programs would be assigned to the group in a collective advertising effort for the suppliers. Each supplier would receive, on the basis of the amount of money earned from him by all members of the group, radio advertising through the medium of 3 minute programs, each of which would have 1 minute of time available for the suppliers' commercial messages. The content of the 1 minute commercial would be governed by the suppliers themselves and would not be connected in any way with the retailers' advertising.

(c) As part of the proposal, for each program a supplier receives the retailers would receive broadcast time on the same

stations for their message, which would be institutional in nature and would extol the advantages of dealing with independent retailers. Under this type of advertising program, it would not be possible to mention individual dealers nor will prices be mentioned in such advertising.

(d) The opinion advised that the Commission could see no objection to the proposal on the understanding that the fund used by or on behalf of the participating group to purchase advertising space will consist only of the aggregate of advertising allowances properly available to the members individually under the terms of section 2(d) of the Clayton Act, as amended by the Robinson-Patman Act. In brief, that section prohibits the payment by sellers of allowances to some customers which are not made available on proportionally equal terms to all competing customers. In this connection, the opinion further advised that it would be unlawful if the combined power of the group was used to induce from the suppliers allowances greater than those to which the individual members were entitled under such section. [33 F.R. 10206, July 17, 1968]

§ 15.270 Necessity for disclosing country of origin of imported ski.

(a) The Commission was requested to render an advisory opinion as to the marking requirements applicable to a ski which is imported from abroad in an unfinished state and which would have to have the decal and the top finish applied in this country, as well as the final process for finishing the bottom or the running surface.

(b) The opinion advised that in the Commission's view it will be necessary to disclose the country of origin of this ski in a clear and conspicuous manner to prospective purchasers at the point of sale.

[33 F.R. 10206, July 17, 1968]

§ 15.271 Adoption of penalty clause which inhibits competitors.

(a) The Commission advised a requesting party that his proposal, if adopted, would violate section 5 of the Federal Trade Commission Act.

(b) The plan and its background were described as follows:

(1) It is customary in the specified market for sellers of components furnished by a single supplier to offer free design services to architects and engi

neers engaged in planning new construction.

(2) When the contracts are let, however, that seller of components who has provided the free design services is not always the successful bidder.

(3) It was proposed, therefore, that the supplier contract and agree with all whom he supplies that a money penalty be imposed on any successful bidder who had not provided the free design services. The prescribed penalty would be paid over to that unsuccessful bidder who in fact provided free design services, failing which the supplier might at his option, cut the offending bidder off.

(c) The Commission noted that any direct, or indirect, agreement between competitors which interferes with the free establishment of a market price whether that price be expressed in money service, or in any other manner, is unlawful.

[33 F.R. 11701, Aug. 17, 1967] § 15.272

Sales promotion plan-opportunity to buy at a savings.

(a) The Commission approved a proposed sales promotion plan described as follows:

(1) The requesting party proposes to offer major oil companies its services in the promotion of the retail sale of gasoline. Participating gasoline stations will be provided with 3 x 4 cards picturing some product, most probably a nationally advertised appliance. These cards will be distributed gratis to those who wish to have them. No purchase of any kind will be required.

(2) The appliance pictured on the card will be offered for sale at a price substantially less than the price at which it is ordinarily available through customary retail outlets. The holder of the card may obtain the appliance by sending the card with remittance to a designated post office box. His purchase will be mailed to him. A purchase may be made without a card if remittance is accompanied either by a facsimile of the appliance or a word description thereof.

(b) The plan was approved on the assumption that the offered savings would in fact be available as prescribed in the Commission's Guides Against Deceptive Pricing.

[33 F.R. 11701, Aug. 17, 1968]

§ 15.273

Publication by trade association of suggested resale price schedule for materials.

(a) The Commission rendered an advisory opinion advising a trade association of independent shops engaged in rendering repair service that its proposal to disseminate a suggested resale price schedule for materials used would be likely to result in a violation of law.

