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the industry member, as compensation for, or as an inducement to obtain, special or greater effort or service on the part of the salesperson in promoting the resale of products supplied by the industry member to the customer

(a) When the agreement or understanding under which the payment or payments are made or are to be made is without the knowledge and consent of the salesperson's employer; or

(b) When the terms and conditions of the agreement or understanding are such that any benefit to the salesperson or customer is dependent on lottery; or (c) When any provision of the agreement or understanding requires or contemplates practices or a course of conduct unduly and intentionally hampering sales of products of competitors of an industry member; or

(d) When, because of the terms and conditions of the understanding or agreement, including its duration, or the attendant circumstances, the effect may be substantially to lessen competition or tend to create a monopoly; or

(e) When similar payments are not accorded to salespersons of competing customers on proportionally equal terms in compliance with section 2 (d) and (e) of the Clayton Act.

NOTE: Payments made by an industry member to a salesperson of a customer under any agreement or understanding that all or any part of such payments is to be transferred by the salesperson to the customer, or is to result in a corresponding decrease in the salesperson's salary, are not to be considered within the purview of this section, but are to be considered as subject to the requirements and provisions of section 2(a) of the Clayton Act. [Rule 15]

§ 75.16 Commercial bribery.

Members of the industry shall not give, or offer to give, or permit or cause to be given, directly or indirectly, money or anything of value to agents, employees, or representatives of customers or prospective customers, or to agents, employees, or representatives of competitors' customers or prospective customers, without the knowledge of their employers or principals, as an inducement to influence their employers or principals to purchase or contract to purchase products manufactured or sold by such industry member or the maker of such gift or offer, or to influence such employers or principals to refrain from

dealing in the products of competitiors or from dealing or contracting to deal with competitors. [Rule 16]

§ 75.17 Exclusive dealing.

Members of the industry shall not contract to sell or sell industry products or fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement, or understanding that the purchaser thereof shall not use or deal in the products of a competitor or competitiors 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. [Rule 17]

§ 75.18 Prohibited forms of trade restraints (unlawful price fixing, etc.).3 Members of the industry, either directly or indirectly, shall not engage in any planned common course of action, or enter into or take part in any understanding, agreement, combination, or conspiracy, with one or more members of the industry, or with any other person or persons, to fix or maintain the price of any industry products or otherwise unlawfully to restrain trade; or use any form of threat, intimidation, or coercion to induce any member of the industry or other person or persons to engage in any such planned common course of action,

The prohibitions of this section are subject to Public Law 542, approved July 14, 1952, 66 Stat. 632 (The McGuire Act, commonly referred to as the Fair Trade Amendment) which provides that with respect to a commodity which bears, or the label or container of which bears, the trade-mark, brand, or name of the producer or distributor of such commodity and which is in free and open competition with commodities of the same general class produced or distributed by others, a seller of such a commodity may enter into a contract or agreement with a buyer thereof which establishes a minimum or stipulated price at which such commodity may be resold by such buyer when such contract or agreement is lawful as applied to intrastate transactions under the laws of the State, Territory, or territorial jurisdiction in which the resale is to be made or to which the commodity is to be transported for such resale, and when such contract or agreement is not between manufacturers, or between wholesalers, or between brokers, or between factors, or between retailers, or between persons, firms, or corporations in competition with each other.

or become a party to any such understanding, agreement, combination, or conspiracy. [Rule 18]

§ 75.19

Prohibited discrimination.

(a) Prohibited discriminatory prices, rebates, discounts, etc. No member of the industry engaged in commerce, in the course of such commerce, shall 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) 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 & 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;

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(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: Subsection (b) of section 2 of the Clayton Act, as amended, reads as follows: "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."

NOTE 2: Nothing in this section should be construed as prohibiting the granting of different prices which are not otherwise violative of the foregoing provisions of this section, to customers in different functional categories. For example, a seller may grant a lower price to wholesalers than to retailers to the extent that such wholesalers resell to retailers. If such wholesalers also sell at retail in competition with their customers they may not properly be granted a price lower than the prices granted to competing retailers on that portion of the goods they sell at retail.

