ployment to employees of competitors in good faith and not for the purpose of injuring, destroying, or preventing competition.

§ 40.13 Prohibited sales below cost.

(a) The practice of selling industry equipment at a price less than the cost thereof to the seller, with the purpose or intent, and where the effect is, or where there is a reasonable probability that the effect will be, to substantially injure, suppress, or stifle competition or tend to create a monopoly, is an unfair trade practice.

(b) This section is not to be construed as prohibiting all sales below cost, but only such selling below the seller's cost as is resorted to and pursued with the wrongful intent or purposes referred to and where the effect is, or where there is a reasonable probability that the effect will be, to substantially injure, suppress, or stifle competition or to create a monopoly. Among the situations in which the requisite purpose or intent would ordinarily be lacking are cases in which such sales were (1) of seasonal goods near the conclusion of the season; (2) of perishable goods in respect to which deterioration is imminent; (3) of obsolescent goods; (4) made under judicial process; or (5) made in bona fide discontinuance of business in the goods concerned.

(c) As used in paragraphs (a) and (b) of this section, the term "cost" means the respective seller's cost and not an average cost in the industry whether such average cost be determined by an industry cost survey or some other method. It consists of the total outlay or expenditure by the seller in the acquisition, production, and distribution of the equipment involved, and comprises all elements of cost such as labor, material, depreciation, taxes (except taxes on net income and such other taxes as are not properly applicable to cost), and general overhead expenses, incurred by the seller in the acquisition, manufacture, processing, preparation for marketing, sale, delivery, and installation of the equipment. Not to be included 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. Op

erating 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. § 40.14

Prohibited discrimination.'

(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 institutions not operated for profit, as supplies for their own use;

2 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 other place under the jurisdiction of the United States."

(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 provisó depends upon net savings in cost based on all facts relevant to the transactions under the terms of proviso (2). For example, if a seller regularly grants a discount based upon the purchase of a specifiled 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, actual or imminent deterioration of perishable 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 (e) of this section.

(b) 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, for 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

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

(e) 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 (e) of this section is a re-statement 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 Commisison must show that the favored buyer induced or re-ceived the lower price knowning, 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 subparagraphs (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, when 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 specifcd as to justify the price differential.

NOTE: Section 40.14 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 of the note to paragraph (d) of § 40.14: "Upon proof being made, at any hearing an 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 thús 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 the 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.

§ 40.15. Exclusive deals.

It is an unfair trade practice for any member of the industry to contract to sell

or sell any industry equipment, or fix a price charged therefor, or discount from, or rebate upon, such price, upon the condition, agreement, or understanding that the purchaser thereof shall not use or deal in the equipment 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. § 40.16 Aiding or abetting use of unfair trade practices.

It is an unfair trade practice for any person, firm, or corporation to aid, abet, coerce, or induce another, directly or indirectly, to use or promote the use of any unfair trade practice specified in the rules of this part.

COMMITTEE ON TRADE PRACTICES

§ 40.201 Industry committee.

The provisions of § 16.1 of this subchapter shall be applicable to an industry committee established under this part.

(a) "Industry products" consist of those products which primarily are of metal composition and are used for the purpose of providing protection to windows, doors, patios, terraces, breezeways, porches, driveways, and other outdoor areas, from sun, rain, hail, snow, or sleet, including, but not limited to, window awnings, door canopies, and carports, and parts and accessories for such products.

(b) "Industry members" are persons, firms, corporations, and organizations engaged in the manufacture, fabrication, assembly, sale, offering for sale, or distribution of industry products as defined above, and their agents. Persons who are not agents, but who purport to act as agents of manufacturers or suppliers of industry products, are also to be regarded as industry members, as well as so-called independent contractors who engage in offering industry products for sale to consumer-purchasers without having title to the products or any agency status with a manufacturer or other supplier of such products, and who, after securing orders for such products, or purportedly having made sales thereof, then undertake to arrange for the transfer of title to the products from a manufacturer or other supplier to them or to their purported vendees.

§ 41.1

Deception in general.

(a) It is an unfair trade practice to sell, offer for sale, or distribute any industry product, or to promote the sale or distribution thereof, under any representation or by any method or under any circumstance, including failure adequately to disclose additional relevant information, which has the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers with respect to the construction, composition, installation, design, model, finish, color or color-fastness, size, origin, manufacture, value, price, quality, strength, weight, gauge, durability, fit, alignment, ventability, or utility of such product or any part thereof, or the ease of operation of such products, or the benefits to be derived from the use thereof, or with respect to the immunity or resistance of such product to wind, storm, or other weather condition, warpage, fire, rust, or sag, or the need for maintenance, repair, or replacement of all or any part of such product, or in any other material respect.

