ferent packers may find that different notification methods are most effective for them.

(a) The packer may enter into contracts with his wholesalers, distributors or other third parties which conform to the requirements of item 10, infra.

or

(b) The packer may place appropriate announcements on product containers inside thereof with conspicuous notice of such enclosure on the outside.

(c) The packer may publish notice of the availability and essential features of a promotional plan in a publication of general distribution in the trade.

Example 1: A packer has a plan for the retail promotion of his products in Philadelphia. Some of his retailing customers purchase directly, and he offers the plan to them. Some other Philadelphia retailers purchase his products through wholesalers. The packer may use the wholesalers to reach the retailing customers who buy through them, either by having the wholesalers notify those retailers in accordance with item 10 or by using the wholesalers' customer lists for direct notification by the packer.

Example 2: A packer has a plan for the retail promotion of his products in Kansas City. Some of his retailing customers purchase directly and he offers the plan to them. Others purchase his products through wholesalers. The packer may satisfy his notification obligations to them by undertaking, in good faith, one or more of the following measures:

(a) Placing on a shipping container or a product package in time to enable them to participate in the program a conspicuous notice of the availability and essential features of his proposals, identifying a specific source for further particulars and details. In lieu of identifying a source for further particulars, brochures describing the details of the offer may be included in the shipping containers. If it is impracticable to include the essential features of the proposal on or in the shipping container, the packer may substitute in the notice, as stated above, a summary of the types of promotions offered (e.g., allowances for advertising in newspapers, handbills, or envelope stuffers; allowances for radio or television advertising; short term display allowances, etc.) and a statement that such promotions are usable in a practical business sense by all retailers regardless of size.

(b) Including the materials within the product container, if a promotional plan simply consists of providing retailers with display materials.

(c) Advising customers from accurate and reasonably complete mailing lists.

(d) Placing an announcement of the availability and essential features of promotional programs, and identifying a specific source

for further particulars and details, at reasonable intervals in publications which have general and widespread distribution in the trade and which are recognized in the trade as means by which packers announce the availability of such programs.

Example 3: A packer has a wholesaler-oriented plan directed to wholesalers distributing his products to retailing customers. He should notify all the competing wholesalers distributing his products of the availability of this plan, but the packer is not required to notify retailing customers.

Example 4: A packer who sells on a direct basis to some retailers in an area, and to other retailers in the area through wholesalers, has a plan for the promotion of his products at the retail level. If the packer directly notifies not only all competing direct purchasing retailers but also all competing retailers purchasing through the wholesalers as to the availability, terms and conditions of the plan, the packer is not required to notify his wholesalers.

Example 5: A packer regularly engages in promotional programs and the competing customers include large direct purchasing retailers and smaller customers who purchase through wholesalers. The packer may encourage, but not coerce, the retailer purchasing through a wholesaler to designate a wholesaler as his agent for receiving notice of, collecting, and using promotional allowances for him. If a wholesaler or other intermediary by written agreement with a retailer is actually authorized to collect promotional payments from suppliers, the packer may assume that notice of and payment under a promotional plan to such wholesaler or intermediary constitutes notice and payment to the retailer.

(A packer should not rely on a written agreement authorizing an intermediary to receive notice of and/or payment under a promotional plan for a retailer if the packer knows, or should know, that the retailer was coerced into signing the agreement. In addition, a packer should assume that an intermediary is not authorized to receive notice of and/or payment under a promotional plan for a retailer unless there is a written authorization signed by such retailer.)

6. Availability to all competing customers. The plan should be such that all types of competing customers may participate. It should not be tailored to favor or discriminate against a particular customer or class of customers but should, in its terms, be usable in a practical business sense by all competing customers. This may require offering all such customers more than one way to participate in the plan or offering alternative terms and conditions to customers for whom the basic plan is not usable and suitable. The packer should not, either expressly or by the way the plan operates,

eliminate some competing customers, although he may offer alternative plans designed for different customer classes. If he offers alternative plans, all of the plans offered should provide the same proportionate equality and the packer should inform competing customers of the various alternative plans.

With respect to promotional plans offered to retailers, the packer should insure that his plans or alternatives do not bar any competing retailer customers from participation whether they purchase directly from him or through a wholesaler or other intermediary.

When a packer, in good faith, offers a basic plan, including alternatives, which is reasonably fair and nondiscriminatory and refrains from taking any steps which would prevent any customer, or class of customers, from participating in his program, he shall be deemed to have satisfied his obligation to make his plan functionally available to all customers, and the failure of any customer or customers to participate in the program shall not be deemed to place the packer in violation of the provisions of the Packers and Stockyards Act.

