cluded are dividends or interest on borrowed or invested capital, or nonoperating losses, such as fire losses and losses from the sale or exchange of capital assets. Operating cost should not be reduced by items of nonoperating income, such as income from investments, and gain on the sale of capital assets.

(d) Nothing in this section shall be construed as relieving an industry member from compliance with any of the requirements of the Robinson-Patman

Act.

§ 23.21 Prohibited discrimination.3

(a) Prohibited discriminatory prices, rebates, refunds, discounts, credits, etc., which effect unlawful price discrimination. 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 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 insti

As used in this section, 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 oher place under the jurisdiction of the United States."

tutions 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 the above proviso depends upon net savings in cost based on all facts relevant to the transactions under the terms of subparagraph (2) of this paragraph. 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: See subsection (b) of section 2 of the Clayton Act as amended, which is set forth in the note following paragraph (f)

of this section.

(b) The following are examples of price differential practices to be considered as subject to the prohibitions of paragraph (a) 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 paragraph (a) of 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 subparagraph (2) of paragraph (a) 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 subparagraph (4) of paragraph (a) of this section); and

(5) The lower price was not made to meet in good faith an equally low price of a competitor (see subparagraph (5) of paragraph (a) of this section).

Example No. 1. At the end of a given period an industry member grants a discount to a customer equivalent to a fixed percentage of the total of the customer's purchases during such period and fails to grant such discount to other customers under like conditions.

Example No. 2. An industry member sells goods to one or more of his customers at a higher price than he charges other customers for like merchandise. It is immaterial whether or not such discrimination is accomplished by misrepresentation as to the grade and quality of the products sold.

NOTE: As previously indicated, the foregoing are examples of practices to be considered violative of the prohibitions of paragraph (a) of this section when involving goods of like grade and quality and when not subject to the other exemptions, exclusions, or defenses set forth in this paragraph.

(c) 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 con

trol, of any party to such transaction other than the person by whom such compensation is so granted or paid.

(d) 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 available on proportionally equal terms to all other customers competing in the distribution of such products or commodities.

NOTE: 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.

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.

(e) 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 service 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: See subsection (b) of section 2 of the Clayton Act as amended, which is set forth in the note following paragraph (1) of this section.

(f) Inducing or receiving an illegal discrimination in price. It is an unfair trade practice for any member of the industry engaged in commerce, in the course of such commerce, knowingly to

induce or receive a discrimination in price which is prohibited by the foregoing provisions of this section.

NOTE: Paragraph (f) of this section is a restatement of section 2 (f) of the Clayton Act as amended. In a complaint proceeding under this section, in order to make out a prima facie violation, the Commission must show that the favored buyer induced or received the lower price knowing, or knowing facts from which he should have known, that such price was violative of section 2 (a) of said Act and not justified under subparagraph (2), (4), or (5) of paragraph (a) of this section. When, in any such proceeding, the issue is limited to the question of whether the price differential involved made only due allowance for differences in cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which the goods were sold and delivered, the Commission may establish a prima facie case in a number of ways, including:

(1) By showing that the buyer paying the lower price knew that the methods by, and quantities in, which the goods were sold and delivered to him by the seller were the same as in the case of the competing buyer or buyers paying the higher price or prices; or (2) By showing where there is a difference in the methods or quantities in which the goods were sold and delivered by the seller to the buyer than in the case of the competing buyer or buyers paying the higher price or prices, that the buyer paying the lower price or prices knew the nature and extent of such differences and knew or should have known that they could not have resulted in sufficient cost savings of the kind and character specified as to justify the price differential.

NOTE: This section is based on the provisions of section 2 of the Clayton Act, as amended by the Robinson-Patman Act.

Subsection (b) of section 2 of the Clayton Act as amended, which reads as follows, is in amplification of the note to subparagraph (5) of paragraph (a) of this section and the note to paragraph (e) of this section:

"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."

§ 23.22 Misrepresentation as to gold

content.

(a) It is an unfair trade practice to sell or offer for sale any industry product under any trade or product name or designation or other representation having the capacity and tendency or effect of deceiving purchasers or prospective purchasers thereof as to the presence of gold or gold alloy in the product, or as to the quantity or fineness of gold alloy contained in the product, or as to the fineness, thickness, weight ratio, or manner of application of any gold or gold alloy plating, covering, or coating on any surface of any industry product or part thereof.

(b) The following practices are among those to be regarded as inhibited by paragraph (a) of this section:

(1) Use of the unqualified word "Gold," or any abbreviation thereof, as descriptive of any industry product, or part thereof, which is not composed throughout of fine (24 karat) gold.

