3. Test for shock resistance. A watch should be tested for shock resistance in a room having a temperature between 18° and 25° C. which does not vary by more than 2° during the test. A wrist watch which does not have a permanently affixed band should be tested without the band or strap.

The test should be conducted as follows: a. One hour after the watch has been fully wound, its daily rate in each of the following three positions should be determined by observing it for 2 minutes in each position: (1) Position HB (horizontal with the dial facing down);

(2) Position VC (vertical with 3 o'clock to the watch's left);

(3) Position VB (vertical with 3 o'clock pointed downwards).

b. Shocks equal to that which the watch would receive if it were dropped from a height of 3 feet onto a horizontal hardwood surface should be applied as follows:

(1) The first shock should be applied to the middle of the watch at a position directly opposite the crown and in a direction which is parallel to the plane of the watch;

(2) The second shock should be applied to the crystal, and in a direction which is perpendicular to the plane of the watch.

c. Five minutes after the last shock, the daily rate of the watch in each of the three positions described in a. above should be determined by observing it for 2 minutes in each position. The differences in daily rate before and after the shock should be determined for each position. The residual effect of the shocks will be equal to the greatest of these differences.

A watch will be considered to have passed the foregoing test, if after application of the shocks, it does not stop; the residual effect does not exceed 60 seconds per day; and an examination of the watch does not disclose any physical damage which would affect its operation or appearance, e.g., hands bent or out of position, cracked crystal, or automatic or calendar devices inoperable or out of alignment.

4. Test for water resistance. A watch should be tested for water resistance by immersing it completely for at least 5 minutes in water under atmospheric pressure of 15 pounds per square inch and for at least another 5 minutes in water under an additional pressure of at least 35 pounds per square inch (total pressure of 50 pounds per square inch). If the watch does not admit any water or moisture it will be considered to have passed the test.

5. Test for antimagnetic qualities. A watch should be tested for its resistance to magnetism by placing it in a demagnetized condition in an electrical field of not less than 60 Gauss for at least 5 seconds in a vertical position and for at least 5 seconds in a horizontal position. If the daily rate of the watch has not been changed by more than 15 seconds as a result of the foregoing exposure, it shall be considered to have passed the test.

top grain leather, split leather, leather from the skin or hide of a certain animal, vinyl, plastic, brass or other metal, or any other material, when such is not the fact.

(2) Any representation that an industry product is made wholly or substantially of a particular material when such is not the fact.

(3) Any trade name, coined name, trademark or other word, term or representation which has the capacity and tendency to convey the impression that an industry product is made in whole or in part from the skin or hide of an animal, or that material in the product is leather, split leather, vinyl, plastic, or other material, when such is not the fact. Also any stamping, tag, label, or other device, in the shape of an animal silhouette, used in connection with an industry product having the appearance of leather but which is not wholly or substantially made from the skin or hide of such an animal should not be used.

(4) Any trade name, coined name, trademark or other word, term or representation that has the capacity and tendency to convey the impression that an industry product is made in whole or in part from the skin or hide of an animal which in fact is nonexistent.

(b) In some instances the failure to disclose certain pertinent facts concerning the material composition of an industry product may have the capacity and tendency to mislead or deceive purchasers. Generally such instances involve split leather which has the appearance of being top grain leather, or nonleather material which has the appearance of being leather, or leather which has been processed to simulate a different kind of leather. Included in, but not limited to, disclosures which should be made concerning material composition are the following:

(1) Disclosure should be made of the split leather content of an industry product or part thereof if the split leather is visible or if any representation is made as to composition thereof.

NOTE: Split leather should be considered as that leather which results from the splitting of hides or skins into two or more thicknesses, other than the grain or hair side.

(2) Disclosure should be made concerning the material composition of an industry product or part thereof which is made of a nonleather material having the appearance of leather. Such disclosure

may either state that the material is not leather or describe the general nature of the material in a manner that would clearly show that it is not leather. Thus, some examples of the manner in which such material may be described are:

Nonleather

Imitation Leather Simulated Leather

Vinyl

Vinyl Coated Fabric Plastic

or

NOTE: Nonleather materials which have the appearance of leather and which primarily contain ground, pulverized shredded leather, are subject to subparagraph (2) of this paragraph (b). Such materials may be described as "Nonleather", "Imitation Leather" or "Simulated Leather" or as "Ground Leather", "Pulverized Leather" or "Shredded Leather", as the case may be.

