native plan seems to be required in the absence of proof that some customers cannot in fact make use of the proposed ads.

(c) The Commission advised that were the plan implemented as proposed, the Commission would have no objection to it. The Commission pointed out that were the plan implemented in a different manner, the promoter, the supplier, and the retailer might be acting in violation of section 2(d) or (e) of the Clayton Act, as amended, and/or section 5 of the Federal Trade Commission Act.

[34 F.R. 18353, Nov. 18, 1969]

§ 15.388 "Bonus" portable typewriter

offer.

(a) The Commission issued an advisory opinion relative to proposed advertising of "bonus" typewriters. The proposed advertisement would offer a portable typewriter as a "bonus" to any one accepted for enrollment in a correspondence course. Readers were invited "to write for information," but the prerequisites to the receipt of the "bonus" typewriter were not disclosed.

(b) The Commission advised that it * is of the view that the advertisement in the circumstances described would be misleading and deceptive and in possible violation of section 5 of the Federal Trade Commission Act in several respects. For one thing, the "bonus" offer is to be a continuing offer, which means that the regular price for the training course of $595 includes the typewriter; the typewriter would not, therefore, be a "bonus". Also, the proposed advertisement does not make clear that what is being sold for a fee is a training course in motel management and that the so-called "bonus" typewriter is offered only in connection with such

course.

(c) "Moreover, even were the typewriter to be given as a true bonus, as, for example, if a time-limited offer was made without a change in tuition, the proposed advertisement would still be deceptive and misleading because the terms and conditions for the receipt of the typewriter are not disclosed, including, it appears, an advance payment of $595 tuition for a motel training course.

(d) "Furthermore, the proposed advertisement is deceptive because, taken as a whole, it tends to convey the impression that service is not being sold but, rather, that a gift is to be given to spe

cially qualified persons who are willing to consider a career in motel management."

[34 F.R. 18353, Nov. 18, 1969]

§ 15.389

Disclosure of foreign assembly operations on ladies' blouses.

(a) The Commission advised that it would not be necessary to disclose the foreign country of origin where certain assembly operations are performed on ladies' blouses.

(b) Under the factual situation involved in the ruling, the synthetic fabric, buttons and thread will all be of domestic origin. The fabric will be cut in the United States and thereafter shipped to Trinidad where it will be assembled. Assembly operations in Trinidad will consist of sewing, pressing and trimming. Approximately 26.4 percent of total production costs will be of foreign origin, with the remaining 73.6 percent representing domestic costs.

(c) Concluding that a disclosure would not be required under section 4(b) (4) of the Textile Fiber Products Identification Act or section 5 of the FTC Act, the Commission said: "In the absence of any affirmative representation that the finished product is made entirely in the United States, the Commission has conIcluded that it will not be necessary to disclose the nature and extent of the foreign operations performed on the ladies' blouses."

[34 F.R. 18353, Nov. 18, 1969]

§ 15.390 Offer of incentive bonus to

customers.

(a) The Commission advised that to offer an incentive bonus to open credit account customers to encourage the payment of invoices within established terms and conditions of sale would not be objectionable.

(b) Most sales are made to open credit account purchasers of plumbing supplies and it was proposed to offer all such customers, as well as all new accounts, a bonus of 1 percent based on the aggregate total of monthly purchases to be given in the form of a credit certificate. This certificate will be honored by a selected local travel agency to apply toward vacation travel, and to be issued to those who adhere to established credit terms. Customers will present their certificates to the travel agency as partial or complete payment of their vacation expenses within 18 months from date of issuance.

(c) The Commission expressed the view that the proposed program, as stated, should be considered as a proposal to increase established credit terms and conditions of sale by 1 percent and as such the program probably would not be unlawful except to the extent, if any, the additional discount may effect unlawful price discriminations within the meaning of section 2(a), amended Clayton Act. However, because the program will be offered and made available to all open credit account customers and because the single qualifying requirement is adherence to established credit terms and conditions of sale it is not likely that implementation of proposed program would result in any adverse competitive effects.

