(d) "Furthermore, the proposed advertisement is deceptive because, taken as a whole, it tends to convey the impression that service is not being sold but, rather, that a gift is to be given to specially qualified persons who are willing to consider a career in motel management."

[34 F.R. 18353, Nov. 18, 1969]

§ 15.389 Disclosure of foreign assembly operations on ladies' blouses.

(a) The Commission advised that it would not be necessary to disclose the foreign country of origin where certain assembly operations are performed on ladies' blouses.

(b) Under the factual situation involved in the ruling, the synthetic fabric, buttons and thread will all be of domestic origin. The fabric will be cut in the United States and thereafter shipped to Trinidad where it will be assembled. Assembly operations in Trinidad will consist of sewing, pressing, and trimming. Approximately 26.4 percent of total production costs will be of foreign origin, with the remaining 73.6 percent representing domestic costs.

(c) Concluding that a disclosure would not be required under section 4(b) (4) of the Textile Fiber Products Identification Act or section 5 of the FTC Act, the Commission said: "In the absence of any affirmative representation that the finished product is made entirely in the United States, the Commission has concluded that it will not be necessary to disclose the nature and extent of the foreign operations performed on the ladies' blouses."

[34 F.R. 18353, Nov. 18, 1969]

§ 15.390 Offer of incentive bonus to

customers.

(a) The Commission advised that to offer an incentive bonus to open credit account customers to encourage the payment of invoices within established terms and conditions of sale would not be objectionable.

(b) Most sales are made to open credit account purchasers of plumbing supplies and it was proposed to offer all such customers, as well as all new accounts, a bonus of 1 percent based on the aggregate total of monthly purchases to be given in the form of a credit certificate. This certificate will be honored by a selected local travel agency to apply toward vacation travel, and to be issued to those who adhere to established credit

terms. Customers will present their certificates to the travel agency as partial or complete payment of their vacation expenses within 18 months from date of issuance.

(c) The Commission expressed the view that the proposed program, as stated, should be considered as a proposal to increase established credit terms and conditions of sale by 1 percent and as such the program probably would not be unlawful except to the extent, if any, the additional discount may effect unlawful price discriminations within the meaning of section 2(a), amended Clayton Act. However, because the program will be offered and made available to all open credit account customers and because the single qualifying requirement is adherence to established credit terms and conditions of sale it is not likely that implementation of proposed program would result in any adverse competitive effects.

(d) The Commission advised it would initiate no proceedings so long as the proposed program is implemented in the manner and for the purpose intended. [34 F.R. 19072, Dec. 1, 1969]

§ 15.391 Labeling of products composed of ground leather and fabric.

(a) The Commission is of the opinion that a product which consists of reconstituted leather applied to a fabric base may not be described as "leather" without proper qualification and may not be described as "genuine milled leather."

(b) This product may not be described as "leather" unless the word is accompanied by a clear statement as to the product's true composition. The term "leather" used alone means top grain leather and the product referred to, composed of ground leather on a fabric backing, does not come within such a definition. The use of the unqualified term "leather" to describe such product would tend to deceive prospective customers and possibly violate section 5 of the Federal Trade Commission Act.

(c) The product may not be described as "genuine milled leather" with or without qualification. It is not clear what is intended by the word "milled" but the phrase as a whole suggests top grain leather in a manner which would make any attempted qualification a contradiction in terms. Use of this phrase would tend to mislead and deceive prospective customers as to the true composition of

the product and might violate the Federal Trade Commission Act.

(d) The close resemblance of the product to leather may tend to mislead prospective purchasers into the belief that the product is top grain leather. Accordingly, the product should be labeled to indicate its true composition or, optionally, that it is imitation or simulated leather or nonleather.

(e) Finally, the backing of the product appears to be a textile fiber product subject to the Textile Fiber Products Identification Act, and, accordingly, certain information must be disclosed as to the composition of such fabric.

(f) The product may be described appropriately in a number of ways, among which are the following:

Ground leather laminated to fabric (60 percent polyester, 40 percent rayon). Shredded leather laminated to fabric (60 percent polyester, 40 percent rayon). Pulverized leather laminated to fabric (60 percent polyester, 40 percent rayon). Imitation leather laminated to fabric (60 percent polyester, 40 percent rayon). Simulated leather laminated to fabric (60 percent polyester, 40 percent rayon). Nonleather. Fabric backing 60 percent polyester, 40 percent rayon.