When nonleather material has been processed to simulate a particular kind of leather, such as alligator leather, any representation as may be made concerning the simulated appearance of the product should be immediately accompanied by the disclosure relating to the nonleather composition of the product. Some examples of the manner in which such material may be described are:

"Not Leather Simulated Alligator Grain” "Plastic with Imitation Alligator Grain”

(3) Disclosure should be made of the kind of leather of which an industry product or part thereof is made when the leather has been embossed, dyed, or otherwise processed to simulate the appearance of a different kind of leather. Thus, a product made wholly of top grain cowhide which has been processed to simulate alligator may be described

as:

"Top Grain Cowhide"

Any additional representation as may be made concerning the simulated appearance of the product should be immediately accompanied by the disclosure relating to the actual kind of leather in the product. An example of the manner in which such a product may be described is:

"Top Grain Cowhide Simulated Alligator Grain"

(4) Disclosure should be made that any material in an industry product is backed with another kind of material when the backing is not apparent upon casual inspection of the product, or when representations are made which in the absence of such disclosure would be de

ceptive as to composition of the product. Some examples of the manner in which such material may be represented are: "Top Grain Cowhide Backed with Split Cowhide"

"Split Cowhide Backed with Simulated Leather"

"Vinyl Backed with Other Material"

If the backing material is visible and is split leather, nonleather material having the appearance of leather, or leather processed to simulate a different kind of leather, disclosure should be made consistent with subparagraphs (1), (2), and (3) of this paragraph (b).

(5) Disclosure as to the composition of an industry product, composed of more than one kind of leather or composed of leather and nonleather material having the appearance of leather, should clearly indicate the part to which the representation is applicable. Thus, some examples of the manner in which products composed of top grain cowhide except for the handles have the appearance of leather may be described are:

"Top Grain Cowhide with Handle of
Simulated Leather"

"Top Grain Cowhide with Plastic Handle" "Top Grain Cowhide with Split Leather Handle"

[Guide 2]

§ 247.3

Form of disclosure as to material composition.

All disclosures under § 247.2 should appear in the form of a stamping on the product, or on a tag, label, or card attached thereto, and be affixed with such degree of permanence as to remain on or attached to the product until it is received by the consumer purchaser. All such disclosures on industry products shall also appear in all advertising of the products irrespective of the media used whenever statements, representations or depictions appear in such advertising which in the absence of such disclosures would have the capacity and tendency to create a false impression that the products, or parts thereof, are of a certain kind of composition. The disclosures affixed to products and made in advertising should be of such conspicuousness and clarity as to be noted by purchasers and prospective purchasers casually inspecting the products or casually reading, or listening to, such advertising. A disclosure made in connection with any such statement, representation or depiction should be in close conjunction therewith. [Guide 3]

§ 247.4 Misrepresentation as to aniline finish, graining, embossing, and processing.

A representation should not be made that an industry product has been:

(a) Colored, finished, or dyed with aniline dye when such is not the fact; or

(b) Dyed, embossed, grained, processed, finished, or stitched in a certain manner when such is not the fact. [Guide 4]

§ 247.5 Misuse of terms such as "Scuffproof", "Scratch proof", "Scuff Resistant”, and “Scratch Resistant”.

(a) An industry product should not be represented as “Scuffproof”, “Scratchproof", or as not subject to wear in any other respect, unless the outer surface of the product is immune to scuffing, scratches, or is in fact not subject to wear as represented.

(b) An industry product should not be represented as "Scuff Resistant", "Scratch Resistant", or as resistant to wear in any other respect, unless there surface of the product is in fact meaningfully and significantly resistant to scuffing, scratches, or to wear as represented. [Guide 5]

§ 247.6 Deceptive pricing.

Members of the industry should not represent directly 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 of instrumentality by which others engaged in the sale of industry products may make any such representation.