(d) The Commission advised it would initiate no proceedings so long as the proposed program is implemented in the manner and for the purpose intended. [34 F.R. 19072, Dec. 1, 1969]

§ 15.391

Labeling of products composed of ground leather and fabric. (a) The Commission is of the opinion that a product which consists of reconstituted leather applied to a fabric base may not be described as "leather" without proper qualification and may not be described as "genuine milled leather."

(b) This product may not be described as "leather" unless the word is accompanied by a clear statement as to the product's true composition. The term "leather" used alone means top grain leather and the product referred to, composed of ground leather on a fabric backing, does not come within such a definition. The use of the unqualified term "leather" to describe such product would tend to deceive prospective customers and possibly violate section 5 of the Federal Trade Commission Act.

(c) The product may not be described as "genuine milled leather" with or without qualification. It is not clear what is intended by the word "milled" but the phrase as a whole suggests top grain leather in a manner which would make any attempted qualification a contradiction in terms. Use of this phrase would tend to mislead and deceive prospective customers as to the true composition of the product and might violate the Federal Trade Commission Act.

Accordingly, the product should be labeled to indicate its true composition or, optionally, that it is imitation or simulated leather or nonleather.

(e) Finally, the backing of the product appears to be a textile fiber product subject to the Textile Fiber Products Identification Act, and, accordingly, certain information must be disclosed as to the composition of such fabric.

(f) The product may be described appropriately in a number of ways, among which are the following:

Ground leather laminated to fabric (60 percent polyester, 40 percent rayon). Shredded leather laminated to fabric (60 percent polyester, 40 percent rayon). Pulverized leather laminated to fabric (60 percent polyester, 40 percent rayon). Imitation leather laminated to fabric (60 percent polyester, 40 percent rayon). Simulated leather laminated to fabric (60 percent polyester, 40 percent rayon). Nonleather. Fabric backing 60 percent polyester, 40 percent rayon.

[34 F.R. 19072, Dec. 1, 1969]

§ 15.392 Disclosure of origin of partly foreign-made foundation garments. (a) The Commission expressed an opinion that it would not be necessary to disclose the name of the foreign country where certain finishing operations are performed on ladies' foundation garments.

(b) The fabric, which is of domestic origin, will be cut to shape in the United States and shipped to Mexico where it will be sewn and finished. The foreign labor costs of producing the finished garment will represent approximately 20 percent of total production costs.

(c) The Commission is of the opinion that it will not be necessary to disclose in the labeling the nature and extent of the foreign operations performed on the foundation garments, either under section 5 of the Federal Trade Commission Act or section 4(b) (4) of the Textile Fiber Products Identification Act. The Commission noted, however, that inquiry should be made of the Bureau of Customs as to any marking requirements under section 304 of the Tariff Act of 1930.

[34 F.R. 19072, Dec. 1, 1969] § 15.393

Request for reconsideration of Advisory Opinion 333 (§ 15.333) pertaining to wholesaler-manufacturer relationship; Freight saving as cost justification.

(a) The Commission was requested to reconsider the advice given in Advisory

Opinion Digest No. 333 (§ 15.333) concerning manufacturers' selling relationships with wholesalers. The Commission also considered the question of passing along freight savings to customers.

(b) After concluding that it would adhere to the advice given in the earlier Advisory Opinion the Commission noted that the issue of potential price discrimination between competing wholesalers, some receiving 40 percent and others 25 percent discounts off list prices, no longer existed since only one discount rate is now involved,

(c) Negative advice was given in connection with the following three factual situations because, in the Commission's opinion, applicable antitrust law prohibits suppliers from taking certain punitive action against wholesalers with whom they have been dealing:

(1) A manufacturer refuses to deal further with a wholesaler who has changed his method of doing business and has undertaken to franchise subjobbers whom he prohibits from buying directly from the manufacturer and requires that they purchase all the manufacturer's products through the wholesaler.

(2) A manufacturer discontinues sales to a wholesaler who ceases to maintain salesmen at all times who regularly call upon beauty salons and advise licensed professional hairdressers "on the safe and proper methods of applying the manufacturer's products and who keep sufficient supplies" on hand for current needs of their beauty salon customers.