(2) Use of the word "Gold," or any abbreviation thereof, as descriptive of any industry product, or part thereof, which is composed throughout of an alloy of gold, unless a correct designation of the karat fineness of the alloy immediately precedes the word "Gold," or abbreviation thereof, and such fineness designation is of at least equal conspicuousness therewith.

(3) Use of the word "Gold," or any abbreviation thereof, as descriptive of any industry product, or part thereof, which is not composed throughout of gold or gold alloy, but is surface-plated or coated with gold alloy, unless the word "Gold," or abbreviation thereof, is so qualified as adequately and nondeceptively to disclose that the product or part is but surface-plated or coated with an alloy of gold; and, when such plating has been mechanically applied, unless such word "Gold," or abbreviation thereof, is immediately preceded by a correct designation of the karat fineness of the alloy and such fineness designation is of at least equal conspicuousness therewith.

NOTE: See acceptable forms of markings and descriptions for such products set out in paragraph (c) (2) of this section.

(4) Use of the terms "Gold Filled," "Rolled Gold Plate," "Rolled Gold Plated," "Gold Overlay," "Gold Plated," or "Gold Plate," as descriptive of an industry product or part thereof, unless

such product or part contains a surfaceplating of gold alloy applied by a mechanical process which is of such thickness and extent of surface coverage that use of the term as descriptive of the product or part will not have the capacity and tendency of deceiving purchasers or prospective purchasers, and unless the term is immediately preceded by a correct designation of the karat fineness of the alloy and such designation is of at least equal conspicuousness as the term used.

NOTE: See acceptable forms of markings and descriptions for such products set out in paragraph (c) (2) of this section.

(5) Use of the term "Gold Electroplate," or "Gold Electroplated," as descriptive of any industry product or part thereof, unless such product or part is plated or coated with gold or a gold alloy and such plating or coating is of such karat fineness, thickness, and extent of surface coverage that the use of the term will not have the capacity and tendency of deceiving purchasers or prospective purchasers.

NOTE: See acceptable forms of markings and descriptions for such products set out in paragraph (c) (3) of this section.

(6) Representing, directly or by implication, by use of any name, terminology, or otherwise, that an industry product is equal or superior to, or different than, a known and established type of industry product with reference to its gold content or method of manufacture, unless the representation is true in fact (namely, that it is equal or superior to or different than the established type in the respects represented or implied).

NOTE: Requirements for use of the word "Gold," or any abbreviation thereof, as above set forth, are applicable to "Duragold,” “Diragold," "Noblegold," "Goldine," or any words or terms of similar import.

NOTE: See also § 23.25 entitled "Additional requirements relating to quality marks."

(c) Markings and descriptions of industry products or parts thereof will be considered as meeting the requirements of this section when in conformity with the following:

(1) An industry product or part thereof composed throughout of an alloy of gold of not less than 10 karat fineness may be marked and described as "Gold" when such word "Gold," wherever appearing, is immediately preceded by a correct designation of the karat fineness

of the alloy and such karat designation is of equal conspicuousness as the word "Gold" (as, for example, "14 Karat Gold," and "14 K. Gold," and "14 Kt. Gold"). Such product may also be marked and described by a designation of the karat fineness of the gold alloy unaccompanied by the word "Gold" (as, for example, "14 Karat," "14 Kt.," and "14 K.").

NOTE: When the term "Gold," or any abbreviation thereof, is used as descriptive of any product or part of a product which is composed throughout of gold alloy but contains a concealed hollow center or interior, the term or its abbreviation shall also be immediately accompanied by a disclosure of the fact that the product or part contains a hollow center or interior (as, for example, "14 Karat Gold-Hollow Center" and "14 K. Gold Tubing," when of a gold alloy tubing of such a karat fineness), when the failure to make such disclosure has the capacity and tendency or effect of deceiving purchasers or prospective purchasers. Such products must not be marked or described as "solid" or as being solidly of gold or of a gold alloy. For example, though the composition of such a product is 14 karat gold alloy, it shall not be described or marked as either "14 Kt. Solid Gold" or as "Solid 14 Kt. Gold."

part

(2) An industry product or thereof on which there has been affixed on all significant surfaces, by soldering, brazing, welding, or other mechanical means, a plating of gold alloy of not less than 10 karat fineness which is of substantial thickness, may be marked or described as "Gold Filled," "Gold Plate,” "Gold Plated," "Gold Overlay," "Rolled Gold Plate," or adequate abbreviations thereof, when such plating constitutes at least 1/20th of the weight of the metal in the entire article, and when the term is immediately preceded by a designation of the karat fineness of the plating which is of equal conspicuousness as the term used (as, for example, "14 Kt. Gold Filled," "14 Kt. G. F.," "14 Kt. Gold Plated," "14 Kt. G. P.," and "14 Kt. Gold Overlay"). When conforming to all such requirements except the specified mini

