§ 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

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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]

§ 248.10 Inducing breach of contract.

(a) An industry member should not knowingly induce or attempt to induce the breach of existing lawful contracts between competitors and their customers or between competitors and their suppliers, or interfere with or obstruct the performance of any such contractual duties or services, under any circumstance having the capacity and tendency or effect of substantially injuring or lessening competition.

(b) Nothing in this section is intended to imply that it is improper for an industry member to solicit the business of a customer of a competing industry member; nor is the section to be construed as in anywise authorizing any agreement, understanding, or planned common course of action by two or more industry members not to solicit business from, or to sell to, the customers of either of them, or customers of any other industry member.

[Guide 10]

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]

§ 248.13

Discriminatory prices, rebates, discounts, etc.

(a) An industry member engaged in commerce, should not in the course of such commerce, 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 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 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 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 made known to and is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities.

(b) An industry member engaged in commerce should not discriminate in favor of one purchaser against another purchaser or purchasers of a commodity bought for resale or distribution, 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 1: Subsection 2(b) of the Clayton Act, as amended, which is set forth in Note 3 in § 248.13 is applicable to this § 248.14.

(c) The following is an example of discrimination in furnishing advertising or promotional allowances or services or facilities to be considered as subject to the provisions of this section when involving goods of like grade and quality and when the industry member is engaged in commerce and the promotional allowance, or service, or facility, is paid or furnished in the course of such commerce.

Example. The furnishing by an industry member to a beauty salon of any promotional allowance, or service, or facility without making available on proportionally equal terms such assistance to all beauty salons and others who compete with the favored salon in the resale of the member's products with or without services.

NOTE 2: Proportionally equal terms means that the assistance is proportionalized on some basis which is fair to all who compete in the resale of the industry member's products. No single way to proportionalize is prescribed by law and any method that treats all who compete in the resale of the member's products on proportionally equal terms may be used.

NOTE 3: When an industry member furnishes any promotional allowance, service, or facility to any direct-buying salon he must also make such assistance available on proportionally equal terms to all salons and others who buy the member's products directly or through intermediaries and who compete with the direct-buying salon in the resale, with or without services, of the industry member's products at the same functional level of distribution. The industry member may make such assistance available directly to the competing salons and others who buy through intermediaries. He may also utilize his intermediaries to administer the promotional program, so long as he takes responsibility for seeing that the assistance is offered and otherwise made available to all salons and others who compete in the resale of the member's products with or without services.

NOTE 4: 248.14 is interpretive of sections 2(d) and 2(e) of the amended Clayton Act. [Guide 14]

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

(a) An industry member engaged in commerce, should not in the course of such commerce, knowingly induce or receive a discrimination in price, advertising or promotional allowances, or services or facilities, which is improper under the foregoing provisions of §§ 248.13 and 248.14.

(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 set forth in §§ 248.13 and 248.14 are present and the party receiving the discriminations knows or should know that the discriminations are illegal.

Example 1. An industry member purchases industry supplies purportedly for resale to beauty salons, and is charged a lower price than the seller charges other customers for industry supplies which they resell in beauty salons, with or without services; but the member who obtained the supplies at the lower price transfers them to a salon which he owns, and resells the supplies therein with or without services, thereby receiving a discrimination in price which is subject to the provisions of § 248.13.

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, with or without services, of the suppliers' products in the industry member's place of business, when the industry member knows or should know that the 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 of § 248.14.

NOTE: 248.15 is interpretive of section 2(f) of the amended Clayton Act and of section 5 of the Federal Trade Commission Act, as amended.

device frequently used to attract customers. Providing such merchandise or service with the purchase of some other article or service has often been found to be a useful and valuable marketing tool.

(2) Because the purchasing public continually searches for the best buy, and regards the offer of "Free" merchandise or service to be a special bargain, all such offers must be made with extreme care so as to avoid any possibility that consumers will be misled or deceived. Representative of the language frequently used in such offers are "Free", "Buy 1-Get 1 Free", "2-for-1 Sale", "50% off with purchase of Two", "1¢ Sale", etc. (Related representations that raise many of the same questions include

66

Cents-Off", "Half-Price Sale", "1⁄2 Off", etc. See the Commission's "Fair Packaging and Labeling Regulation Regarding 'Cents-Off' and Guides Against Deceptive Pricing.")

(b) Meaning of "Free". (1) The public understands that, except in the case of introductory offers in connection with the sale of a product or service (See paragraph (f) of this section), an offer of "Free" merchandise or service is based upon a regular price for the merchandise or service which must be purchased by consumers in order to avail themselves of that which is represented to be "Free". In other words, when the purchaser is told that an article is "Free" to him if another article is purchased, the word "Free" indicates that he is paying nothing for that article and no more than the regular price for the other. Thus, a purchaser has a right to believe that the merchant will not directly and immediately recover, in whole or in part, the cost of the free merchandise or service by marking up the price of the article which must be purchased, by the substitution of inferior merchandise or service, or otherwise.

(2) The term "regular" when used with the term "price", means the price, in the same quantity, quality and with the same service, at which the seller or advertiser of the product or service has openly and actively sold the product or service in the geographic market or trade area in which he is making a "Free" or similar offer in the most recent and regular course of business, for a reasonably substantial period of time, i.e., a 30-day period. For consumer products or services which fluctuate in price, the "regular" price shall be the lowest price at which any substantial sales were made

during the aforesaid 30-day period. Except in the case of introductory offers, if no substantial sales were made, in fact, at the "regular" price, a "Free" or similar offer would not be proper.

(c) Disclosure of conditions. When making "Free" or similar offers all the terms, conditions and obligations upon which receipt and retention of the "Free" item are contingent should be set forth clearly and conspicuously at the outset of the offer so as to leave no reasonable probability that the terms of the offer might be misunderstood. Stated differently, all of the terms, conditions and obligations should appear in close conjunction with the offer of "Free' merchandise or service. For example, disclosure of the terms of the offer set forth in a footnote of an advertisement to which reference is made by an asterisk or other symbol placed next to the offer, is not regarded as making disclosure at the outset. However, mere notice of the existence of a "Free" offer on the main display panel of a label or package is not precluded provided that (1) the notice does not constitute an offer or identify the item being offered "Free", (2) the notice informs the customer of the location, elsewhere on the package or label, where the disclosures required by this section may be found, (3) no purchase or other such material affirmative act is required in order to discover the terms and conditions of the offer, and (4) the notice and the offer are not otherwise deceptive.

(d) Supplier's responsibilities. Nothing in this section should be construed as authorizing or condoning the illegal setting or policing of retail prices by a supplier. However, if the supplier knows, or should know, that a "Free" offer he is promoting is not being passed on by a reseller, or otherwise is being used by a reseller as an instrumentality for deception, it is improper for the supplier to continue to offer the product as promoted to such reseller. He should take appropriate steps to bring an end to the deception, including the withdrawal of the "Free" offer.

(e) Resellers' participation in supplier's offers. Prior to advertising a "Free" promotion, a supplier should offer the product as promoted to all competing resellers as provided for in the Commission's "Guides for Advertising Allowances and Other Mercnandising Payments and Services." In advertising the “Free” pro