tion shall be construed as prohibiting the use of cotton fiber which is not less than 16" in length of staple for the counts of 35 and less above referred to. [Rule 3]

§ 152.4

"Irregulars,” or “seconds".

(a) It is an unfair trade practice to fail to disclose on industry products and in all advertising and promotional material relating thereto that such products are "irregulars" or "seconds," when such is the case.

(b) It is an unfair trade practice to cause any industry products to be falsely or deceptively marked, advertised, described or otherwise represented, either as not being or as being "irregulars" or "seconds," when such is not the fact.

(c) For the purpose of this section "irregulars" shall be considered as including all hosiery which is not of first quality but which contains only minor imperfections limited to irregularities in dimensions, size, color or knit, and without the presence of any obvious mends, runs, tears or breaks in the fabric or any substantial damage to the yarn or fabric itself. "Seconds" shall be considered as including all hosiery which is not of first quality, does not qualify as “irregulars" and which contains runs, obvious mends, irregularities, substantial imperfections, or defects in material, construction or finish.

(d) The marking of hosiery under this section shall be made in a conspicuous and non-deceptive manner with sufficient permanency or indelibility to carry through the channels of trade to the ultimate consumer in a clearly legible condition. The words "irregulars' or "seconds" as the case may be shall be set out distinctly by transfer or other marking on the fabric of each stocking, sock or other unit, whether sold in pairs, threes or otherwise. In addition, if the hosiery is packaged in any manner so as to conceal the disclosures required by this section then such disclosures shall also be made on such packaging in a conspicuous and non-decepitve manner. The required disclosures in advertising and other promotional material that industry products are “irregulars" or "seconds," must also be made in a conspicuous and non-deceptive manner. [Rule 4]

§ 152.5 Removal, obliteration, or alteration of marks.

It is an unfair trade practice for any manufacturer, converter, processor, dyer, finisher, distributor, dealer, importer or vendor, or person acting for or in collusion with any concern or vendor, (a) to remove, obliterate, deface, change, alter, conceal, or make illegible any information required by the rules in this part to be disclosed on industry products, without replacing the same before sale, resale or distribution for sale with a proper mark meeting the requirements of the rules in this part; or (b) to sell, resell, or distribute any industry product without its being marked and described in accordance with the requirements of the rules in this part.

NOTE: Hosiery which has been redyed shall be re-marked in accordance with the requirements of the rules in this part. Hosiery found to contain a false or deceptive mark, or a mark contrary to the requirements of the rules in this part, shall be re-marked in accordance with the rules in this part. [Rule 5]

§ 152.6 Misrepresentation as to character of business.

It is an unfair trade practice for any member of the industry to represent, directly or indirectly, through the use of any word or term in his corporate or trade name, in his advertising or otherwise, that he is a manufacturer, producer, or importer of industry products, or that he is the owner or operator of a mill or factory manufacturing them, when such is not the fact, or in any other manner to misrepresent the character, extent, volume, or type of his business. [Rule 6]

§ 152.7 Deceptive price representations.

Members of the industry shall not represent directly or indirectly in advertising or otherwise than 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.

NOTE: On December 20, 1963, the Commission adopted Guides Against Deceptive Pricing which became effective on January 8, 1964 and which supersede the Guides on this subject as adopted October 2, 1958. The 1964 Guides appear in the January 8, 1964 issue of the FEDERAL REGISTER on pages 178–180 and are set forth as an appendix to the rules in this part. Copies of the Guides will be furnished upon request.

[Rule 7]

[29 F.R. 7461, June 10, 1964]

§ 152.8

Substitution of products.

It is an unfair trade practice for a member of the industry to make an unauthorized substitution of products, where such substitution has the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers, by (a) shipping or delivering industry products which do not conform to samples submitted, to specifications upon which the sale is consummated, or to representations made prior to securing the order, without advising the purchaser of the substitution and obtaining his consent thereto prior to making shipment or delivery; or (b) falsely representing the reason for making a substitution. [Rule 8]

§ 152.9 Size markings and designations."

In connection with the sale or offering for sale of industry products, it is an unfair trade practice:

(a) To mark or otherwise represent any industry product as being of a certain size which is not in fact the true and normal size thereof; or

(b) To alter the true and normal size of industry products by stretching or manipulation so as to deceive purchasers or prospective purchasers as to such size;

or

(c) To fail to disclose on industry products the true and normal size thereof when the failure to make such disclosure has the capacity and tendency or effect of deceiving purchasers or prospective purchasers as to the size of such products.

2 Commercial Standard CS 46-49, "Hosiery Lengths and Sizes" is recognized as a proper method to follow in determining measurements and sizes of hosiery.

