standing is that the program would operate substantially as follows:

(1) Each competing retail magazine seller in or out of the area would be notified of the program by first class mail by the publisher and afforded the opportunity to choose either of two plans for each publication of the publisher he sells.

(2) Under Plan 1, the dealer would be given a rebate of 10 percent of the cover price for each copy of a magazine sold, provided he maintained two displays (full cover exposed, flat stack or vertical display) of the publication through its "on sale" period in (1) the maximum traffic area of his newsstand and (2) on the main or auxiliary racks. Under Plan 2, the dealer would be given a rebate of 5 percent on the same basis as under Plan 1 for maintaining one display in the maximum traffic area. "Maximum traffic area" means: Where the retailer sells most of his magazineswhere the largest display of magazines is located.

(3) In the event of a sellout of an issue, the dealer would agree to reorder immediately. Both the publisher and its distributor would spot check on dealer compliance. A dealer would submit quarterly reports together with statements of performance to the publisher to claim his rebate.

(c) The Commission's advice was that "implementation of the program as described probably would not result in violation of laws administered by the Commission provided (1) the program is offered to eligible new entrants into magazine retailing when they receive their initial shipment of magazines and (2) the notice to dealers is changed to inIclude a definition of 'maximum traffic area' conforming to the meaning set forth above."

[31 F.R. 10116, July 27, 1966]

§ 15.76 Foreign origin disclosure of individual items repackaged in combination sets.

(a) The Federal Trade Commission announced that it had rendered an advisory opinion dealing with disclosure of foreign origin of imported novelty items which will be repackaged in various combination sets in this country.

the labels will not be visible to prospective purchasers.

(c) As to sets composed entirely of imported nontextile fiber products, the Commission said "that a proceeding by it to require disclosure of origin on the package would not appear to be warranted in the absence of any showing of material deception."

(d) However, as to any combination set containing only imported textile fiber products, the Commission said the specific country of origin of these products must be disclosed in such a manner that it would be observed upon casual inspection by prospective purchasers before, not after, the purchase. The necessity of this disclosure is based upon the requirements of the Textile Fiber Products Indentification Act and the rules issued thereunder. The disclosure, the Commission said, "does not necessarily have to be on the outside of the package; it could be inside the package, provided it would be clearly visible through the cellophane cover. The point is that the disclosure must be in some position on the package where it would be observed prior to the purchase, not afterward."

(e) If imported textile fiber products are packaged in the same combination set with imported nontextile fiber products, the Commission advised that "it would also be necessary to disclose the foreign origin of the nontextile fiber components. Otherwise, prospective purchasers are likely to be misled into the mistaken belief, through the affirmative disclosure of the foreign origin of the textile fiber products, that the nontextile fiber products packaged therewith are of domestic origin."

(Sec. 1, 72 Stat. 1717, as amended; 15 U.S.C. 70) [31 F.R. 10116, July 27, 1966] § 15.77

Proportionally equal treatment for competing customers under promotional assistance programs.

(a) In advisory opinions by the Federal Trade Commission, two promotional assistance programs devised by third parties for grocery retailers and suppliers have been approved if the proposed plans are implemented as represented.

(b) Under the one plan, an independent promoter would supply food retailers with racks in which to display recipe cards and uniformly pay the retailer for providing space for each rack used.

Manufacturer-suppliers (1) would fur

nish

participating customers with cards-containing recipes calling for the use of the manufacturer's product and a picture of the finished recipe item or of the manufacturer's product-on a proportionally equal basis related to the retailer's volume of sales of the product, (2) pay the promoter for the cards at a per-card-supplied rate, and (3) offer the plan to each customer by means necessary to insure complete notification of the plan to all competing customers. After each initial distribution, retailers would receive as many additional cards as requested up to 1,000 per month per product.