As here used, the term "substantial thickness" is to be construed as requiring that all areas of the plating be of such thickness as to assure of a durable coverage of the base metal to which it has been affixed. Since industry products embrace items having surfaces and parts of surfaces which are subject to different degrees of wear, this requirement of substantial thickness may not necessitate uniformity of thickness of plating for all items or for different areas of the surface or surfaces of individual items.

mum of 1/20th of the weight of the metal in the entire article, the terms "Gold Plate," "Gold Plated," "Rolled Gold Plate," and "Gold Overlay" may be used when the karat fineness designation is immediately preceded by a fraction which accurately discloses the portion of the weight of the metal in the entire article accounted for by the plating, and when such fraction is of equal conspicuousness as the term used (as, for example, "1/40 12 Kt. Rolled Gold Plate," and "1/40 12 Kt. R. G. P.").

on

(3) An industry product or part thereof, all significant surfaces which there has been affixed by an electrolytic process a coating or plating of gold, or of a gold alloy of not less than 10 karat fineness, the minimum thickness throughout of which is equivalent to 7/1,000,000ths of an inch of fine gold, may be marked or described as "Gold Electroplate" or "Gold Electroplated." When the coating or plating meets the minimum fineness, but not the minimum thickness, above specified, the marking or description may be "Gold Flashed" or "Gold Washed," and when of the minimum fineness above specified and of a minimum thickness throughout which is equivalent to 100/1,000,000ths of an inch of fine gold, the marking or description may be "Heavy Gold Electroplate" or "Heavy Gold Electroplated." When coatings or platings qualify for the term "Gold Electroplate" (or "Gold Electroplated"), or the term "Heavy Gold Electroplate" (or "Heavy Gold Electroplated"), and have been applied by use of a special kind of an electrolytic process, the designation for which the coating or plating is qualified may be accompanied by an identification of the process used, as for example, "Gold Electroplated (X Process)"; "Heavy Gold Electroplated (Y Process)."

(d) The requirements of this section relating to markings and descriptions of industry products and parts thereof are subject to the tolerances applicable thereto under the National Stamping Act (15 U.S. Code, sections 294, et seq.) and to the exemptions applicable thereto under section 10 of Commercial Standard CS 67-38, relating to marking articles made of karat gold, and under section 12(a) of Commercial Standard CS 47-34 (including supplement thereof effective February 25, 1939), relating to marking of gold filled and rolled gold plate articles other than watch cases.

(e) The exemption provisions of Commercial Standard CS 67-38, mentioned in paragraph (d) of this section, are as follows:

10. Exemptions recognized in the jewelry trade and not to be considered in any assay for quality include springs, posts, and separable backs of lapel buttons, posts, and nuts for attaching interchangeable ornaments, and wire pegs or rivets used for applying mountings and other ornaments, which mountings or ornaments shall be of the quality marked.

(f) The exemption provisions of Commercial Standard CS 47-34, mentioned in paragraph (d) of this section, are as follows:

12(a). Exemptions recognized in the jewelry trade and not to be considered in any assay for quality include joints, catches, screws, pin stems, pins of scarf pins, hat pins, etc., field pieces and bezels for lockets, posts and separable backs of lapel buttons, springs, and metallic parts completely and permanently encased in a nonmetallic covering. Field pieces of lockets are those inner portions used as frames between the inside edges of the locket and the spaces for holding pictures. Bezels are the separable inner metal rings used to hold the pictures in place. [22 F.R. 4568, June 28, 1957, as amended at 24 F.R. 9581, Dec. 1, 1959]

§ 23.23 Misrepresentation as to silver

content.

(a) It is an unfair trade practice to misrepresent in any way the silver content or fineness of silver content of any industry product, or to represent such product as having a silver content, plating, electroplating, or coating, when such is not the fact.*

The requirements of this section relating to markings and descriptions of industry products and parts thereof are subject to the tolerances applicable thereto under the National Stamping Act (15 U.S. Code, section 294, et seq.) and to the exemptions applicable thereto under section 8 of Commercial Standard CS 118-44 (Marking of Jewelry and Novelties of Silver), and section 8(a) of Commercial Standard CS 51-35 (Marking Articles Made of Silver in Combination with Gold).

The exemption provisions of Commercial Standard CS 118-44, above mentioned, are as follows:

8. Exemptions: The only exemptions recognized and not to be included in any assay for quality include screws, rivets, springs, spring pins for wrist watch straps; posts and separable backs of lapel buttons; wire pegs, posts and nuts used for applying mountings or other ornaments, which mountings or ornaments shall be of the quality marked;