It is an unfair trade practice for a member of the industry, directly or indirectly, to give, or offer to give, or permit or cause to be given, money or anything of value to agents, employees, or representatives of customers or prospective customers, or to agents, employees, or representatives of competitors' customers or prospective customers, without the knowledge of their employers or principals, as an inducement to influence their employers or principals to purchase or contract to purchase products imported, manufactured, or sold by such industry member or the maker of such gift or offer, or to influence such employers or principals to refrain from dealing in the products of competitors or from dealing or contracting to deal with competitors. [Rule 10]

§ 152.11 Exclusive deals.

It is an unfair trade practice for any member of the industry to contract to sell or sell any industry product, 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 11]

(b) It is also an unfair trade practice to use, or cause to be used, any guarantee in which the obligations of the guarantor are impracticable of fulfillment, or in respect to which the guarantor fails or refuses to observe his liabilities thereunder.

(c) This section shall be applicable not only to guarantees but also to warranties, to purported guarantees and warranties, and to any promise or representation in the nature of a guarantee or warranty.

NOTE: The "guarantees" and "warranties" to which this section relates do not include the "guaranty" provided for in the Wool Products Labeling Act of 1939, the Textile Fiber Products Identification Act, or in the rules and regulations issued under such Acts. [Rule 12]

It is an unfair trade practice for any industry member to 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 industry member to the customer:

(a) When the agreement or understanding 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 chance; or

(c) When any provision of the agreement or understanding requires or contemplates practices or a course of conduct unduly and intentionally hampering sales of products of competitors of an industry member; or

(d) When, because of the terms and conditions of the agreement or understanding, 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 sections 2 (d) and (e) of the Clayton Act.

NOTE: Payments made by an industry member to a salesperson of a customer under an agreement or understanding that all

or any part of such payments is to be transferred by the salesperson to the customer, or is to result in a corresponding decrease in the salesperson's salary, are not to be considered within the purview of this section, but are to be considered as subject to the requirements and provisions of section 2(a) of the Clayton Act.

[Rule 13]

§ 152.14

Prohibited discrimination."

(a) Prohibited discriminatory prices, rebates. refunds, discounts, credits, etc., which effect unlawful price discrimination: It is an unfair trade practice for any member of the industry engaged in commerce, in the course of such commerce, to grant or allow, secretly or openly, directly or indirectly, 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 competition 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: Provided, however,

(1) That the goods involved in any such transaction are sold for use, consumption, 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 institutions not operated for profit, as supplies for their own use.

NOTE: Purchases by the U.S. Government. In an opinion submitted to the Secretary of War under date of December 26, 1936,

As used in this section, the word "commerce" means "trade or commerce among the several States and with foreign nations, or between the District of Columbia or any Territory of the United States and any State, Territory, or foreign nation, or between any insular possessions or other places under the jurisdiction of the United States, or between any such possession or place and any State or Territory of the United States or the District of Columbia or any foreign nation or within the District of Columbia or any Territory or any insular possession or other place under the jurisdiction of the United States."

the U.S. Attorney General advised that the Robinson-Patman Antidiscrimination Act "is not applicable to Government contracts for supplies." (38 Opinions, Attorney General 539.)

(2) That nothing contained in this paragraph shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered;

NOTE 1: Cost justification to be based on net savings in cost of manufacture, sale or delivery. Cost justification under subparagraph (2) of this paragraph depends upon net savings in cost based on all facts relevant to the transactions under the terms of such subparagraph. For example, if a seller regularly grants a discount based upon the purchase of a specified quantity by a single order for a single delivery, and this discount is justified by cost differences, it does not follow that the same discount can be cost justified if granted to a purchaser of the same quantity by multiple orders or for multiple deliveries.

NOTE 2: Credit or refund for returned goods. In determining whether a price differential based on cost savings under subparagraph (2) of this paragraph is warranted there shall be taken into account any portion of the goods involved which are returned by the customer-purchaser to the seller for credit or refund. See also paragraph (e) (2) of this section.

(3) That nothing contained in this section shall prevent persons engaged in selling goods, wares, or merchandise in commerce from selecting their own customers 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 response 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 1: An industry member cannot justify a price differential under subparagraph (5) of this paragraph if his lowered price is part of his general pricing system and is not made in response to an individual competitive demand.

NOTE 2: Subsection (b) of Section 2 of the Clayton Act, as amended, reads as follows:

"Upon proof being made, at any hearing on a complaint under this section, that there has been discrimination in price or services or facilities furnished, the burden of rebutting the prima facie case thus made by showing justification shall be upon the person charged with a violation of this section, and unless justification shall be affirmatively shown, the Commission is authorized to issue an order terminating the discrimination; Provided, however, That nothing herein contained shall prevent a seller rebutting the prima facie case thus made by showing 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.”

