used only for a short period of time, is not a regular price. Consequently, use of any price or amount, other than the advertiser's own bona fide regular price, in connection with a "free" film representation is deceptive. (c) "Free" film offers are understood by consumers to mean that the price charged by the advertiser is for processing alone and has not been raised to include any payment for the film. In other words, they understand that the film, in fact, is a gift to the consumer given by the advertiser in return for the processing business he receives. In such circumstances, if any portion of the represented price charged for processing includes any payment for the film to the processor, the "free" film offer is deceptive and consumers are misled. (d) Where a processor has not established a regular price for processing service by itself, he has no basis, except in the case of introductory offers, upon which to make a "free" film representation. Likewise, a processor may not justify "free" film offers, whether advertised with or without qualification, on the ground that his price for processing and film is equal to or less than the price charged by local developers for processing alone, in a given trade area. Only the processor's own regular processing price may be used as a basis for the "free" film representation. (e) Continuous free film offers or the repetition of such offers with great frequency should be avoided. Continuous or frequent offers of free film made in connection with the sale of processing service are false and misleading since the processor's price for his service alone will, by lapse of time, become his regular price for processing service and film in combination. The film, in such circumstances, would therefore no longer be "free". (f) Introductory (temporary) offers of "free" film should not be advertised where processors do not, in good faith, expect to discontinue the offer after a limited time and commence selling processing service separately at the same price at which the offer of such service, together with the "free" film, was made. (g) The guide does not preclude the use of nondeceptive "combination" offers in which film and processing are offered for sale as a single unit at a single stated price, and where no representation is made that the price is to be paid for one item and the other is "free". Similarly, film processors are not precluded from setting a price for processing which also includes furnishing the purchaser with a replacement roll of film at one inclusive price-again, where no representation is made that the latter is "free". NOTE: On December 1, 1953, the Commission approved a trade practice rule on use of the word "Free". The provisions of the guide set forth above are advisory in nature and are not to be construed as replacing or modifying any of the provisions of the aforementioned trade practice rule. (38 Stat. 717, as amended; 15 U.S.C. 41-58) [33 F.R. 8336, June 5, 1968] PART 244-GUIDES FOR THE GREETING CARD INDUSTRY RELATING TO DISCRIMINATORY PRACTICES 244.1 Price discriminations in general. 244.2 Promotional assistance. AUTHORITY: The provisions of this Part 244 issued under secs. 5, 6, 38 Stat. 719, as amended, 721; 15 U.S.C. 45, 46: 49 Stat. 1526; 15 U.S.C. 13, as amended. SOURCE: The provisions of this Part 244 appear at 33 F.R. 16634, Nov. 15, 1968, unless otherwise noted. § 244.0 Definitions. For purposes of this part the following definitions will apply: (a) "Greeting card" means any commercial form of card, sheet, or folder which conveys a greeting or similar type of message by means of printed reading matter or pictorial matter. The term includes "chromos" which contain pictures but no words, and also, cards which contain words but no pictures. (b) "Publisher" means any person, firm, partnership, corporation, or any other organization which has greeting cards printed or packaged, whether in its own plant or other plant, for sale exclusively by it. It does not include the printer or packager unless he acts for his own account. (c) "Distributor" means any person, firm, partnership, corporation, or any other organization that purchases greeting cards for resale to parties other than the ultimate consumer. This includes wholesalers, jobbers, and all other intermediaries other than retailers. (d) "Supplier" means any greeting card publisher or distributor. (e) "Retailer" means any seller of greeting cards to the ultimate consumer, such as card shops, drug stores, discount houses, department stores, etc. Title 16 Chapter I (f) "Competing customers" means, for purposes of § 244.2 entitled "Promotional Assistance", all businesses that compete in the resale of the supplier's greeting cards at the same functional level of distribution regardless of whether they purchase direct from the supplier or through some intermediary (e.g., direct buying retailers and retailers that purchase through wholesalers and compete with the direct buying retailers). (g) "Commerce"-this has not been precisely defined in the statute. In general, if there is any part of a business which is not wholly within one State (for example, sales or deliveries of products, their subsequent distribution or purchase, or delivery of supplies or raw materials), the business may be subject to section 2 of the amended Clayton Act and/or section 5 of the Federal Trade Commission Act. Sales in the District of Columbia are also covered by the Acts. (h) "Promotional assistance"1 means any payment, allowance, service, or facility provided by a supplier whether direct to a customer or to a third party for the benefit of a customer in connection with the processing, handling, sale, or offering for sale the supplier's product, including but not limited to: (1) Any kind of advertising; (2) Window and counter displays; (3) Servicing of greeting card cabinets or racks; (4) Greeting card cabinets, or a discount thereon; (5) Rebates or allowances for soiled, discontinued or leftover cards; (6) Push money; (7) Contribution to a customer's anniversary or any other sale. equal terms" (i) "Proportionally means that the promotional assistance is proportionalized on some basis which is fair to all competing customers. No