[34 F.R. 19072, Dec. 1, 1969]

§ 15.392

Disclosure of origin of partly foreign-made foundation garments. (a) The Commission expressed an opinion that it would not be necessary to disclose the name of the foreign country where certain finishing operations are performed on ladies' foundation garments.

(b) The fabric, which is of domestic origin, will be cut to shape in the United States and shipped to Mexico where it will be sewn and finished. The foreign labor costs of producing the finished garment will represent approximately 20 percent of total production costs.

(c) The Commission is of the opinion that it will not be necessary to disclose in the labeling the nature and extent of the foreign operations performed on the foundation garments, either under section 5 of the Federal Trade Commission Act or section 4(b) (4) of the Textile Fiber Products Identification Act. The Commission noted, however, that inquiry should be made of the Bureau of Customs as to any marking requirements under section 304 of the Tariff Act of 1930.

[34 F.R. 19072, Dec. 1, 1969]

§ 15.393 Request for reconsideration of Advisory Opinion 333 (§ 15.333) pertaining to wholesaler-manufacturer relationship; Freight saving as cost justification.

(a) The Commission was requested to reconsider the advice given in Advisory Opinion Digest No. 333 (§ 15.333) concerning manufacturers' selling relationships with wholesalers. The Commission also considered the question of passing along freight savings to customers.

(b) After concluding that it would adhere to the advice given in the earlier Advisory Opinion the Commission noted that the issue of potential price discrimination between competing wholesalers, some receiving 40 percent and others 25 percent discounts off list prices, no longer existed since only one discount rate is now involved.

(c) Negative advice was given in connection with the following three factual situations because, in the Commission's opinion, applicable antitrust law prohibits suppliers from taking certain punitive action against wholesalers with whom they have been dealing:

(1) A manufacturer refuses to deal further with a wholesaler who has changed his method of doing business and has undertaken to franchise subjobbers whom he prohibits from buying directly from the manufacturer and requires that they purchase all the manufacturer's products through the wholesaler.

(2) A manufacturer discontinues sales to a wholesaler who ceases to maintain salesmen at all times who regularly call upon beauty salons and advise licensed professional hairdressers "on the safe and proper methods of applying the manufacturer's products and who keep sufficient supplies" on hand for current needs of their beauty salon customers.

(3) A manufacturer refuses to deal further with a wholesaler who, without the manufacturer's authorization, resells to independent subjobbers and other wholesalers.

(d) With respect to the problem of cost justification the Commission advised that applicable provisions of section 2(a) of the amended Clayton Act permit a supplier to pass along freight savings to customers but only to the extent of such savings and only if available to all customers competing in the resale of his products.

[34 F.R. 20333, Dec. 30, 1969]

§ 15.394 Approval for merger of privately owned tufting machinery and equipment manufacturers.

(a) The Federal Trade Commission granted clearance to privately owned manufacturers of carpet tufting machinery and related equipment to merge their operations into one corporation whose voting stock will be offered for sale to the general public.

(b) The merging companies manufacture machinery and related equipment used by textile mill operators in the production of rugs, carpets, and other textiles. Some of the companies have a common ownership and are competitors; another is not a competitor but manufactures machinery used by customers of the others. Some have about the same market shares in an industry of five manufacturers, about one-fifth of the market share of the dominant company, a substantial national conglomerate enterprise. One firm to be merged competes with ten others in its related industry.

(c) After having considered all available information the Commission concluded that the effect of the proposed merger is not likely to result in any lessening of competition nor the creation of a monopoly in the manufacturing of tufting machinery and equipment. The Commission is of the opinion that the beneficial competitive effects flowing from the amalgam of the privately owned enterprises into a publicly owned corpo`ration will be to give greater competition to its giant rival.

[34 F.R. 20333, Dec. 30, 1969]

§ 15.395 Retailer price reporting plan.

(a) The Commission issued an advisory opinion governing a proposed price checking service designed to publicize various current retail prices for grocery store products. Underlying data would be obtained in part by direct observation of posted prices and in part by reference to information supplied by wholesalers and retailers. The service would be available, for a fee, to anyone interested.

(b) In the Commission's view, exchange of price data may lend itself to price fixing and may result in the elimination of price competition and the legality of the proposed course of action would depend on its implementation. [34 F.R. 20333, Dec. 30, 1969]

§ 15.396 Use of term "Peat Moss-Pifine and Sedge".