(3) A manufacturer refuses to deal further with a wholesaler who, without the manufacturer's authorization, resells to independent subjobbers and other wholesalers.

(d) With respect to the problem of cost justification the Commission advised that applicable provisions of section 2(a) of the amended Clayton Act permit a supplier to pass along freight savings to customers but only to the extent of such savings and only if available to all customers competing in the resale of his products.

[34 F.R. 20333, Dec. 30, 1969]

§ 15.394 Approval for merger of privately owned tufting machinery and equipment manufacturers.

(a) The Federal Trade Commission granted clearance to privately owned manufacturers of carpet tufting machin

ery and related equipment to merge their operations into one corporation whose voting stock will be offered for sale to the general public.

(b) The merging companies manufacture machinery and related equipment used by textile mill operators in the production of rugs, carpets, and other textiles. Some of the companies have a common ownership and are competitors; another is not a competitor but manufactures machinery used by customers of the others. Some have about the same market shares in an industry of five manufacturers, about one-fifth of the market share of the dominant company, a substantial national conglomerate enterprise. One firm to be merged competes with ten others in its related industry.

(c) After having considered all available information the Commission concluded that the effect of the proposed merger is not likely to result in any lessening of competition nor the creation of a monopoly in the manufacturing of tufting machinery and equipment. The Commission is of the opinion that the beneficial competitive effects flowing from the amalgam of the privately owned enterprises into a publicly owned corporation will be to give greater competition to its giant rival.

[34 F.R. 20333, Dec. 30, 1969]

§ 15.395 Retailer price reporting plan.

(a) The Commission issued an advisory opinion governing a proposed price checking service designed to publicize various current retail prices for grocery store products. Underlying data would be obtained in part by direct observation of posted prices and in part by reference to information supplied by wholesalers and retailers. The service would be available, for a fee, to anyone interested.

(b) In the Commission's view, exchange of price data may lend itself to price fixing and may result in the elimination of price competition and the legality of the proposed course of action would depend on its implementation. [34 F.R. 20334, Dec. 30, 1969] § 15.396

Use of term "Peat Moss-Pifine and Sedge".

(a) The Commission rendered an advisory opinion concerning a proposal to describe peat with the following terminology:

Peat Moss Pifine and Sedge

(b) The product is composed of at least 75 percent peat by weight, with the remaining 25 percent comprised of such soil substances as are commonly intermixed with peat as found in its natural state. It is derived from three nonmoss substances; namely, Pifine (Paille Finne), or commonly referred to as maiden cane grass, cut grass, and saw grass, Pifine comprises the bulk of the plant residue present in the product.

(c) Three provisions of the Commission's Trade Practice Rules for the Peat Industry govern the use of the term "Peat Moss" in this particular situation. First, there is the definition of the word "peat," which is as follows:

"Peat". Any partly decomposed vegetable matter "which is accumulated under water or in a water-saturated environment through decomposition of mosses, sedges, reeds, tule, trees, or other plants."

(d) The second pertinent provision is Rule 2, which prohibits use of the word "Peat" to describe any product "which is not in fact composed predominantly of peat to the extent that at least 75 percent (by weight) of the product is composed of peat, with such other materials as may be present in the content, and constituting the remaining percent

age, being comprised of such soil substances as are customarily intermixed with peat as found in its natural state."

(e) Third, Rule 3 covers use of the terms "Moss Peat" and "Peat Moss", and has been codified under § 185.3 of this Title 16.

(f) On the basis of the foregoing facts, the Commission expressed the opinion that the proposed terminology complies with the requirements of Rule 3(b) of the Trade Practice Rules for the "Peat Industry". However, the opinion also noted that some of the art work used the words "Peat Moss" without qualification or without conspicuous qualification. Such a representation, the Commission said, would not be in compliance with Rule 3(b). Concluding its opinion, the Commission said: "It is necessary under the pertinent rule * * to dis

*

close the kinds of peat of which (the) product is composed i.e., Pifine and Sedge, and that such disclosure be of equal size and conspicuousness and be placed in immediate conjunction with the words 'Peat Moss' whenever they are used in labeling or advertising. If the proposed terminology is used in such manner, the Commission would interpose no objection thereto." [34 F.R. 20334, Dec. 30, 1969]

PART 16-INDUSTRY COMMITTEE UNDER TRADE PRACTICE RULES

§ 16.1 Industry committee under trade practice rules.

