inch of fine gold, the marking or description may be "Heavy Gold Electroplate" or "Heavy Gold Electroplated." When coatings or platings qualify for the term "Gold Electroplate" (or "Gold Electroplated"), or the term "Heavy Gold Electroplate" (or "Heavy Gold Electroplated"), and have been applied by use of a special kind of an electrolytic process, the designation for which the coating or plating is qualified may be accompanied by an identification of the process used, as for example, "Gold Electroplated (X Process)"; "Heavy Gold Electroplated (Y Process)."

NOTE: When a quality mark has proper application but to one or more parts of an industry product and not to another part or parts thereof which are of similar surface appearance, it shall be accompanied by identification of the part or parts to which it is applicable. No quality mark shall be used in which words or letters appear in greater size than other words or letters of the marking, e.g., the marking "gold electroplated,' "gold flashed," or "gold washed" shall not be used with the word "electroplated," "flashed," or "washed" in small type and the word "gold" in larger type. As used in this section, the term "quality mark" means any letter, figure, numeral, symbol, sign, word, or term, or any combination thereof, which has been stamped, embossed, inscribed, or otherwise placed, on any industry product and which indicates or suggests that such product is composed throughout of gold or gold alloy, or has a surface or surfaces on which there has been plated or deposited any gold or gold alloy. Included are the words "gold," "karat," "carat," or any abbreviation thereof, whether used alone or in conjunction with the word "filled," "plated," "overlay," "electroplated," "flashed," or "washed."

(d) The requirements of this section relating to markings and descriptions of industry products and parts thereof are subject to the tolerances applicable thereto under the National Stamping Act (15 U.S. Code, Sections 294, et seq.). Such requirements are also subject to exemptions applicable thereto under section 10 (a) of Commercial Standard CS 67-38, relating to articles made of karat gold, and under section 12(a) of Commercial Standard CS 47-34, relating to articles having mechanically-applied surface platings of gold alloy.

§ 202.9 Guarantees, warranties, etc.

(a) It is an unfair trade practice to represent, in advertising or otherwise, that any industry product is "guaranteed" unless the nature and extent of

such guarantee is conjunctively disclosed and without deceptively minimizing the terms and conditions relating to the obligations of the guarantor.

(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.

§ 202.10 Defamation of competitors or false disparagement of their products. The defamation of competitors by falsely imputing to them dishonorable conduct, inability to perform contracts, questionable credit standing, or by other false representations, or the false disparagement of competitors' products in any respect, or of their business methods, selling prices, values, credit terms, policies, or services, is an unfair trade practice.

§ 202.11

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 of 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 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 with the intent or effect of lessening competition.

§ 202.12 Prohibited discrimination.*

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

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

* 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."

ferences 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 the above proviso depends upon net savings in cost based on all facts relevant to the transactions under the terms of subparagraph (2) of this section. 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 fied 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 commis

sion, 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 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 furnishing 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: See subsection (b) of section 2 of the Clayton Act, as amended, which is set forth in the note concluding paragraph (a) of this section.

(e) 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 (e) 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 establish 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.

§ 202.13

Prohibited sales below cost.

(a) The practice of selling industry products 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 resorted to and pursued with the wrongful intent or purpose referred to

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 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 (a) of seasonal goods near the conclusion of the season; (b) of perishable goods in respect to which deterioration is imminent; (c) of obsolescent goods; (d) made under judicial process; or (e) made in bona fide 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 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.

§ 202.14 Prohibited forms of trade restraints (unlawful price fixing, etc.)3

It is an unfair trade practice for any member of the industry, either directly

5 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

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.

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.

AUTHORITY: The provisions of this Part 205 issued under secs. 6, 5, 38 Stat. 721, 719; 15 U.S.C. 46, 45.

SOURCE: The provisions of this Part 205 appear at 17 F.R. 416, Jan. 15, 1952, unless otherwise noted.

§ 205.1

GROUP I

Misrepresentation (general).

It is an unfair trade practice to make or publish, or cause to be made or published, directly or indirectly, any false, misleading, or deceptive statement or representation, by way of advertisement or otherwise, with respect to the grade, quality, freedom from defects or imperfections, quantity, use, size, material content, thread count, origin, shrinkage properties, proof against or resistance to wrinkling, creasing or crushing, colorfastness, washability, resistance to or immunity from moth, fire or flame damage, production, manufacture, or distribution of any upholstery or drapery fabrics, or to misrepresent any upholstery or drapery fabric in any other material respect.

§ 205.2 Misbranding.

The labeling, marking, or branding of upholstery and drapery fabrics in any manner which is false, misleading, or deceptive in respect to the grade, quality, freedom from defects or imperfections, quantity, use, size, material content, thread count, origin, shrinkage, properties, proof against or resistance to wrinkling, creasing or crushing, colorfastness, washability, resistance to or immunity from moth, fire or flame damage, production, manufacture, or distribution of such products, or in any other material respect is, an unfair trade practice.

§ 205.3 False invoicing.

Withholding from or inserting in invoices any statement 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, with the capacity and tendency or effect of thereby misleading or deceiving purchasers, prospective purchasers. or the consuming public, is an unfair trade practice.

§ 205.4 Deception as to origin.

With respect to any upholstery and drapery fabrics of the following types:

Fabrics which have been woven or fabricated in a foreign country and imported in the grey or other unfinished state and dyed or finished in the United States; and fabrics which have been imported in the finished state and dyed, redyed, or refinished in the United States; it is an unfair trade practice:

(a) To offer for sale, sell, or distribute any such fabrics under marks, stamps, brands, labels, or representations which have the capacity and tendency or effect of misleading or deceiving purchasers, prospective purchasers, or the consuming public into the belief (1) that such fabrics were woven or fabricated in the United States, when such is not the fact; or (2) that they were dyed, finished, redyed, or refinished elsewhere than in the United States, when such is not true;

or

(b) To offer for sale, sell, or distribute any such fabrics without the same being marked, stamped, branded, or labeled so as to indicate clearly and nondeceptively (1) the country of origin of the fabrics, and (2) that such fabrics were woven or fabricated in said country and were dyed or finished or redyed or refinished in the United States, as the case may be, where the failure, refusal, or omission to so mark, stamp, brand, or label such fabrics has the capacity and tendency or effect of thereby promoting, abetting, or effectuating the marketing of such products under conditions which are misleading or deceptive to purchasers, prospective purchasers, or the consuming public.

NOTE: Nothing in this section shall be construed as relieving any member of the industry or other party of the necessity of complying with requirements of the customs laws or regulations, or other applicable provisions of law or regulations, relating to the marking of imported articles.

§ 205.5 Identification and disclosure of fiber or material content.

(a) In the sale, offering for sale, or distribution of upholstery and drapery fabrics, it is an unfair trade practice to misrepresent or deceptively conceal the identity of the fiber or material content of any such product.

(b) All upholstery or drapery fabrics which are composed wholly or in part of rayon, acetate, silk, or linen shall be identified as to their fiber content in accordance with the requirements of the trade practice rules heretofore promulgated by the Commission for the rayon and acetate textile industry, the silk in