ranties," to purported “guarantees” and "warranties," and to any promise or representation in the nature of a “guarantee" or "warranty." [Rule 131

§ 154.14 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 substantially to lessen competition or tend to create a monopoly or unreasonably to restrain trade, is an unfair trade practice. [Rule 14]

§ 154.15

Inducing breach of contract.

(a) Knowingly inducing or attempting to induce the breach of existing lawful contracts between competitors and their customers or between competitors and their suppliers, or interfering with or obstructing the performance of any such contractual duties or services, under any circumstance having the capacity and tendency or effect of substantially injuring or lessening 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, or to sell to, the customers of either of them, or customers of any other industry member. [Rule 15]

§ 154.16

Misrepresentation as to character of business.

It is an unfair trade practice for any industry member, in the course of or in connection with the sale of industry products, to represent, directly or indirectly, that he is a manufacturer of industry products, unless he owns and operates or directly controls a factory wherein such products are made, or to represent that he is a wholesaler of industry products when such is not a fact, or in any other manner to misrepresent the character, extent, or type of his business. [Rule 16]

§ 154.17 Deception in distribution of special lots.

In the case of lots or quantities of industry products advertised or offered for sale at so-called special or bargain sales

or reduced price sales or otherwise, it is an unfair trade practice to use advertisements or representatives thereof which represent, import or imply that such merchandise consists entirely or in substantial or greater part of products or articles of well-known manufacturers or of well-known or reputable brands or of products or articles of certain high quality, grade, or price, when no such products or articles are contained in said lot or quantity of merchandise or when only a relatively small quantity or number thereof is contained in such merchandise, or when such advertisements or representations otherwise have the capacity and tendency or effect of misleading or deceiving the purchasing or consuming public. [Rule 17]

§ 154.18

Use of the word "free."

In connection with the sale, offering for sale, or distribution of industry products, it is an unfair trade practice to use the word "free," or any other word or words of similar import, in advertisements or in other offers to the public, as descriptive of an article of merchandise, or service, which is not an unconditional gift, under the following circumstances:

(a) When all the conditions, obligations, or other prerequisites to the receipt and retention of the "free" article of merchandise or service offered are not clearly and conspicuously set forth at the outset so as to leave no reasonable probability that the terms of the offer will be misunderstood; and, regardless of such disclosure:

(b) When, with respect to any article of merchandise required to be purchased in order to obtain the "free" article or service, the offerer (1) increases the ordinary and usual price of such article of merchandise, or (2) reduces its quality, or (3) reduces the quantity or size thereof.

NOTE: The disclosure required by paragraph (a) of this section shall appear in close conjunction with the word "free" (or other word or words of similar import) wherever such word first appears in each advertisement or offer. A disclosure in the form of a footnote, to which reference is made by use of an asterisk or other symbol placed next to the word "free," will not be regarded as compliance.

[Rule 18]

§ 154.19 Deceptive pricing.

It is an unfair trade practice for any member of the industry to represent di

rectly or indirectly in advertising or otherwise that 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. Copies of the Guides will be furnished upon request. [Rule 19]

[29 F.R. 7670, June 16, 1964]

§ 154.20 Use of gift enterprise or lottery schemes.

The offering or giving of prizes, premiums, or gifts in connection with the sale or distribution of industry products, or as an inducement thereto, by any method which involves a lottery or gift enterprise, and the sale or distribution of industry products by any method or plan which involves a lottery or gift enterprise, are unfair trade practices. [Rule 201 § 154.21

Prohibited forms of trade restraints (unlawful price fixing, etc.)1 It is an unfair trade practice for any member of the industry, either directly

2 The prohibitions of this section are subject to Public Law 542, approved July 14, 1952-66 Stat. 632 (the McGuire Act, commonly referred to as the Fair Trade Amendment) 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 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.

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 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. [Rule 21]

§ 154.22 Unfair interference.

It is an unfair trade practice for any member of the industry, by means of any monopolistic practice, or through combination, conspiracy, coercion, boycott, threats, or any other unlawful means, directly or indirectly, to interfere with a competitor's right to purchase his materials and supplies from whomsoever he chooses, or to sell to whomsoever he chooses. [Rule 22]

§ 154.23 Prohibited discrimination.

(a) Prohibited discriminatory prices, rebates, discounts, etc. 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 purchasers 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;

(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: 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.

(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: 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."

(b) 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.

(c) 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 made known to and is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities.

NOTE 1: Industry members giving advertising allowances to competing customers must exercise precaution and diligence in seeing that all of such allowances are used in accordance with the terms of their offers.

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.

(d) 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 fur

nishing of, any services 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: Subsection (b) of section 2 of the Clayton Act as amended, which is set forth in the note concluding paragraph (a) of this section is applicable to this paragraph.

(e) (1) The following is presented for the purpose of clarifying the requirements of paragraphs (c) and (d) 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.

(2) 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, 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, fa

cility or payment required of any customer. The 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.

(f) Inducing or receiving an illegal discrimination in price, advertising or promotional allowances, or services or facilities: 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, advertising or promotional allowances, or services or facilities, prohibited by the foregoing provisions of this section. [Rule 23]

§ 154.24 Discriminatory returns.

It is an unfair trade practice for any member of the industry to discriminate in favor of one customer-purchaser against another customer-purchaser of industry products, bought from such member of the industry for resale, by contracting to furnish, or furnishing in connection therewith, upon terms not accorded to all customer-purchasers on proportionally equal terms, the service or facility whereby such favored customer is accorded the privilege of returning industry products so purchased and receiving therefor credit or refund of purchase price: Provided, however, That nothing in this part shall prohibit or be used to prevent the return of merchandise by purchaser for credit or refund of purchase price: Provided, however, That merchandise has not been properly labeled by the seller in accordance with this part or has been otherwise falsely or deceptively labeled or represented, or when and because such merchandise is defective in material, workmanship, or in any other respect is contrary to warranty or purchase contract: And provided, further, That nothing herein shall prohibit a purchaser from exchanging the current season's merchandise for different sizes of the same style number in order to balance purchaser's stock. (Nothing in this section is intended to modify or affect any of the requirements of § 154.23 entitled "Prohibited Discrimination.") [Rule 24]

§ 154.25

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) Nothing in this section shall be construed to authorize any understanding or agreement, combination or conspiracy, or planned common course of action, by and between industry members, mutually to conform or restrict their practice of shipping goods on consignment. [Rule 25]

§ 154.26 Exclusive dealing.

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. [Rule 26]

The false or deceptive marking or branding of products of the industry, or the making or publishing of any false or deceptive advertisements, statements, or representations, concerning the dyeing, printing, bleaching, finishing, or processing of any products of the industry, or concerning their quality, quantity, weighting, fiber content, or preparation, or in any other material respect, is an unfair trade practice.

§ 155.2 Deceptive concealment.

It is an unfair trade practice for any member of the industry to use, or directly or indirectly to assist others in the use of, any deceptive selling method or other deceptive act or practice by concealing or failing to disclose textile content, weighting, and other information required to be disclosed by Parts 123 and 135 of this subchapter, or other applicable rules; or by any other means to engage in deceptive selling methods. § 155.3 Substitution of products.

The practice of shipping or delivering products which do not conform to samples submitted, or to representations made prior to securing the order, without