(c) The other plan, proposed by a separate promoter, would utilize a variation of the "jigsaw puzzle." Each time a shopper would pass the check-out stand (no purchase would be required) of a participating grocery retailer, she would receive a card from which four assorted pieces of a reproduction of a label could be removed. Upon collecting pieces necessary to form a complete facsimile of either a private or name brand label, she would be awarded a prize of trading stamps, cash or merchandise. In each 8-week period the plan would be in operation, eight different products will be involved, six of which will be name brands of participating suppliers and two private labels selected by participating retailers. If the retailer does not have private labels to enter in the program, his cost will be reduced on a pro-rata basis or he may select eight name brand products and pay the regular price which will be the same to each retailer and supplier per product per 1,000 cards (the cost of the program will be defrayed out of this charge). Each retailer will receive the same in-store displays and advertising material and each supplier will have his product pictured on each give-away card. Necessary notification of the proposed plan will be given, and all competing retailers will be afforded the opportunity to participate.

(d) The Commission pointed out to the promoters that "it remains the supplier's responsibility to assure that in fact the retailers who compete with one another are dealt with on proportionally equal terms." If the plans are implemented in such a manner, they "would appear to satisfy the supplier's obligation of proportionally equal treat

ment and the suppliers participating *** would not thereby violate any Commission administered laws."

(e) In reaching this conclusion, the Commission advised that it had relied particularly upon the below-described three representations by the promoters as to the manner in which the plans will be implemented.

(f) In each of the two promotions, the requesting party informed the Commission that:

(1) All competing retailers would be notified of their right to participate in the plan; and

(2) The plan would be made available to all competing retailers and offered to those located on the periphery of a given marketing area who compete with the participating retailers.

(3) The third representation relied upon by the Commission in the respective matters was that:

(1) (Puzzle promotion) A reduction in cost or alternative choice of either name brand products would be provided participating retailers unable to enter two labels in the plan.

(ii) (Recipe card promotion) Small retailers who, for space or other reasons, cannot utilize the larger racks but wish recipe cards featuring one or two profitable items, will be provided with a "snapon" shelf rack for this purpose. [31 F.R. 10357, Aug. 2, 1966]

§ 15.78 Disapproval of merchandising plan involving a lottery.

(a) A retailer has been advised by the Federal Trade Commission that its proposed weekly drawings for portable radio-phonographs would be an unlawful lottery.

(b) Participants would be required to pay $2 a week for 20 weeks. The winner each week will be awarded a radio and will not be required to make any further payments. The participants who do not win will each receive a radio-phonograph at the end of the 20 weeks for which they would have then paid $40. The retailer advised that it regularly sells these instruments for $40.

(c) This proposal, the FTC's advisory opinion stated, "would constitute a scheme to sell merchandise by means of a lottery or game of chance, a sales device long held to be illegal under laws administered by this agency. The mere fact that each participant receives a thing of value for his contribution does not negate the existence of a lottery nor

change the plan's essential nature as an appeal to the public's gambling instincts. Clearly, the participants in this drawing would be motivated by the chance of receiving something of more value than the amount they contributed. Hence, the nature of the appeal is unmistakable."

[31 F.R. 10358, Aug 2, 1966]

§ 15.79

Rejection of deceptive firm name for skip-tracing operation. (a) The Federal Trade Commission has rejected a proposal by a debt collection concern to send out skip-tracing material under a firm name such as Missing Heirs, Inc., requesting delinquent debtors to contact the company on a matter of importance and to furnish information concerning jobs, addresses, etc.

(b) Advising that "this proposal would be clearly illegal under previous Commission and court decisions dealing with skip-tracing practices," the Commission pointed out that its first "case involving a skip-tracing device was decided in 1943 and dealt with an identical subterfuge to that here proposed, that is the attempt to deceive debtors into believing that they were being contacted in connection with the settlement of estates. No matter what the device employed, and there have been many down through the years, the law has set its stamp against this type of deception."

(c) Consequently, the advisory opinion continued, the FTC "cannot approve the use of any representations or trade names which would have the effect of deceiving others as to the true nature of your activity or which fail to reveal that the purpose for which the representations are made or the information requested is that of obtaining information concerning delinquent debtors." [31 F.R. 10572, Aug. 6, 1966]

§ 15.80 By-law prohibiting certain advertising claims by members of trade association.

(a) The Federal Trade Commission has informed a trade association that it cannot give its approval to a proposed amendment to the association's bylaws which would prohibit a member from advertising that its service is faster and better in other towns than that of members who actually are in business in those towns.

(b) The Commission said in its advisory opinion that "the adoption of this

proposal would be highly questionable under the antitrust laws for the reason that advertising is an element or form of competition and any agreement among competitors to refrain from legitimate and truthful advertising restricts competition.