Example 1: A packer offers a plan of short term store displays' of varying sizes, including some which are suitable for each of his competing customers and at the same time are small enough so that each customer may make use of the promotion in a practical business sense. The plan also calls for uniform, reasonable certification of performance by the retailer. Because they are reluctant to process a reasonable amount of paperwork, some small retailers do not participate. This fact is not deemed to place a packer in violation of Item 6 and he is under no obligation to provide additional alternatives.

Example 2: A packer offers a plan for cooperative advertising on radio, television, or

'Allowances that have little or no relationship to cost or approximate cost of the service provided by the retailer may be considered to be in violation of section 202 of the Act, such as an allowance of $1 per case of goods purchased if the retailer furnishes a display or provides specific shelf space, or a promotional allowance of 10 percent of purchases during a specific period of time if the retailer places an ad of at least 3 column inches in a newspaper. In addition, a customer, subject to the Act, that induces such allowances may be proceded against under section 202 of the Act. Also, the purchase of display or shelf space, whether directly or by means of so-called allowances, may be considered an “unfair practice” in violation of section 202 of the Act.

in newspapers of general circulation.2 Because the purchases of some of his customers are too small, this offer is not "functionally available" to them. The packer should offer them alternative(s) on proportionally equal terms that are usable by them and suitable for their business.

7. Need to understand terms. In informing customers of the details of a plan, the packer should provide them sufficient information to give a clear understanding of the exact terms of the offer, including all alternatives, and the conditions upon which payment will be made or services furnished.

8. Checking customer's use of payments. The packer should take reasonable precautions to see that services he is paying for are furnished and also that he is not overpaying for them. Moreover, the customer should expend the allowance solely for the purpose for which it was given. If the packer knows or should know that what he pays or furnishes is not being properly used by some customers, the improper payments or services should be discontinued.

A packer who, in good faith, takes reasonable and prudent measures to verify the performance of his competing customers will be deemed to have satisfied his obligations under the Act. Also, a packer who, in good faith, concludes a promotional agreement with wholesalers or other intermediaries and who otherwise conforms to the standards of Item 10 shall be deemed to

2In order to avoid the tailoring of promotional programs that discriminate against particular customers or class of customers, the packer in offering to pay allowances for newspaper advertising should offer to pay the same percentage of the cost of newspaper advertising for all competing customers in a newspaper of the customer's choice, or at least in those newspapers that meet the requirements for second class mail privileges. Examples of promotional plans that may discriminate against small retailers are: (1) a plan that offers to pay 75 percent of the cost of advertising in daily newspapers, which are the regular advertising media of the packer's large or chain store customers, and only 50 percent of the cost of advertising in other newspapers that may be used by small retail customers; and (2) a plan that pays allowances for advertising in daily newspapers, which are the regular advertising media of the packer's large or chain store customers, but does not pay allowances for advertising in semi-weekly, weekly, or other newspapers that may be desirable to small retail customers, who are offered, as an alternative to advertising in daily newspapers, services such as envelope stuffers, handbills, window banners, etc. (See item 4.)

have satisfied this obligation. If a packer has taken such steps, the fact that a particular customer has retained an allowance in excess of the cost, or approximate cost if the actual cost is not known, of services performed by him shall not alone be deemed to place a packer in violation of the Act.

(When customers may have different but closely related costs in furnishing services that are difficult to determine, such as the cost for distributing coupons from a bulletin board or using a window banner, the packer may furnish to each customer the same payment if it has a reasonable relationship to the cost of providing the service or is not grossly in excess thereof.)

9. Competing customers. The packer is required to provide in his plan only for those customers who compete with each other in the resale of the packer's products of like grade and quality. Therefore a packer should make available to all competing wholesalers any plan providing promotional payments or services to wholesalers, and similarly should make available to all competing retailers any plan providing promotional payments or services to retailers. With these requirements met, a packer can limit the area of his promotion. However, this section is not intended to deal with the question of a packer's liability for use of an area promotion where the effect may be to injure the packer's competition.

10. Wholesaler or third party performance of packer's obligations. (a) A packer may, in good faith, enter into written agreements with intermediaries, such as wholesalers, distributors or other third parties, including promoters of tripartite promotional plans, which provide that such intermediaries will perform all or part of the packer's obligations under this part. However, the interposition of intermediaries between the packer and his customers does not relieve the packer of his ultimate responsibility of compliance with the provisions of the Packers and Stockyards Act. The packer, in order to demonstrate his good faith effort to discharge his obligations under this part, should include in any such agreement provisions that the intermediary will:

(1) Give notice to the packer's customers in conformity with the standards set forth in items 5 and 7; supra.