(a) The Commission rendered an advisory opinion concerning a proposal

to describe peat with the following terminology:

Peat Moss Pifine and Sedge

(b) The product is composed of at least 75 percent peat by weight, with the remaining 25 percent comprised of such soil substances as are commonly intermixed with peat as found in its natural state. It is derived from three nonmoss substances; namely, Pifine (Paille Finne), or commonly referred to as maiden cane grass, cut grass, and saw grass, Pifine comprises the bulk of the plant residue present in the product.

(c) Three provisions of the Commission's Trade Practice Rules for the Peat Industry govern the use of the term "Peat Moss" in this particular situation. First, there is the definition of the word "peat," which is as follows:

"Peat". Any partly decomposed vegetable matter "which is accumulated under water or in a water-saturated environment through decomposition of mosses, sedges, reeds, tule, trees, or other plants."

(d) The second pertinent provision is Rule 2, which prohibits use of the word "Peat" to describe any product "which is not in fact composed predominantly of peat to the extent that at least 75 percent (by weight) of the product is composed of peat, with such other materials as may be present in the content, and constituting the remaining percentage, being comprised of such soil substances as are customarily intermixed with peat as found in its natural state."

(e) Third, Rule 3 covers use of the terms "Moss Peat" and "Peat Moss", and has been codified under § 185.3 of this Title 16.

(f) On the basis of the foregoing facts, the Commission expressed the opinion that the proposed terminology complies with the requirements of Rule 3(b) of the Trade Practice Rules for the "Peat Industry". However, the opinion also noted that some of the art work used the words "Peat Moss" without qualification or without conspicuous qualification. Such a representation, the Commission said, would not be in compliance with Rule 3(b). Concluding its opinion, the Commission said: "It is necessary under the pertinent rule * to disclose the kinds of peat of which (the) product is composed 1.e., Pifine and Sedge, and that such disclosure be of equal size and conspicuousness and be placed in immediate conjunction with the words 'Peat Moss' whenever they

*

are used in labeling or advertising. If the proposed terminology is used in such manner, the Commission would interpose no objection thereto." [34 F.R. 20334, Dec. 30, 1969]

§ 15.397 Origin of dresses partly made in United States and Haiti.

(a) The Commission rendered an advisory opinion in regard to the proper marking of dresses partly made in the United States, Puerto Rico, and Haiti.

(b) The fabric will be of American origin representing 73 percent of total production costs; cutting and sorting in Puerto Rico-8 percent of production costs; sewing in Haiti-8 percent of production costs; hem sewing, ironing, final checking and sorting, packing and attaching hand tags in the United States11 percent of production costs.

(c) The question considered involved which of the following three labels must be applied to the dresses:

(1) "Made in U.S.A."
(2) "Made in Haiti."

(3) "Made in Haiti with U.S. component parts."

(d) The first claim constitutes an affirmative representation that the product is made in its entirety in the United States. Since a substantial portion of the manufacturing process on the dresses is performed in Haiti, it would be improper to use the "Made in U.S.A.." claim without clearly disclosing that the dresses are sewn in Haiti.

(e) Similarly, a "Made in Haiti" claim would be misleading because the dresses are not made in their entirety in that particular country.

(f) Except for the word "made", the third proposed claim would be unobjectionable. There are two princinal steps in the manufacturing process of dresses; namely, cutting and sewing. Since approximately one-half of the manufacturing process (the cutting) takes place in another country, a more accurate description of what is being done in Haiti would be to substitute the word "sewn" for the word "made." Thus, the claim as revised would read: "Sewn in Haiti with U.S. component parts".

(g) Althought not specifically asked, the Commission further advised that in the absence of any affirmative representation that the dresses are entirely of United States' origin, it will not be necessary to disclose the fact that the dresses are sewn in Haiti. Finally, that this opinion does not relieve anyone from

[35 F.R. 418, Jan. 13, 1970]

§ 15.399 Plan for merchandising by lottery.

(a) The Commission issued on advisory opinion relative to proposed weekly drawings for wigs.

