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volving 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 response 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).

Example 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 such customer's purchases during the period and fails to grant a discount of the same percentage to all other customers during such period.

Example 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 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.

Example 3. Terms of 2 percent 10 days 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 percent instead of a 2 percent discount when making payment to the industry member within the time prescribed.

Example 4. An industry member sells goods to one or more of his customers at a lower price than he charges other customers

2 See also note under subparagraph (1) of paragraph (a) of this section.

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 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.

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,

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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 (g) 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 service or facilities connected with the processing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all competing purchasers on proportionally equal terms.

NOTE 1: See subsection (b) of section 2 of the Clayton Act as amended, which is set forth in the note following paragraph (g) of this section.

NOTE 2: Among the practices inhibited by paragraph (e) of this section is that of an industry member according to one or more customers the privilege of returning for credit or refund any or all of the goods purchased by them and failing to accord the same privilege to another or other competing customers on proportionally equal terms. In this connection see also Note 2 under cost justification proviso, paragraph (a) (2) of this section.

(f) Clarification of requirements for supplying of marketing services, facilities or allowances. The following is presented for the purpose of clarifying the requirements of paragraphs (d) and (e) of this section with respect to the supplying of marketing services, facilities or allowances by industry members to their customers, but it is not intended to imply by such presentation that other methods which assure of proportional equality of

treatment of competing customers may not also be used.

(1) An industry member may simultaneously offer to each of his customers competing in the resale of his products the same kind of promotional service, facility or allowance of a cost value equal to a uniform percentage of the sales (or purchases) of the industry member's products by each customer during a specified and identical period of time: Provided, however, That when the service, or facility or allowance offered is of a type which under reasonable terms and conditions is not usable or suitable to the facilities and business of all customers, and is offered to any one customer, the member offer each of those customers to whom the service, facility or allowance is not usable or suitable an alternate type of promotional service, facility or allowance which is of equivalent measurable cost, is usable by the customer, and is suitable to his facilities and business, and promptly inform all competing customers of the kind and amount of services, facilities or allowances which he has offered to each and the respective terms and conditions under which such services, facilities or allowances are to be furnished by the industry member: And provided further, That when the offer of any service, facility or allowance to any customer is conditioned on such customer supplying some reciprocal service, facility or payment, a reciprocal service, facility or payment be required in the offers to all other customers and there be an equality of ratio among all customers as to the measurable cost of that which is supplied by the industry member and the reciprocal service, facility or payment required of any customer. industry member must take every reasonable precaution to see that services, facilities or allowances which he furnishes to customers are used in accord with the terms of his offer; and upon failure of the customer to perform any obligation on his part the industry member must cease supplying the customer any further service, facility or allowance.

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(2) Explanatory analysis: In other words, one but not the only, method of complying with paragraphs (d) and (e) of this section is as follows:

The industry member may offer, simultaneously, to each competing resale customer, the same kind of

1. Promotional service, or 2. Facility, or

3. Allowance,

The value of which must be equal to a uniform percentage of dollar volume:

1. Of the sales or purchases by each customer of the industry member's products, 2. Computed for an identical, specified period of time.

However, if the same kind is not usable and suitable under reasonable terms and conditions to all such customers, and is offered to one, the others must be offered an alternate type of:

1. Promotional service, or 2. Facility, or

3. Allowance, and

The alternate type must be:

1. Of equivalent measurable cost, and 2. Usable by the customer and suitable with respect to his facilities and character of business; and

All such customers must be promptly informed of:

(a) The kind,

(b) The amount, and

(c) Terms and conditions of the offer.

Also: When the offer is conditioned upon something reciprocal to be furnished by the customer, the member

1. Must require of all customers the same proportionate reciprocity (equality of ratio as to the measurable cost of that supplied by the customer to that supplied by the member);

2. Must take every reasonable precaution to see that what he pays or furnishes is used in accordance with the terms of his offer; and

3. Must cease furnishing or paying it to the customer when the industry member knows, or has reason to believe, it is not so used.

(g) Inducing or receiving an illegal discrimination in price. It is an unfair trade practice for any member of the industry engaged in commerce, in the course of such commerce, knowingly to induce or receive a discrimination in price which is prohibited by the foregoing provisions of this section.

NOTE: Paragraph (g) of this section is a restatement of section 2 (f) of the Clayton Act as amended. In a complaint proceeding under this section, in order to make out a prima facie violation, the Commission must show that the favored buyer induced or received the lower price knowing, or knowing facts from which he should have known, that such price was violative of section 2 (a) of said act and not justified under subparagraph (2), (4) or (5) of paragraph (a) of this section. When, in any such proceeding, the issue is limited to the question of whether the price differential involved made only due allowance for differences in cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which the goods were sold and delivered, the Commission may estab

lish a prima facie case in a number of ways, including:

(1) By showing that the buyer paying the lower price knew that the methods by, and quantities in, which the goods were sold and delivered to him by the seller were the same as in the case of the competing buyer or buyers paying the higher price or prices;

or

(2) By showing where there is a difference in the methods or quantities in which the goods were sold and delivered by the seller to the buyer than in the case of the competing buyer or buyers paying the higher price or prices, that the buyer paying the lower price or prices knew the nature and extent of such differences and knew or should have known that they could not have resulted in sufficient cost savings of the kind and character specified as to justify the price differential.

NOTE: Section 193.1 is based on the provisions of Section 2 of the Clayton Act as amended by the Robinson-Patman Act.

Subsection (b) of section 2 of the Clayton Act, as amended, to which reference is made in the note to subparagraph (5) of paragraph (a) of this section and in Note 1 under paragraph (e) of this section, 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."