(2) Check customer performance in conformity with the standards set forth in item 8; supra.

(3) Implement the plan in a manner which will insure its functional availability to the packer's customers in conformity with the standards set forth in item 6, supra. (This must be done whether the plan is one devised by the packer himself or by the intermediary for use by the packer's customers.); and

(4) Provide certification in writing and at reasonable intervals that the packer's cus

tomers have been and are being treated in conformity with the agreement.

(b) A packer who negotiates such agreements with his wholesalers, distributors or third party promoters will be considered by the Administration to have justified his "good faith" obligations under this section only if he accompanies such agreements with the following supplementary measures: At regular intervals the packer takes affirmative steps to verify that his customers are receiving the proportionally equal treatment to which they are entitled by making spot checks designed to reach a representative cross section of his customers. Whenever such spot checks indicate that the agreements are not being implemented in such a way that his customers are receiving such proportionally equal treatment, the packer takes immediate steps to expand or to supplement such agreements in a manner reasonably designed to eliminate the repetition or continuation of any such discriminations in the future.

(c) Intermediaries, subject to the Packers and Stockyards Act, administering promotional assistance programs on behalf of a packer may be in violation of the provisions of the Packers and Stockyards Act if they have agreed to perform the packer's obligations under the Act with respect to a program which they have represented to be usable and suitable for all the packer's competing customers if it should later develop that the program was not offered to all or, if offered, was not usable or suitable, or was otherwise administered in a discriminatory

manner.

11. Customer's liability. A customer, subject to the Packers and Stockyards Act, who knows, or should know, that he is receiving payments or services which are not available on proportionally equal terms to his competitors engaged in the resale of the same packer's products may be in violation of the provisions of the Act. Also, customers (subject to the Packers and Stockyards Act) that make unauthorized deductions from purchase invoices for alleged advertising or other promotional allowances may be proceeded against under the provisions of the Act.

Example 1: A customer subject to the Act should not induce or receive an allowance in excess of that offered in the packer's advertising plan by billing the packer at "vendor rates" or for any other amount in excess of that authorized in the packer's promotion program.

12. Meeting competition. A packer charged with discrimination under the provisions of the Packers and Stockyards Act may defend his actions by showing that the payments were made or the services were furnished in good faith to meet equally high payments made by a competing packer to the particu

lar customer, or to meet equivalent services furnished by a competing packer to the particular customer. This defense, however, is subject to important limitations. For instance, it is insufficient to defend solely on the basis that competition in a particular market is very keen, requiring that special allowances be given to some customers if a packer is "to be competitive."

13. Cost justification. It is no defense to a charge of unlawful discrimination in the payment of an allowance or the furnishing of a service for a packer to show that such payment or service could be justified through savings in the cost of manufacture, sale, or delivery.

The foregoing are guidelines which set forth the general views of the Packers and Stockyards Administration regarding advertising allowances and other merchandising payments and services. In a particular situation in which the Administrator believes that the Act has been violated in connection with such activities, a complaint may be issued instituting a formal administrative proceeding under the Act. In such a proceeding, the Administrative Law Judge or the Judicial Officer of the Department will determine, after opportunity for full hearing, whether the packer has in fact violated the Packers and Stockyards Act and should be ordered to cease and desist from continuing such violation.

(Approved by the Office of Management and Budget under control number 05900001)

(Sec. 202(a), 42 Stat. 161, as amended, 7 U.S.C. 192; sec. 402, 42 Stat. 168, as amended, 7 U.S.C. 222; sec. 407(a), 42 Stat. 169, as amended, 7 U.S.C. 228(a); sec. 6(g), 38 Stat. 721, 15 U.S.C. 46(g))

[38 FR 21173, Aug. 6, 1973, as amended at 49 FR 39516, Oct. 9, 1984]

8203.15 Trust benefits under sections 206 and 207 of the Act.

(a) Within the times specified under sections 206(b) and 207(d) of the Act, any livestock seller, live poultry seller or grower, to preserve his interest in the statutory trust, must give written notice to the appropriate packer or live poultry dealer and file such notice with the Secretary. One of the ways to satisfy the notification requirement under these provisions is to make certain that notice is given to the packer or live poultry dealer within the prescribed time by letter, mailgram, or telegram stating:

(1) Notification to preserve trust benefits:

(2) Identification of packer or live poultry dealer;

(3) Identification of seller or poultry grower;

(4) Date of the transaction;

(5) Date of seller's or poultry grower's receipt of notice that payment instrument has been dishonored (if applicable); and

(6) Amount of money due; and to make certain that a copy of such letter, mailgram, or telegram is filed with a P&SA Regional Office or with P&SA, USDA, Washington, DC 20250, within the prescribed time.