NOTE: The Commission's Guides Against Deceptive Pricing furnish additional guidance respecting price savings representations and are to be considered as supplementing this section. See Part 233 of this chapter for the Guides Against Deceptive Pricing.

[Guide 6]

§ 247.7 Discriminatory prices, rebates, discounts, etc.

NOTE: $247.7 is interpretive of sections 2 (a) and (b) of the amended Clayton Act.

(a) Industry members, engaged in commerce, in the course of such commerce, should not 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 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 the U.S. Government, State and local government entities, 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 section 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 industry products are sold or delivered to different purchasers;

NOTE: Cost justification under the above proviso (2) depends upon savings in cost based on all facts relevant to the transactions under the terms of such proviso. 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 discount can be cost justified if granted to a purchaser of the same quantity by multiple orders or for multiple deliveries.

same

(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 section 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 actual or imminent deterioration of perishable goods, 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 or a greater promotional allowance or other service or facility paid for or furnished by a competitor.

NOTE: "Meeting competition in good faith" is an affirmative defense which may be undertaken by a supplier charged with a violation of subsection (a), (d), or (e) of section 2 of the amended Clayton Act who can defend his actions by establishing that his lower price or granting of disproportionate promotional allowance or other service or facility was made in good faith to meet an equally low price of a competitor or a greater promotional allowance or other service or facility 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."

(b) The following are examples of price differential practices to be considered as subject to the provisions 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 the U.S. Government, State and local government entities, 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 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 provided that

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

(4) The price differential was 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); or

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

Example 2. An industry member sells handbags 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 3. An industry member sells handbags directly to a retailer at a lower price than he charges distributors whose retail customers compete with the favored retailer.

Example 4. An industry member pays freight on shipments to one customer and does not pay freight on shipments to another customer, or pays freight on shipments to a distributor's customer and does not pay such freight on shipments to other distributors' customers thereby effecting a difference in price between customers.

Example 5. Terms of 10 prox. are granted by an industry member to some customers on handbags purchased by them from the industry member. Another customer or customers are, nevertheless, allowed to take an additional discount when making payment to the industry member within the time prescribed or granted an extended period of time within which to avail themselves of the originally offered discount.

Example 6. An industry member invoices handbags 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: Functional discounts. Neither this section, nor section 2(a) of the Clayton Act, as amended, of which this section is interpretive, expressly permits or prohibits the granting of functional discounts. The propriety of such discounts is contingent, principally, on whether they may substantially lessen competition or tend to create a monopoly. Ordinarily, however, a seller may grant a lower price to wholesalers than to retailers to the extent that such wholesalers resell to retailers, without such effects as may substantially lessen competition or tend to create a monopoly. But if such wholesalers also sell at retail, in competition with other of the seller's retail customers, they may not properly be granted a price lower than the prices granted to competing retailers on that portion of the goods they sell at retail.

[Guide 7]

§ 247.8 Advertising or promotional allowances, or services or facilities.

(a) Advertising or promotional allowances. No member of the industry engaged in commerce should 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 industry products manufactured, sold, or offered for sale by such member, unless such payment or consideration is offered to and made available on proportionally equal terms to all other customers competing in the distribution of the seller's products of like grade and quality.

(b) Services or facilities. No member of the industry engaged in commerce should discriminate in favor of one purchaser against another purchaser or purchasers of industry products 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 products unless such services or facilities are offered to and made available on proportionally equal terms to all other customers competing in the distribution of the seller's products of like grade and quality.

NOTE 1: The "meeting competition in good faith" defense which is set forth in the note following paragraph (a)(5) of § 247.7 is also applicable to provisions of both (a) and (b) of this section.

NOTE 2: For further guidance in this area see Part 240 of this chapter for the Commission's Guides for Advertising Allowances and Other Merchandising Payments and Services. [Guide 8]

§ 247.9 Inducing or receiving illegal discrimination_in_price, advertising or promotional allowances, or services or facilities.

NOTE: § 247.9 is interpretive of section 2(f) of the amended Clayton Act and of section 5 of the Federal Trade Commission Act, as amended.

(a) Industry members engaged in commerce, in the course of such commerce, should not knowingly induce or receive a discrimination in price, advertising or promotional allowances, or serv