The industry may, at its option, form a trade practice committee, which shall be fairly representative of the industry, to cooperate with the Federal Trade Commission in the following respects:

(a) To assist in keeping the rules of the industry active by periodically bringing to the attention of industry members the provisions thereof;

(b) To publicize and disseminate among all members of the industry Commission stipulations, orders, and opinions or administrative interpretations relating to practices covered by the rules;

(c) To meet periodically with Commission personnel for the purpose of discussing the rules, the need for their revision, and the administration thereof, the committee's function in connection with such meetings being informative only, with decisions as to any action to

be taken being left solely in the hands of government officials. All such meetings shall be:

(1) Called and chairmanned by a fulltime Commission official; and

(2) Limited to a discussion of matters outlined in an agenda prepared by a fulltime Commission official.

Full and complete minutes of each such meeting shall be prepared and filed with the Commission.

(d) It is not the function of the committee to:

(1) Interpret the rules;

(2) Attempt to correct alleged rules violations;

(3) Make determinations or express opinions as to whether practices are violative of the rules;

(4) Receive or screen complaints of violations of the rules; or

(5) Perform any other act or acts within the authority of the Federal Trade Commission or any other governmental Agency or Department.

(e) All complaints of industry members and other parties respecting rule violations should be made directly to the Commission. In the event any complaint is received by the committee, or any information is brought to its attention indicating a probable violation of a rule, all relevant information with respect thereto shall be promptly transmitted by the committee to the Commission without the committee contacting the party or parties alleged to have violated the rule.

(f) Immediately after its formation the committee shall inform the Commission of the identity of the members thereof, the names and addresses of the companies or concerns represented by such members, and shall supply the Commission with information showing that the membership of the committee is fairly representative of the industry. Changes in composition of the committee shall be reported to the Commission as soon as they may occur.

(g) Full and complete minutes of all meetings of the committee, identifying the members in attendance and informative of the matters discussed and actions taken, shall be kept. The minutes of the meetings falling under paragraph (c) of this section shall be filed with the Commission, and the minutes of all other meetings shall be kept by the committee and be made available to the Commission on request.

(Sec. 6, 38 Stat. 721; 15 U. S. C. 46) [21 F. R. 1174. Feb. 21, 1956]

public in conducting its affairs in conformity with legal requirements. They provide the basis for voluntary and simultaneous abandonment of unlawful practices by members of industry. Failure to comply with the guides may result in corrective action by the Commission under applicable statutory provisions. Guides may relate to a practice common to many industries or to specific practices of a particular industry.

(b) Trade practice rules promulgated by the Commission are designed to foster and promote the maintenance of fair competitive conditions in the interest of protecting industry, trade, and the public. It is to this end, and to the exclusion of any act or practice which suppresses competition, restrains trade, fixes or controls price through combination or agreement, or which otherwise injures, destroys, or prevents competition, that the rules are to be applied.

[32 F.R. 15540, Nov. 8, 1967]

§ 17.2 Definition of "commerce."

As used in the sections of the rules on the subject of discrimination, the word "commerce" means "trade or commerce among the several States and with foreign nations, or between the District of Columbia or any Territory of the United States and any State, Territory, or foreign nation, or between any insular possessions or other places under the jurisdiction of the United States, or between any such possession or place and any State or Territory of the United States or the District of Columbia or any foreign nation, or within the District of Columbia or any Territory or any insular possession or other place under the jurisdiction of the United States."

§ 17.3

Definition of Group I rules.

The unfair trade practices embraced in the Group I rules herein are considered to be unfair methods of competition, unfair or deceptive acts or practices, or other illegal practices, prohibited under laws administered by the Federal Trade Commission; and appropriate proceedings in the public interest will be taken by the Commission to prevent the use, by any person, partnership, corporation, or other organization subject to its jurisdiction, of such unlawful practices in commerce.

§ 17.4 Definition of Group II rules.

Compliance with trade practice provisions in Group II rules is considered to be