single way to proportionalize is prescribed by law and any method that treats competing customers on proportionally equal terms may be used. (j) "Cost justification" is an affirmative defense which may be undertaken by a supplier charged with price discrimination, by establishing that his price differential was based solely on differences in the cost of manufacture, sale or delivery resulting from the differing 1 This phrase incorporates any and all services and facilities covered by subsections (d) and (e) of section 2 of the amended Clayton Act, including those which technically may not be promotional in nature. methods or quantities in which his products are sold or delivered. This defense depends upon savings in cost based on all the facts relevant to the transactions. It is a technical defense and some items, such as savings in brokerage, may not be included in determining savings in cost. (This defense is not available to a supplier charged with discrimination in the furnishing of promotional assistance.) (k) "Meeting competition in good faith" is an affirmative defense which supplier may be undertaken by a charged with a violation of subsection 2 (a), (d), or (e) of the amended Clayton Act who can defend his actions by establishing that his lower price or granting of disproportionate promotional assistance was made in good faith to meet an equally low price or greater promotional assistance paid for or furnished by a competitor. This defense, however, is subject to important limitations. For instance, it is insufficient to defend a charge of violating subsection (a), (d), or (e) of section 2 of the amended Clayton Act solely on the basis that competition in a particular industry is very keen, requiring that special prices or allowances be given to some customers if a seller is "to be competitive". § 244.1 Price discriminations in general. NOTE: This section is not applicable to greeting cards purchased by the U.S. Government, State and local government entities or by schools, colleges, universities, public libraries, hospitals, churches, and charitable institutions not operating for profit, as supplies for their own use. Also, this section is not to be construed as preventing 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, obsolescence of seasonal goods, distress sales under court process or sales in good faith in discontinuance of business in the goods concerned. (b) The following are examples of practices involving price differentials to be avoided in commerce, when involving goods of like grade and quality, where the effect thereof may have the reasonable probability of adversely affecting competition and the seller is unable to establish either the "cost justification" or "meeting competition in good faith" defense: (1) A supplier sells to retailers at 50 percent off list but grants an extra 5 percent discount to chain store customers. It is immaterial that such 5 percent discount is given under the guise of or labeled as a promotional allowance. (2) A supplier sells direct to retailers at 50 percent off list and at the same time, sells to a retail buying group allowing the latter an additional 5 percent discount. (3) A supplier grants discounts of 2 percent on first $1,000 of purchases, 4 percent on the next $1,000 of purchases, and 6 percent on all purchases thereafter during a specified period of time. (4) A supplier grants a 5 percent rebate on the increased amount of greeting cards purchased over purchases in the preceding year. (5) A supplier pays freight on shipments to one or more customers but does not pay such freight for all customers, thereby effecting a difference in price between customers. (6) A supplier invoices goods to all 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. NOTE 1: As previously indicated, the foregoing are examples of practices involving price differentials to be avoided in commerce, when involving goods of like grade and quality, where the effect thereof may have the reasonable probability of adversely affecting competition and when not subject to the other exemptions, exclusions, or defenses set forth in this section. NOTE 2: While this section concerns violations of the Clayton Act, as amended, pertaining to price discriminations granted by publishers and distributors it should not be overlooked that section 2(f) of such Act makes it unlawful for any person engaged in commerce, in the course of such commerce. knowingly to induce or receive a discrimination in price prohibited by the Act. [Guide 1] Promotional assistance. § 244.2 greetings cards, providing promotional assistance in the course of commerce to competing customers, should do so under a plan which takes into account the following: (1) The promotional assistance must be made available on proportionally equal terms to all competing customers. (2) The competing customers must be made aware that the promotional assistance is available. It is not absolutely necessary that the offer be in writing for it may be made in any manner the supplier chooses including letter, telegram, conspicuous notice on invoice, by salesmen, etc. However, if the supplier wants to be able to show later that the offer was made to a certain customer, he is in a better position to do so if the offer was made in writing. (3) The supplier must not adopt a plan which is of use to only one customer or to only one favorite class of customers. The plan must be either realistically available to all competing customers in a practical business sense, or reasonable alternatives must be made available on proportionally equal terms. (4) The supplier must take reasonable precautions to see that the customers receiving promotional assistance are performing what is required of them under the plan, and that he is not paying any amount in excess of that actually used by the customers. (b) The following are examples of practices involving discriminations in the furnishing of promotional assistance to be avoided in commerce when involving products of like grade and quality and when the seller is unable to establish a defense of "meeting competition in good faith." (1) A supplier grants allowances only for radio, television, and newspaper advertising when he