ices or facilities, as reflected in §§ 247.7 and 247.8.

(b) The following are examples of inducing or receiving discriminations in price, advertising or promotional allowances, or services or facilities, to be considered as subject to this section when the requisites of an improper discrimination on the part of the seller as reflected in §§ 247.7 and 247.8 are present and the party receiving the discriminations knows or has reason to know that the discriminations are illegal.

Example 1. An industry member purchases handbags purportedly for resale to retailers, and is charged a lower price than the seller charges other customers for handbags which they resell at retail; but the member then transfers such handbags to another part of its business where they are resold at retail, thereby receiving a discrimination in price which is covered in § 247.7.

Example 2. An industry member induces suppliers to contribute sums of money to defray some or all of the costs of advertising sponsored by such member and designed to promote the sale of such suppliers' handbags in its place of business, when the industry member knows or should know that allowances for such purpose are not made available on proportionally equal terms by the same suppliers to other customers competing with the favored member, thereby receiving a discrimination in promotional allowances subject to the provisions reflected in § 247.8.

Sec.

248.15 Inducing or receiving an illegal discrimination in price, advertising or promotional allowances, or services or facilities.

AUTHORITY: The provisions of this Part 248 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 248 appear at 33 F.R. 11987, Aug. 23, 1968, unless otherwise noted.

§ 248.0 Definitions.

As used in this part the terms "industry products," "industry member," "beauty salon,” “beauty school," "beauty clinic," "cosmetology," "hairdressing," "barber shop,” and “barber school” shall have the following meanings, respectively:

(a) Industry products. Items used by or marketed through barber shops, barber schools, beauty parlors, beauty salons, beauty schools and beauty clinics. (Such products embrace a wide range of beauty and barber preparations; also the many articles or items of equipment, furnishings and supplies for such aforementioned establishments.)

(b) Industry member. Any person, firm, corporation, organization, barber shop, beauty salon, beauty school, beauty clinic or similar establishment engaged in the manufacture, distribution, or sale (including utilization in connection with services) of industry products.

(c) Beauty salon. An establishment providing cosmetology and hairdressing services to the public.

(d) Beauty school. An institution established to render instruction in cosmetology and hairdressing.

(e) Beauty clinic. The segment of a beauty school furnishing the students with practical experience in hairdressing and cosmetology.

(f) Cosmetology. Art or practice of treating, protecting, cleaning or beautifying the skin, hair or nails of human beings, and the art or practice of treating, protecting or beautifying synthetic hair, wigs, or hair pieces to be worn by human beings.

(g) Hairdressing. Art or practice of treating, grooming, protecting, cleaning, beautifying or styling of hair of human beings.

(h) Barber shop. An establishment which provides tonsorial services.

(1) Barber school. An institution established to render instruction in the art of tonsorial services.

§ 248.1 Misrepresentation in general. An industry member should not use, or cause or promote the use of, any statement, representation, guarantee,1 testimonial, or endorsement, by way of advertising (through newspapers, magazines, circulars, booklets, or by radio, television or any other medium), oral representation, or otherwise, which has the capacity and tendency or effect of misleading or deceiving purchasers, prospective purchasers, or the consuming public including customers receiving cosmetology, hairdressing, or tonsorial services

(a) With respect to efficacy, permanency of the effects, medicinal or curative properties, grade, quality, quantity, substance, character, origin, size, preparation, manufacture, or distribution of any product of the industry; or

(b) Concerning the purported approval or endorsement of such product by State, Federal, medical or other authority, or

(c) In any other material respect.

NOTE: Among the provisions of this section is "false advertisement," as defined in section 15 of the Federal Trade Commission Act, of any "cosmetic" as such term is defined in the same section. Furthermore, nothing in this Part 248 is to be construed as relieving anyone of the necessity of complying with the cosmetic labeling requirements of the "Federal Food, Drug and Cosmetic Act" and the general regulations thereunder. [Guide 1]

§ 248.2 Misrepresentation as to character of business.

An industry member should not misrepresent, directly, or indirectly, through the use of any word or term in his corporate or trade name, in his advertising, or otherwise:

(a) That he is a producer, manufacturer, wholesaler, distributor, importer, or retailer of industry products; or

(b) The character, including the nature, purpose or function, of his business or the type of services he offers.

Example: An industry member advertises his place of business as a beauty salon when in fact it is a clinic operated by a beauty school, thereby deceiving the public as to the true character of his establishment. In

1 The Commission has adopted Guides Against Deceptive Advertising of Guarantees. See 16 CFR Part 239 for the Guides Against Deceptive Advertising of Guarantees for additional guidance with respect to guarantee and warranty representations.

order to avoid such deception the industry member should clearly and conspicuously disclose that his establishment is a beauty school.

[Guide 2]

§ 248.3 Deceptive plaques and certifi

cates.

In the course of or in connection with the distribution, promotion, or sale (including utilization in connection with services) of any industry product, an industry member should not display or place in the hands of others any plaque, emblem, seal, insignia, testimonial, or certificate which is false, misleading, or deceptive as to an industry member's professional proficiency or competence or as to his membership in any guild or industry association.