(b) While the above information is desirable, any written notice which informs the packer or live poultry dealer and the Secretary that the packer or live poultry dealer has failed to pay is sufficient to meet the above-mentioned statutory requirement if it is given within the prescribed time.

(Approved by the Office of Management and Budget under control number 05900001)

[54 FR 16357, Apr. 24, 1989]

§ 203.16 Mailing of checks in payment for livestock purchased for slaughter, for cash and not on credit.

(a) The Packers and Stockyards Administration recognizes that one who sells livestock to a packer, market agency, or dealer, who is purchasing for slaughter, may not intend to be present at the point of transfer of possession of the livestock, to receive payment, at the time a check in payment for such livestock may be delivered by the purchaser, and may not wish to authorize a representative to receive such a check; or for other reasons such a seller may prefer that such a purchaser make payment by mailing a check within the time limit as prescribed in section 409(a) of the Act. In cases when the seller does not intend to be present, he may use the following form of notification to the purchaser:

I do not intend to be present at the point of transfer of possession of livestock sold by me to (name of packer, market agency, or dealer) for the purpose of receiving a check in payment for such livestock.

I hereby direct (name of packer, market agency, or dealer) to make payment for live

stock purchased from me, by mailing a check for the full amount of the purchase price before the close of the next business day following the purchase of livestock and transfer of possession thereof or, in the case of a purchase on a "carcass" or "grade and yield" basis, not later than the close of the first business day following determination of the purchase price.

This does not constitute an extension of credit to (name of packer, market agency or dealer). This is subject to cancellation by me at any time, and if not cancelled by (date), it shall terminate on that date.

If the seller, for reasons other than not being present to receive payment, prefers to have the packer, market agency, or dealer make payment by mailing a check within the time limit as provided in section 409(a), he may use the above form but should not inIclude the statement in the first sentence that he does not intend to be present.

(b) The Packers and Stockyards Administration believes that such an agreement would not constitute an extension of credit within the meaning of section 206 of the Act because it would not give the purchaser any more time to issue a check than is provided in section 409(a).

(Approved by the Office of Management and Budget under control number 05900001)

(Sec. 401, 42 Stat. 168 (7 U.S.C 221); sec. 407, 42 Stat. 169 (7 U.S.C. 228); sec. 409, as added by sec. 7, 90 Stat. 1250 (7 U.S.C. 228b); 7 CFR 2.17, 2.54; 42 FR 35625; Pub. L. 96-511, 94 Stat. 2812 (44 U.S.C. 3501 et seq.); 7 U.S.C. 222 and 228 and 15 U.S.C. 46)

[42 FR 49929, Sept. 28, 1977, as amended at 49 FR 39516, Oct. 9, 1984]

§ 203.17 Statement of general public with respect to rates and charges at posted stockyards.

(a) Requests have been received from stockyard operators, market agencies, and livestock producers urging a reduction of rate regulation at posted stockyards. Their requests are based on the belief that competition among markets will set a level of rates and charges fair to both the market operator and to the livestock producer. Packers and Stockyards Administration will accept for filing tariffs containing any level of charges after 10 days' notice to the public and

to the Secretary as required by the Act.

(b) Packers and Stockyards Administration will not investigate the level of rates and charges established by stockyard owners and market agencies for reasonableness except upon receipt of a valid complaint or under compelling circumstances warranting such an investigation. Stockyard owners and market agencies will have substantial flexibility in setting their own rates and charges.

(c) Complaints filed about the reasonableness of rates and charges will be investigated to determine the validity of such complaints and appropriate action taken if warranted.

(d) Packers and Stockyards Administration will continue to insure that the schedules of rates and charges filed with the Department are applied uniformly and in a nondiscriminatory

manner.

(Approved by the Office of Management and Budget under control number 05900001)

(7 U.S.C. 203, 204, 207, 217a, 222 and 228) [49 FR 33004, Aug. 20, 1984]

§ 203.18 Statement with respect to packers engaging in the business of custom feeding livestock.

(a) In its administration of the Packers and Stockyards Act, the Packers and Stockyards Administration has sought to promote and maintain open and fair competition in the livestock and packing industries, and to prevent unfair or anticompetitive practices when they are found to exist. It is the opinion of the Administration that the ownership or operation of custom feedlots by packers presents problems which may, under some circumstances, result in violations of the Packers and Stockyards Act.

(b) Packers contemplating entering into such arrangements with custom feedlots are encouraged to consult with the Administration prior to the commencement of such activities. Custom feedlots are not only places of production, but are also important marketing centers, and in connection with the operation of a custom feedlot, it is customary for the feedlot operator to assume responsibility for