(b) Among the practices to which the inhibitions of this section are applicable

are:

(1) Representing that industry products require no maintenance or repair, or that the initial cost is the only cost, when such is not the fact.

(2) Representing that industry products, or any part or parts thereof, are everlasting or are made of indestructible materials.

(3) Representing that the colors in which industry products are finished are impervious to the elements or will last a lifetime, when such is not the fact.

NOTE: For requirements relating to use of the terms "windproof," stormproof." and "rustproof," and terms of similar import, and for representations concerning temperature reduction or control resulting from the use of industry products, see §§ 41.2, 41.3, 41.4, and 41.5, respectively.

(c) The inhibitions of this section are applicable with respect to every species of advertisement or form of representation, whether oral, or in a newspaper or other periodical, telephone directory. sales catalog, sales promotional literature, radio or television broadcast, or other media, or whether in the form of a mark, tag, or label on, affixed to, or accompanying, the product.

NOTE: The inhibitions of this section shall also be considered as extending to deception of purchasers or prospective purchasers as to the character, nature, or origin, of any product of the industry, or as to any quality or efficacy of such product, through use of any corporate name, trade name, or trademark by any industry member in connection with the sale or offering for sale of such product.

§ 41.2 Misuse of term "windproof,”

etc.

In the sale, offering for sale, or distribution of industry products, it is an unfair trade practice for any member of the industry to use the term "windproof," or any other word or term of similar import, as descriptive of any industry product, unless such product and its installation attachments will suffer no damage during the life expectancy thereof as the result of being exposed to wind of any velocity or violence: Provided, however,

(a) That the term may be used as descriptive of any product which, together with its installation atachments, will suffer no damage during the life expectancy thereof as the result of being exposed to winds of any degree of velocity or violence which is less than that involved in hurricanes, cyclones, or tornadoes, when the term is immediately accompanied by a conspicuous exception of winds involved in hurricanes, cyclones, or tornadoes (e. g., "windproof-except as to hurricanes, cyclones, or tornadoes"); and

(b) That the term may be used as descriptive of any product which, together with its installation attachments, will suffer no damage for a substantial period of time, though less than the life expectancy thereof, as the result of being exposed to winds of any velocity or violence, when the term is immediately accompanied by a conspicuous disclosure of the period during which the immunity of the product to such damage will prevail (e. g., "windproof for a period of three years"). (When for a substantial period of time, though less than the expected life of the product, it will suffer no damage as the result of being exposed to winds of any degree or velocity or violence which is less than that involved in hurricanes, cyclones, or tornadoes, the term may be used when additionally qualified in accordance with the requirements of paragraph (a) of this section

and this paragraph (e. g., "windproof, except as to hurricanes, cyclones, or tornadoes, for a period of three years"): And provided, further, That the term may be used as descriptive of a product, exclusive of the installation attachments, when all parts of such product except such attachments meet the requirements of paragraph (a) of this section and this paragraph and in immediate conjunction with the term, and with equal conspicuousness, there appears a specific exception of such attachments from applicability of the term.

NOTE 1: It is the consensus of the industry that no industry product of present commercial manufacture is immune to damage resulting to exposure to wind of the force and violence involved in hurricanes, cyclones, or tornadoes.

NOTE 2: Immunity of products of this industry to wind damage is dependent not only upon the composition and construction of the product and its installation attachments, but also upon the strength of the building or other fixture to which such attachments are to be amxed and the proper application of such attachments thereto. In order to avoid deception of purchasers or prospective purchasers as to the extent of the applicability of the term "windproof," or any other term of similar import, industry members using the term must not only comply with the foregoing provision of this section, but also must take care not to imply that the term has applicability to the installation of the product when they are not in a position to assure of proper installation and of the requisite strength of the building or fixture to which the product is to be attached. In such cases, when using the word "windproof," or any term of similar import, as descriptive of industry products, they should either affirmatively disclaim application of the term to the installation or, in immediate conjunction with the term and with equal conspicuousness, disclose that the immunity of the product to wind damage is dependent in part upon proper installation and the strength of the building or fixture to which the product is attached.

§ 41.3 Misuse of the term proof," etc.

"storm

In the sale, offering for sale, or distribution of industry products, it is an unfair trade practice for any member of the industry to use the term "stormproof," or any other word or term of similar import, as descriptive of any industry product unless such product and its installation attachments will suffer no damage during the life expectancy there