(c) "If * ** [an industry member] wishing to compete in another city is denied the right to advertise that despite his geographical disadvantage he can furnish faster and better service than his local competitors, assuming the representation to be truthful, he is to that extent denied the right to compete effectively and local * * * [industry members] are thus insulated from outside competition.

(d) "If competition in an industry is to survive, the members must be left free to exploit in a lawful manner such advantages as they actually possess. Consequently, the proposed amendment to the Association's bylaws cannot receive Commission approval."

[31 F.R. 10572, Aug. 6, 1966] § 15.81

tee.

Advertised satisfaction guaran

(a) In an advisory opinion the Federal Trade Commission gave qualified approval to the proposal by a marketer of a facial cream to advertise a "10 day trial" satisfaction guarantee.

(b) Its approval, the Commission said, “is based upon the assumption that there are no material limitations or conditions whatsoever attached to the guarantee. If there are any such conditions or limitations, they must be disclosed."

[31 F.R. 10733, Aug. 12, 1966]

§ 15.82 Disapproval of the marking “US Made" for items with substantial imported components.

(a) A Federal Trade Commission advisory opinion disapproved the marking "US Made" for two electric devices, one consisting of an imported motor assembled with an American-made casing and cord, and the other of which both the motor and the casing are imported and the cord is domestic.

(b) The Commission stated that "It would be improper to label either of the finished products as 'US Made' because this would constitute an affirmative representation that the entire product was of domestic origin, when in fact a substantial part thereof was imported." [31 F.R. 10733, Aug. 12, 1966]

§ 15.83 Impropriety of labeling foreignmade machine with American-made parts added to it as "Made in U.S.A." (a) The Federal Trade Commission has advised an American manufacturer that a machine made in a foreign country with certain American-made parts added to it by the domestic manufacturer may not be labeled "Made in U.S.A."

(b) The Commission said that it would be "improper to label the machine in question as 'Made in U.S.A.' because this would constitute an affirmative representation that the entire machine was of domestic origin, when in fact a substantial part thereof was imported." [31 F.R. 11030, Aug. 19, 1966]

§ 15.84 Proper labeling of rebuilt fuses. (a) The Federal Trade Commision made public an advisory opinion concerning the proper labeling of rebuilt fuses to be used by public utilities and commercial consumers of electricity.

(b) The requesting company inquired as to whether it will be necessary to label a fuse as "rebuilt" or "remanufactured" if it is broken down to its smallest components and all parts that are used are inspected to meet new parts standards.

(c) Advising that the concern's "rebuilt fuses would have to be labeled as such," the Commission cited its frequent holding, "in connection with a variety of products, that in the absence of an adequate disclosure to the contrary, merchandise which resembles and has the appearance of merchandise composed of new materials but which is, in fact, composed of reclaimed materials, will be regarded by purchasers as being entirely new and that a substantial segment of the consuming public has a preference for merchandise which is composed of new and unused materials. This has been held to be so without regard to the comparative quality of the new and rebuilt products, for in such matters the public is entitled to get what it chooses no matter what dictates the choice."

(d) Answering other questions posed by the company, the Commission stated: All "advertising material promoting the sale of these fuses should also contain a disclosure of their used or rebuilt nature, [but] it is not necessary, once this disclosure is clearly and conspicuously made, to repeat the word over and over again even where technical instructions are being given. Technical instructions for the use of these fuses are not ordinarily part of the advertising designed to induce

customers to buy and, if not, there would be no requirement for disclosure in the instructions as distinguished from advertising."

(e) "Generally speaking, *** the disclosure must be on the cartons, invoices and in advertising literature, as well as on the fuses themselves. However, the disclosure need not be placed on the fuses themselves if you can establish that the disclosure on the bags, boxes, or other containers is such that the ultimate purchasers, at the point of sale, are informed that they are rebuilt fuses. The question of informing the ultimate purchasers here becomes important in the event any of your customers also resell the fuses to others under circumstances where those ultimate purchasers are not informed as to their rebuilt nature."

[31 F.R. 11030, Aug. 19, 1966]

(a) A national trade association has been advised by the Federal Trade Commission that its proposed reference service for members concerning problems encountered by them would not be unlawful "so long as the program embraces only an interchange of information and experience among members of the Association, and is not used as a device for a concerted boycott of particular sellers."

