§ 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 modities.

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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: 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, facility 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

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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]

§ 154.27 Aiding or abetting use of unfair trade practices.

It is an unfair trade practice for any person, firm, or corporation to aid, abet, coerce, or induce another directly or indirectly, to use or promote the use of any unfair trade practice prohibited by this part. [Rule 27]

§ 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 the consent of the customers to such substitutions, or with the capacity and tendency or effect of misleading or deceiving the purchasing or consuming public, is an unfair trade practice.

It is an unfair trade practice for a member of the industry, directly or indirectly, to 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 contract for the processing of goods or products by such industry member or the maker of such gift or offer, or to influence such employers or principals to refrain from dealing with competitors.

§ 155.8 Procurement of competitors' confidential information by unfair means and wrongful use thereof. Obtaining information concerning the business of a competitor by bribery of an employee or agent of such competitor, by false or misleading statements, by the impersonation of one in authority, or by any other unfair means, and using the information so obtained in such a manner as to injure said competitor in his business or to suppress competition or unreasonably restrain trade, is an unfair trade practice.

§ 155.9 Inducing breach of contract.

Inducing or attempting to induce the breach of existing lawful contracts between competitors and their customers or their suppliers by any false or deceptive means whatsoever, or interfering with or obstructing the performance of any such contractual duties or services by any such means, with the purpose and effect of unduly hampering, injur

§ 155.12

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 to substantially lessen competition or tend to create a monopoly or to unreasonably restrain trade, is an unfair trade practice.

§ 155.13 Bogus independents.

It is an unfair trade practice to sell or offer to sell industry products through a pretended independent concern in such manner as to mislead or deceive customers or prospective customers into the erroneous belief that such concern is independent and in competition with that member of the industry owning or controlling such concern.

§ 155.14 Selling below cost.

The practice of selling industry products below the seller's cost, when pursued with wrongful intent of thereby injuring a competitor and where the effect of such practice is to unreasonably restrain trade, tend to create a monopoly, or substantially lessen competition, is an unfair trade practice.

This section is not to be construed as prohibiting all sales below cost, but only such selling below the seller's cost as is resorted to and pursued as a monopolistic practice with the wrongful intent referred to and coupled with the effect of unreasonably restraining trade, tending to create a monopoly, or substantially lessening competition.

The costs referred to in this section are actual costs of the respective seller and not some other figure or average costs in the industry determined by an industry cost survey or otherwise.

§ 155.15 Discrimination; prohibited discriminatory prices, or rebates, refunds, discounts, credits, etc., which effect unlawful price discrimination. (a) General. 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, allowance for alleged imperfect workmanship after material has been cut, or other form of price differential, where such rebate, refund, discount, credit, allowance for alleged imperfect workmanship, or other form of price differential, effects a discrimination in price between different purchasers of commodities 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;

(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 such commodities are to such purchasers sold or delivered;

(3) That nothing contained in this section shall prevent persons engaged in selling goods, wares, or merchandise in