Example 1. A distributor of industry products awards a certificate to a beauty salon owner indicating that the recipient has attained a high degree of professional skill through some unusual or extended training, when in fact the award was not granted on the basis of professional competency but was given merely as an inducement to buy the products of such distributor.

Example 2. An industry member displays in his salon a seal which indicates he is a member of a guild when in fact he is not such a member.

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 or 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 16 CFR Part 233 for the Guides Against Deceptive Pricing for additional guidance with respect to price savings representations.

mark, or other trade designation, which has the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers as to the character, name, nature, or origin of any product of the industry, or of any material used therein, or which is false or misleading in any other material respect. (See also § 248.2.) [Guide 5]

§ 248.6 False invoicing.

An industry member should not withhold from, or insert 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 in any material respect.

[Guide 6]

§ 248.7 Defamation of competitors or false disparagement of their prod

ucts.

An industry member should not engage in (a) the defamation of competitors by falsely imputing to them dishonorable conduct, inability to perform contracts, questionable credit standing, or by other false representations, or (b) the false disparagement of the quality, grade, origin, use, design, performance, properties, manufacture, or distribution of the products of competitors or of their business methods, selling prices, values, credit terms, policies or services. [Guide 71

§ 248.8 Push money.

An industry member should not pay or contract to pay anything of value to a salesperson employed by a customer of the industry member, as compensation for, or as an inducement to obtain, special or greater effort or service on the part of the salesperson in promoting the resale, including use in connection with services, of products supplied by the industry member to the customer

(a) When the agreement or understanding under which the payment or payments are made or are to be made is without the knowledge and consent of the salesperson's employer; or

(b) When the terms and conditions of the agreement or understanding are such

that any benefit to the salesperson or customer is dependent on lottery; or

(c) When any provision of the agreement or understanding requires or contemplates practices or a course of conduct unduly and intentionally hampering sales of products of competitors of an industry member; or

(d) When, because of the terms and conditions of the understanding or agreement, including its duration, or the attendant circumstances, the effect may be to substantially lessen competition or tend to create a monopoly; or

(e) When similar payments are not accorded to salespersons of competing customers on proportionally equal terms in compliance with sections 2 (d) and (e) of the Clayton Act. (See § 248.14.)

NOTE: Payments made by an industry member to a salesperson of a customer under any agreement or understanding that all or any part of such payments is to be transferred by the salesperson to the customer, or is to result in a corresponding decrease in the salesperson's salary, are not to be considered within the purview of this § 248.8; but are to be considered as subject to the requirements and provisions of section 2(a) of the Clayton Act. (See § 248.13.)

[Guide 8]

§ 248.9 Enticing away employees of competitors.

An industry member should not willfully entice away employees or sales-contract personnel of competitors with the intent and effect of thereby hampering or injuring competitors in their business or destroying or substantially lessening competition; Provided, That nothing in this section shall be construed as precluding such persons from seeking more favorable employment, or as precluding employers from hiring or offering employment to employees of a competitor in good faith and not for the purpose of inflicting competitive injury. [Guide 9]

An industry member should not contract to sell or sell any industry product, or fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement, or understanding that the purchaser thereof shall not use or deal in the products of a competitor or competitors of such industry member, where the effect of such sale or contract for sale, or of such condition, agreement, or understanding, may be substantially to lessen competition or tend to create a monopoly in any line of commerce. [Guide 11]

§ 248.12 Commercial bribery.

An industry member shall not directly or indirectly 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 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. [Guide 12]

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 1: This section does not apply to purchases by the U.S. Government for its 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 2: Cost justification under the above proviso (2) depends upon net 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 specifiled 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 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.

NOTE 3: Subsection 2(b) 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."

NOTE 4: In complaint proceedings, justification of price differentials under subparagraphs (2), (4), and (5) of this paragraph (a) is a matter of affirmative defense to be established by the person or concern charged with price discrimination.

NOTE 5: Nothing in this section should be construed as precluding charging customers at a higher level of distribution lower prices than those charged to customers at a lower level of distribution provided that such price differential is not otherwise precluded by the aforegoing provisions of this section. For example, a seller may grant a lower price to wholesalers than to retailers to the extent that such wholesalers resell to retailers. If such wholesalers also sell at retail 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.

(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 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

(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. An industry member sells supplies to one or more of his beauty school customers at a lower price than he sells to one or more of his wholesale customers who resell to a competitor or competitors of the favored beauty school or schools. The probable injury to competition resulting from such practice may occur in the resale of the supplies with or without services being furnished in connection therewith.

NOTE 6: Example 1 should not be construed as admonishing an industry member not to grant to his beauty school customers a favorable price on supplies and/or equipment for use in preclinical training. However, the industry member should assure himself that the materials are to be used for the purpose intended and not diverted for use in a salon or clinic.

Example 2. 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 7: Section 248.13 is interpretive of sections 2(a) and 2(b) of the amended Clayton Act.

[Guide 13]

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

(a) An industry member engaged in commerce should not 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