(b) The Association stated the purpose of the program is to assist its members to communicate with each other so that there may be a greater availability of the knowledge and experience acquired by them on materials used in the industry. Especially of interest is the experience of members with materials that have been newly developed and the properties and suitability of which are not yet widely known. Under the reference service members would be invited to write the Association advising it of any special experience or knowledge they have had with materials, either favorable or unfavorable.

[31 F.R. 11302, Aug. 26, 1966]

§ 15.86 Sales promotion plan involving a lottery rejected.

(a) In an advisory opinion the Federal Trade Commission informed a retailer that his proposed sales promotion is illegal because it involves the sale of merchandise by means of a lottery and therefore is an unfair method of competition and an unfair practice.

(b) The retailer planned to list cer

tain selected items with the local bank. After the customer makes his regular purchase at the retail store, he checks with the bank, and if that particular item is listed with the bank, the customer is entitled to keep the merchandise without charge. On the other hand, if the item is not listed at the bank, the purchaser must pay the regular price for it. (c) In reaching its conclusion that the plan was illegal, the Commission reasoned that "the mere fact that a purchaser receives a thing of value for his contribution does not negate the existence of a lottery."

[31 F.R. 11302, Aug. 26, 1966]

§ 15.87

Sale of silverware through plan involving lottery rejected.

(a) The Commission issued an advisory opinion (with Commissioner

Elman not concurring) in which it disapproved a silverware manufacturer's plan because it involved the sale of merchandise by means of a lottery.

(b) Under the terms of the proposed plan, advertisements will be published inviting the reader to complete a contest entry form specifying his preference among certain flatware featured therein, together with his name and address. The reader will be invited to leave said form with the manufacturer's dealer or, in lieu of using the form featured in the advertisement, he can obtain the same form at his dealer or print the same information on a blank piece of paper and leave it with the dealer. At the conclusion of the contest, each dealer will draw the name of one contestant who will receive a free 4-piece place setting in the pattern specified on his entry form.

(c) There is absolutely no requirement on the part of any participant or winner to purchase or promise to purchase any merchandise. However, the rules further provide that if the winner purchased other settings in his particular pattern during the period of the contest, the dealer will donate additional pieces in that pattern equivalent in retail value to those purchased.

(d) In its advisory opinion, the Commission took the position that "the portion of the plan which awards a 4-piece place setting to the winner is unobjectionable."

(e) "However," the Commission added, "the matching provision on the part of the dealer creates the element of consideration on the part of participants and therefore constitutes the sale of mer

chandise by means of a lottery or by means of a chance or gaming device contrary to the provisions of section 5 of the FTC Act. As a result, the Commission cannot give its approval to this aspect of your proposed plan in its present form." [31 F.R. 11607, Sept. 2, 1966]

§ 15.88 Three-way promotional plan set up by radio station and financed by participating retailers and their suppliers.

(a) A radio station has been advised by the Federal Trade Commission that its proposed three-party promotional plan as originally presented would be unlawful because it would not be available to all competing customers in a practical business sense, but that subsequent revisions in the basic plan, coupled with the addition of an alternative plan, now bring the basic plan within the requirements of functional availability. However, the revised plan contains one defect which will be discussed later, and which will receive correction before Commission approval can be given.

(b) The proposal involves the furnishing of background music and in-store commercial announcements to retail establishments. The radio station would install, without cost, the necessary receiving equipment in each participating retail store. The products advertised will be limited primarily to grocery store items. Each store would pay a fixed amount for the background music, depending upon the number of speakers (one speaker for every 600 square feet of floor space). The value of the instore message to the participating supplier will be measured and paid for on the basis of the total number of persons exposed to the in-store commercials at a fixed rate per thousand estimated weekly transactions. As originally submitted, no alternative plan or plans would be offered.

(c) In its first advisory opinion, the Commission said that the legality of the proposed plan raised the following two questions: (1) Did it meet the requirement of functional availability since there was no provision for an alternative plan or plans? (2) Did it provide for payments to all competing purchasers on proportionally equal terms if the method of payment for the in-store commercials is based upon the number of customers who are exposed to said commercials?

(d) With respect to the first question,