(b) The wigs are purchased at $5 each wholesale and retailed to consumers at $50. None have ever been sold at retail below this price. It is proposed to establish a method by which each buyer of a wig would be assured of a wig at a price of $50 or less. The method of operation would be as follows: Customers would be divided into groups of 10. Each week, each such customer in each such group would pay $5, and a drawing would be had, the winner to receive a wig. The next week, the nine remaining persons in the group of 10 would each pay $5, and one of them would receive a wig. This process would continue, until finally the last person in the group would pay the full price of $50 for the wig.

(c) The Commission expressed the view that the proposed course of action would constitute a scheme to sell merchandise by means of a lottery or game of chance, a sales device long held to be illegal under the Federal Trade Commission Act, section 5. The mere fact that each participant receives a thing of value for his contribution does not negate the existence of a lottery nor change the plan's essential nature as an appeal to the public's gambling instincts. Clearly, the participants in this drawing would be motivated by the chance of receiving something of more value than the amount they contributed. Hence, the nature of the appeal is unmistakable.

[35 F.R. 418, Jan. 13, 1970]

§ 15.400 Labeling of imported magnetic recording tape.

(a) Modifying the position announced in Advisory Opinion Digest No. 366

(1) Tape accompanying an imported tape recorder, if packaged to show country of origin, is not required to express quantity of contents as described in Advisory Opinion Digest No. 366 (§ 15.366), provided the description of contents does not constitute an unfair or deceptive practice which would violate the Federal Trade Commission Act.

(2) Cartridge tapes may be expressed in terms of playing time in lieu of a linear measurement.

(3) Imported packaged magnetic recording tapes may continue to be distributed provided the country of origin is appropriately shown.

(b) This action was taken to conform the opinion with the Commission's Statement of General Policy and Interpretation, § 503.2 of this chapter.

[35 F.R. 2655, Feb. 6, 1970]

§ 15.401

Designation of landscaping material by volume on containers.

(a) In a previous advisory opinion the Commission advised that to designate the contents on containers of landscaping material by cubic measurement rather than by weight would be objectionable under section 5, Federal Trade Commission Act.

(b) The proposal considered involved the marketing of a processed clay material in physical form varying from pieces of approximately 2 inches down to 10 of an inch in diameter for use as a landscaping material, particularly around shrubs, trees, walkways and other non-grassed areas. Because the density of the product by volume is less and the area of coverage by weight greater than competing materials used for the same purpose it was represented that it would be more beneficial and informative to consumers to stipulate the container contents in cubic measurement instead of by the traditional contents by weight designation. Specifically, the Commission was asked:

(1) May the product be marketed by showing the contents of the bags in which it is contained by way of cubic measurement and not by weight, leaving off all reference to weight?

(2) Also, may the area the material will cover in square inches, feet, or yards to a specified depth be shown on the bags?

(c) The Commission expressed the view that the product, being used mainly for ground covering purposes, is classified as a type of lawn and garden commodity and as such is not considered a "consumer commodity" as defined by the Fair Packaging and Labeling Act. Whether the proposed labeling would be an unfair or deceptive act must, therefore, be tested against the criteria of section 5, FTC Act. Controlling in matters of this nature is whether the proposed course of action is fair to consumers according to recognized principles, not that it might be unfair according to tradition and the morals of the market place. The concept of “Unfair or deceptive acts of practices" stresses business integrity, encourages legitimate trading, and protects consumers against commercial spoliation.

(d) The Commission expressed the view that it would be more beneficial and informative to consumers if the contents were designated on the product containers by both weight and volume. Although not essential, it would also be beneficial and informative to consumers if the extent of area coverage to a predetermined depth by weight and by volume were included in such content designation.

(e) The Commission further advised that its opinion is confined to so much of the request as falls within its jurisdiction and the extent, if any, to which another governmental agency, either local, State, or Federal, may be concerned is a matter to be determined by reference to that agency.

[35 F.R. 2655, Feb. 6, 1970]

§ 15.402 Marking of shoe soles composed of ground leather.

(a) The Commission issued an advisory opinion in regard to the proper marking of a material to be used in the manufacture of shoe soles.

(b) The material in question is not leather but a man-made fibrous leather material bonded with an adhesive. It will be manufactured and sold in its natural form to manufacturers for use as shoe soles and/or heels. Shoe manufacturers will in all probability dye or stain the material so as to give it the appearance of leather or any other material as desired. Under no circumstances will the manufacturer of the material have any control over its appearance once it has been sold to shoe manufacturers.