NOTE 3: In complaint proceedings, justification of price differentials under subparagraphs (2), (4) and (5) of this paragraph is a matter of affirmative defense to be established by the person or concern charged with price discrimination.

(b) The following are examples of price differential practices to be considered as subject to the prohibitions of paragraph (a) of this section when involving goods of like grade and quality which are sold for use, consumption, or resale within any place under the jurisdiction of the United States, and which are not purchased by schools, colleges, universities, public libraries, churches, hospitals, and charitable institutions not operated for profit, as supplies for their own use, and when:

(1) The commerce requirements specified in paragraph (a) of this section are present; and

(2) The price differential has a reasonable probability of substantially lessening competition or tending to create a monopoly in any line of commerce, or of injuring, destroying, or preventing competition with the industry member or with the customer receiving the benefit of the price differential, or with customers of either of them; and

(3) The price differential is not justified by cost savings (see paragraph (a) (2) of this section); and

(4) The price differential is not made in reponse to changing conditions affecting the market for or the marketability of the goods concerned (see paragraph (a) (4) of this section); and

(5) The lower price was not made to meet in good faith an equally low price of a competitor (see paragraph (a) (5) of this section):

See also Note under paragraph (a) (1) of this section.

Example No. 1. At the end of a given period an industry member grants a discount to a customer equivalent to a fixed percentage of the total of the customer's purchase during such period and fails to grant such discount to other customers under like conditions.

Example No. 2. An industry member sells goods to one or more of his customers at a higher price than he charges other customers for like merchandise. It is immaterial whether or not such discrimination is accomplished by misrepresentation as to the grade and quality of the products sold.

Example No. 3. Terms of 10th prox. are granted by an industry member to some customers on goods purchased by them from the industry member. Another customer or customers are, nevertheless, allowed to take a 5% instead of a 2% discount when making payment to the industry member within the time prescribed.

Example No. 4. An industry member sells goods to one or more of his customers at a lower price than he charges other customers therefor, basing his justification for the price difference solely on the fact that the goods sold at the lower price bear the private brand name of customers.

Example No. 5. An industry member invoices goods to all his customers at the same price but supplies additional quantities of such goods at no extra charge to one or more, but not to all, such customers; or supplies other goods or premiums to one or more, but not to all, such customers for which he makes no extra charge and which effects an actual price difference in favor of certain of his customers.

Example No. 6. An industry member sells goods to one or more of his customers at a higher price than he charges other customers for like merchandise. It is immaterial

whether the goods sold at the lower price are classified by the industry member as "seconds," "secondary line," "rejects," or are otherwise represented by the industry member as inferior, if the goods are in fact of like grade and quality as the goods sold at the higher price.

NOTE: As previously indicated, the foregoing are examples of practices to be considered violative of the prohibitions of paragraph (a) of this section when involving goods of like grade and quality and when not subject to the other exemptions, exclusions, or defenses set forth in this paragraph.

(c) Prohibited brokerage and commissions: It is an unfair trade practice for any member of the industry engaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, except for services rendered in connection with the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction 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 indirect control, of any party to such transaction other than the person by whom such compensation is so granted or paid.

(d) Prohibited advertising or promotional allowances, etc.: It is an unfair trade practice for any member of the industry engaged in commerce to pay or contract for the payment of advertising or promotional allowances or any other thing of value to or for the benefit of a customer of such member in the course of such commerce as compensation or in consideration for any services or facilities furnished by or through such customer in connection with the processing, handling, sale, or offering for sale of any products or commodities manufactured, sold, or offered for sale by such member, unless such payment or consideration is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities.

NOTE 1: Industry members giving allowances for advertising or sales promotion must, in addition to according same to all competing customers on proportionally equal terms, exercise precaution and diligence in seeing that all such allowances are used by the customers for such purpose. Customers receiving such allowances must not use same for any other purpose.

When an allowance is made ostensibly for advertising or sales promotion of products and is not in fact used for that purpose the practice may constitute a price discrimination. In such case, the party giving the allowance may violate paragraph (a) of this section and the party receiving same may violate paragraph (f) of this section.

NOTE 2: When an industry member gives allowances to competing customers for advertising in a newspaper or periodical, the fact that a lower advertising rate for equivalent space is available to one or more, but not all, such customers, is not to be regarded by the industry member as warranting the retention by such customer or customers of any portion of the allowance for his or their personal use or benefit.

(e) Prohibited discriminatory services or facilities: It is an unfair trade practice for any member of the industry engaged in commerce to discriminate in favor of one purchaser against another purchaser or purchasers of a commodity bought for resale, with or without processing, by contracting to furnish or furnishing, or by contributing to the furnishing of, any services or facilities