(b) The schedule in question consisted of two tables, one of which gave the shopowner a quick reference to suggested resale prices for materials and the other of which gave him an explanation of the total by itemization of each resalable product. The schedule explained that after hours of study it was found that computing labor and materials charges by allowing a price for each hour of labor was very unfair to the shops and far below their cost of materials. Hence the schedule gave the shop a quick method of computing the price of materials to which would be added the cost of labor.

(c) The Commission advised that implementation of this proposal by the association would be likely to result in a violation of law. Even though couched in the form of a suggestion, the natural and probable result of such an action by the association would be to persuade substantial numbers of the members to charge the prices suggested, thus leaving an almost inescapable inference of an agreement among competitors to charge a uniform price for materials. Such an agreement, the Commission stated, would be a clear restraint of trade under existing law.

(d) It was the opinion of the Commission that the prices charged by the members for materials 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. 11701, Aug. 17, 1968]

§ 15.274 Proposal to reduce discounts granted small volume purchasers.

(a) The Commission rendered an advisory opinion in which a distributor of leather specialty goods was informed that a proposed merchandising plan under which those customers whose annual purchase volume is less than an arbitrary and fixed amount would be

granted a smaller discount than would be granted those whose purchases exceed such amount cannot be approved because it appears on its face to violate section 2(a) of the amended Clayton Act if it were put into operation.

(b) The proposed merchandising program will continue the current discount of 50 percent off list to those whose annual purchase volume exceeds $250. All other accounts will be granted 40 percent discount on orders of less than $200 list and 50 percent discount on orders over this amount until their cumulative purchase volume reaches $500 list at which time each will receive a retroactive rebate adjustment on past purchases and the current discount on subsequent purchases. A service charge of $2 is to be charged on orders of less than $20 net.

(c) The Commission further pointed out that price discriminations to customers who in fact compete with each other in the resale of commodities of like grade and quality would violate section 2(a) of the amended Clayton Act unless cost justified or unless the lower price is a good faith meeting of a competitor's equally low price.

[33 F.R. 11701, Aug. 17, 1968]

§ 15.275 Necessity for disclosing country of origin of imported watch bands.

(a) The Commission was requested to furnish an advisory opinion as to the necessity for disclosing the country of origin of watch bands which will be assembled in the Virgin Islands wholly from parts imported from Hong Kong. (b) The opinion advised that in the Commission's view the country of origin of these watch bands must be disclosed in a clear and conspicuous manner either on the bands themselves or on the packages in which they are sold.

[33 F.R. 11702, Aug. 17, 1968]

§ 15.276 Disclosure of foreign assembly not required for product made of domestic components.

(a) The Commission advised a requesting party that in the absence of facts indicating actual deception disclosure of the foreign assembly of a product made of domestic components would not be required.

(b) The domestic components accounted for approximately 90 percent of

the manufacturing cost of the finished product; foreign assembly accounted for approximately 10 percent of the cost of the finished product.

[33 F.R. 11986, Aug. 23, 1968]

§ 15.277 Formation of consumers savings group.

(a) The Commission was requested to render an advisory opinion as to the legality of a proposed method of organizing and operating a consumers savings group.

(b) Under the facts as presented, certain select merchants in a town would agree to give designated cash savings to the members of the group upon the purchase of merchandise for cash, which would be a percentage of the purchase price. This savings would not be paid directly to the consumer at the time of purchase, but would be remitted to the group and held in reserve to be disbursed on a cyclical basis. The group would retain no portion of the member's savings, but would earn its profits solely from the fee charged for the consumer's membership in the group and from interest earned on the funds while they were being held for the consumers.