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The inhibitions of this section are subJect to Public Law 542, approved July 14, 1952-66 Stat. 632 (the McGuire Act) which provides that with respect to a commodity which bears, or the label or container of which bears, the trade-mark, brand, or name of the producer or distributor of such commodity and which is in free and open competition with commodities of the same general class produced or distributed by others, a seller of such a commodity may enter into a contract or agreement with a buyer thereof which establishes a minimum or stipulated price at which such commodity may be resold by such buyer when such contract or

or indirectly, to engage in any planned common course of action, or to enter into or take part in any understanding, agreement, combination, or conspiracy, with one or more members of the industry, or with any other person or persons, to fix or maintain the price of any goods or otherwise unlawfully to restrain trade; or to use any form of threat, intimidation, or coercion to induce any member of the industry or other person or persons to engage in any such planned common course of action, or to become a party to any such understanding, agreement, combination, or conspiracy.

§ 193.3

Prohibited sales below cost.

(a) The practice of selling products of the industry at a price less than the cost thereof to the seller, with the purpose or intent, and where the effect is, or where there is a reasonable probability that the effect will be, to substantially injure, suppress, or stifle competition or tend to create a monopoly, is an unfair trade practice.

(b) This section is not to be construed as prohibiting all sales below cost, but only such selling below the seller's cost as is resorted to and pursued with the wrongful intent or purpose referred to and where the effect is, or where there is reasonable probability that the effect will be, to substantially injure, suppress, or stifle competition or to create a monopoly. Among the situations in which the requisite purpose or intent would ordinarily be lacking are cases in which such sales were: (1) Of seasonal goods near the conclusion of the season; (2) of obsolescent goods; (3) made under judicial process; or (4) made in bona fied discontinuance of business in the goods concerned.

(c) As used in paragraphs (a) and (b) of this section, the term "cost" means the respective seller's cost and not an average cost in the industry whether such average cost be determined by an industry cost survey or some other

agreement is lawful as applied to intrastate transactions under the laws of the State, Territory, or territorial jurisdiction in which the resale is to be made or to which the commodity is to be transported for such resale, and when such contract or agreement is not between manufacturers, or between wholesalers, or between brokers, or between factors, or between retailers, or between persons, firms, or corporations in competition with each other.

method. It consists of the total outlay or expenditure by the seller in the acquisition, production, and distribution of the products involved, and comprises all elements of cost such as labor, material, depreciation, taxes (except taxes on net income and such other taxes as are not properly applicable to cost), and general overhead expenses, incurred by the seller in the acquisition, manufacture, processing, preparation for marketing, sale and delivery of the products. Not to be included are dividends or interest on borrowed or invested capital, or nonoperating losses, such as fire losses and losses from the sale or exchange of capital assets. Operating cost should not be reduced by items of nonoperating income, such as income from investments, and gain on the sale of capital assets.

(d) Nothing in this section shall be construed as relieving an industry member from compliance with any of the requirements of the Robinson-Patman Act. § 193.4 Exclusive deals.

It is an unfair trade practice for any member of the industry engaged in commerce, in the course of such commerce, to lease or make a sale or contract for sale of any industry product, for use, consumption, or resale within any place under the jurisdiction of the United States, or fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale, or such condition, agreement, or understanding, may be to substantially lessen competition or tend to create a monopoly in any line of commerce.

§ 193.5

Coercing purchase of one product as a prerequisite to the purchase of other products.

The practice of coercing the purchase of one or more products as a prerequisite to the purchase of one or more other products, where the effect may be to substantially lessen competition or to tend to create a monopoly or to unreasonably restrain trade, is an unfair trade practice.

§ 193.6 Consignment distribution.

(a) It is an unfair trade practice for any member of the industry to employ the practice of shipping industry products on consignment without the express

request or prior consent of the purchasers.

(b) It is an unfair trade practice for any member of the industry to employ the practice of shipping industry products on consignment or pretended consignment for the purpose and with the effect of artificially clogging or closing trade outlets and unduly restricting competitors' use of said trade outlets in getting their products to purchasers through regular channels or distribution, thereby injuring, destroying, or preventing competition or tending to create a monopoly or unreasonably to restrain trade.

(c) Nothing in this section shall be ing or agreement, combination or conconstrued to authorize any understandspiracy, or planned common course of action, by and between industry members, mutually to conform or restrict their practice of shipping goods on consignment with the intent or effect of lessening competition.

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§ 193.8

Inducing breach of contract.

(a) Knowingly inducing or attempting to induce the breach of existing lawful contracts between competitors and their customers or their suppliers, or interfering with or obstructing the performance of their contractual duties or services, under any circumstance having the capacity and tendency or effect of substantially injuring or lessening present or potential competition, is an unfair trade practice.

(b) Nothing in this section is intended to imply that it is improper to solicit the business of a customer of a competing industry member; nor is the section to be construed as in anywise authorizing any agreement, understanding, or planned common course of action by two or more industry members not to solicit business from the customers of either of them, or from customers of any other industry member.

§ 193.9

Substitution of products.

It is an unfair trade practice for a member of the industry to make an unauthorized substition 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.

§ 193.10 False invoicing.

Withholding from or inserting in invoices or sales slips any statements or information by reason of which omission or insertion a false record is made, wholly or in part, of the transactions represented on the face of such invoices or sales slips, with the capacity and tendency or effect of thereby misleading or deceiving purchasers, prospective purchasers, or the consuming public, is an unfair trade practice.

§ 193.11 Commercial bribery.

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.

§ 193.12 Enticing away employees of competitors.

It is an unfair trade practice for any member of the industry willfully to entice away employees or salescontact personnel of competitors with the intent and effect of thereby unduly

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