has some competing customers, such as small card shops, which are unable to advertise in these media, even with the promotional assistance offered. (In the above circumstances, and in order to satisfy legal requirements, the supplier must make usable and suitable alternatives available on proportionally equal terms to all other customers competing in the distribution of the supplier's greeting cards, such as, but not limited to, advertising in the neighborhood paper or buying guide, in-store advertising, envelope stuffers, handbills, etc.) (2) A supplier grants as a service to department stores or other customers a rebate of 50 percent on all Christmas cards purchased from the supplier and left over after Christmas, but does not make the offer to all of its customers competing with those to whom this service is accorded.2 (3) A supplier furnishes greeting card cabinets without cost or with a special discount to one or more customers, but does not make the same offer available on proportionally equal terms to all other competing customers, or in the event he does make such offer, he does not offer usable and suitable alternatives of equivalent measurable cost to those competing customers to whom cabinets are not usable and suitable. (4) A supplier accords to one or more customers the privilege of returning for credit, refund, or exchange, any or all of the greeting cards purchased from the supplier but fails to offer the same privilege to all other customers competing in the distribution of the supplier's greeting cards. (In the above circumstances, the supplier need not offer alternatives to returns for credit, refund, or exchange because they would appear to be usable by all customers in a practical business sense.) (5) A supplier furnishes promotional assistance based on increased amounts of purchases, such as 2 percent cooperative advertising allowance on yearly purchases up to $1,000, and 4 percent cooperative advertising allowance on purchases over $1,000. (Generally, using as a basis for promotional assistance a percentage of dollar volume or quantity of goods purchased during a specified period of time will insure that the promotional assistance is furnished on proportionally equal terms; Provided, however, That when promotional assistance is furnished on this basis, the percentage remains constant regardless of the amount of purchases.) NOTE 1: As previously indicated, the foregoing are examples of practices involving discriminations in the furnishing of promotional assistance to be avoided in commerce when involving products of like grade and quality and when the seller is unable to establish a defense of "meeting competition in good faith." NOTE 2: While this section concerns violations of the Clayton Act, as amended, pertaining to discriminations in the furnish 2 A rebate on leftover greeting cards may, under some circumstances, be cognizable under § 244.1, as a price discrimination. (b) The term "watchcase" or "case" means any metal case, covering, or housing of any quality or description for a watch as defined above and shall include the back, center, lugs, bezel, pendant, crown, bow, cap, and other parts thereof, including a watch band which has been permanently affixed thereto; and unless otherwise stated, either term as used in this part applies to the case whether marketed separately or together with the movement or works. (c) The term "accessories" means products, other than watch bands, which are affixed to and sold in combination with watchcases or watches, such as, for example, bracelets, pins, pendants, brooches, or ornaments. (NOTE: Metallic watch bands of the detachable type are subject to the provisions of the Trade Practice Rules for the Metallic Watch Band Industry, promulgated June 30, 1962, and amended June 16, 1964.) (d) The term "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 for the purpose of disclosing its metallic composition or any other material information. (e) The term "plate" or "plated" means that a sheet or shell of metal has been applied by soldering, brazing, welding, or other mechanical means to the outer surfaces of foundation metal stock. (f) The term "electroplate" or "electroplated" means that a coating of metal has been applied by the electrolytic method to the outer surfaces of foundation metal stock. (g) The term "industry product” means a watch, watchcase, accessory or a part thereof. (h) The term "industry member” means a person, firm, corporation, or organization engaged in the importation, manufacture, sale, or distribution of any industry product. [Guide 1] size, construction, novelty, composition, accuracy, dependability, imperviousness, repairability, conformance to standards, or methods of manufacture, of industry products; or (b) With respect to the country of origin of industry products or parts thereof; or (c) In any other material respect. [Guide 2] § 245.3 Misrepresentation of metallic composition of watchcases and certain watch bands. Industry members should not directly or indirectly, in advertising, marking, labeling, in a brand or trade name, or otherwise, misrepresent the matallic composition of a watchcase. With respect to cases having an exposed surface or surfaces which are, or have the appearance of being, metal, the metallic composition of the cases should be clearly and conspicuously disclosed in accordance with the methods and terminology set forth below: (a) Exclusions. In determining the metallic composition of watchcases, parts which are necessarily required to be of steel or some other base metal may be excluded, namely, the springs, hinge pins for jointed cases, spring pins for straps or bands, separate inside movement holding rings, and crown cores. (b) Gold. Watchcases which are not composed entirely of fine (24 karat)1 gold should not be marked with the unqualified word "gold" or an abbreviation thereof. (c) Gold alloy. Watchcases composed entirely of an alloy of gold of not less than 10 karat fineness1 should be marked as "gold" or by an abbreviation thereof, and such word or abbreviation should be immediately preceded with a correct designation of the karat fineness of the alloy, for example, "10 Karat Gold," "14 Kt Gold," "10 Kt." |