(c) The Commission advised that it could see no objection to the operation of the group in the manner stated provided the purchase prices to be charged the consumer on which his percentage savings were to be computed were in fact the retailers' own former prices for the articles sold within the meaning of Guide I of the Guides Against Deceptive Pricing. In the Commission's view, the entire proposal was based on an assurance to consumers that they would save a stated percentage of the purchase prices actually paid and that those prices would be the regular prices customarily charged by the retailers or the prices at which the articles were openly and actively offered for sale in good faith for a reasonably substantial period of time in the recent, regular course of business. [33 F.R. 11986, Aug. 23, 1968]

§ 15.278 Commission approves proposed franchise agreement for chain of pizza and sandwich restaurantcarryout shops.

The Commission issued an advisory opinion approving a proposed franchise agreement between a trademark-trade

name owner and individual operators of pizza and sandwich restaurant-carryout shops. Some of the important provisions of the agreement are the following:

(a) Either the licensee or the licensor may submit to arbitration any questions concerning agreement termination rights and obligations, including return to the license of all or any portion of the initial fee.

(b) Licensor must make available for sale to licensee the foods, paper products and supplies necessary for conducting the business but licensee is not required to purchase them from licensor.

(c) Licensor will prepare and place advertising directed to ultimate consumers in the general area of licensee's shop; license will provide the funds for such advertising; licensor will give licensee a quarterly accounting of the use of such funds.

(d) Licensor may direct information other than price to go into signs and advertising.

(e) The food sold and service provided must meet standards of quality set by licensor.

(f) Licensee is not to operate a similar business for 2 years after termination of the agreement within 2 miles of his former shop.

[33 F.R. 11987, Aug. 23, 1968]

§ 15.279

Commission advises agricultural cooperatives it has no objection to proposed purchase of country elevators of financially-troubled direct competitor.

(a) The Commission issued an advisory opinion to agricultural cooperative applicants who wish to acquire several country elevators of a financially-troubled direct competitor.

(b) The applicants are a statewide federated agricultural association and affiliated local farmer cooperatives. Applicants, and the company with the operating plants sought to be acquired, purchase farm products from growers and resell the partially processed products to further processors, canners and other intermediate distributors. The State organization offers to help the financially-troubled company by furnishing technical assistance on a contract basis in the farm supply and commodity marketing area to help the company in continuing to be an important factor in a particular industry. Individual market shares of the cooperatives are reported to be small.

(c) The Commission advised the applicants it has no objection to the proposed acquisition of some of the assets of the financially-troubled competitor [33 F.R. 12088, Aug. 27, 1968]

§ 15.280 Commission advised applicant it cannot approve a proposed partial acquisition of a direct competitor's business that may substantially increase applicant's market power.

(a) The Commission issued an advisory opinion to an applicant who sought premerger clearance to acquire a number of operating plants of a direct competitor.

(b) According to the information submitted by the applicant, both companies purchase an agricultural product from growers and resell the partially processed product to further processors and canners. Both companies appear to be among the top four firms in the market and to have substantial shares of the market.

(c) The Commission expressed the opinion that it cannot approve the proposed acquisition because such an acquisition may substantially increase applicant's market power and thereby tend to produce anticompetitive effects in violation of the Clayton Act, as amended, [33 F.R. 12088, Aug. 27, 1968]

§ 15.281 Trade association recommendations with respect to sales periods and services furnished by members and cash discounts by suppliers.

(a) The Commission rendered an advisory opinion to a trade association of clothing retailers that its proposal to hold discussions, conduct studies and make recommendations to its members and their suppliers with respect to three problems which confront the industry would probably be illegal.

(b) The association advised that competitive conditions have forced the retailers into longer and longer sales periods which squeeze profit margins in the stores and contribute to improper merchandise assortments for one-third of the year. Second, it was stated that the cost of alterations was creeping upward as labor costs increase, thus adding to overhead expense and that only a limited number of stores charge for these alterations. Third, the association advised that manufacturers vary in the amounts of cash discounts they will give and in the time periods during which they will be allowed, thus confusing retailers and