(b) Prohibited brokerage and commissions. No member of the industry engaged in commerce, in the course of such commerce, shall pay or grant, or 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 control, of any party to such

transaction other than the person by whom such compensation is so granted or paid.

(c) Prohibited advertising or promotional allowances, etc. No member of the industry engaged in commerce shall 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 sales by such member, unless such payment or consideration is made known to and is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities.

NOTE: Subsection (b) of section 2 of the Clayton Act, as amended, which is set forth in the note concluding paragraph (a) of this section is applicable to this paragraph (c).

(d) Prohibited discriminatory services or facilities. No member of the industry engaged in commerce shall 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 including, but not limited to, displays, exhibits, and promotional material 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: Subsection (b) of section 2 of the Clayton Act, as amended, which is set forth in the note concluding paragraph (a) of this section is applicable to this paragraph (d).

(e) Inducing or receiving an illegal discrimination in price, advertising or promotional allowances, or services or facilities. No member of the industry engaged in commerce, in the course of such commerce, shall knowingly induce or receive a discrimination in price, advertising or promotional allowances, or services or facilities, which is prohibited by the foregoing provisions of this section. [Rule 19]

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(a) The Federal Trade Commission interprets paragraph (a) and the concluding Note in § 75.3 of the trade practice rules for the Household Furniture Industry as requiring that when a wood name is used in advertising or labeling to describe the grain design and/or color of a stain finish or other type of simulated finish which has been applied to a surface composed of something other than solid wood of the type named, it must be made clear that the wood name used is merely descriptive of the grain design and/or color or other simulated finish.

(b) Under this interpretation, unqualified phrases such as "walnut finish" and "mahogany finish" will not satisfy this requirement. But statements such as "walnut grained plastic top," "walnut color," "walnut stain," "maple stained finish," "mahogany finish on gum" and "walnut finished hardwoods" (or "softwoods," as the case may be) will satisfy this requirement if such statements are factually correct and appear in contexts which are otherwise nondeceptive.

(c) Section 75.2(3) (ii) which relates to similar representations will be interpreted consistently with the foregoing. [31 F.R. 5069, Mar. 29, 1966]

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scrap iron and steel according to certain specifications by so arranging the shipments in the cars that the inferior products will not be readily discovered on surface inspection, without the consent of the consumer and/or purchasers to such substitutions and with the effect of receiving or misleading consumers

and/or purchasers, is an unfair trade practice.

$76.2 Defamation of competitors.

The defamation of competitors to falsely imputing to them dishonorable conduct, inability to perform contracts. questionable credit standing, or by other false representations, or the false disparagement of the grade or quality of their goods, with the tendency and capacity to mislead or deceive purchasers or prospective purchasers, is an unfair trade practice.

§ 76.3 Inducing breach of contract.

Maliciously inducing or attempting to induce the breach of existing contracts between competitors and their customers by any false or deceptive means whatsoever, or interfering with or obstructing the performance of any such contractual duties or services by any such means with the purpose and effect of unduly hampering, injuring, or embarrassing competitors in their businesses, is an unfair trade practice.

§ 76.4 Commercial bribery.

Directly or indirectly to give or permit to be given or offer to give money or anything of value to agents, employees, or representatives of customers or prospective customers or to agents, employees, or representatives of competitors' customers or prospective customers, without the knowledge of their employers or principals, as an inducement to influence their employers or principals to purchase or contract to purchase industry products from the maker of such gift or offer, or to influence such employers or principals to refrain from dealing or contracting to deal with competitors is an unfair trade practice.

GROUP II

§ 76.101 False billing.

The presentation or use of fictitious bills of lading or other evidence of billing, for the purpose of securing advances of money or other valuable consideration, is condemned by the industry.

§ 76.102 Credit for overweight.

Failure of dealers or brokers to give credit for overweight, where credit for overweights has been passed by the consumer, is hereby condemned.

§ 76.103 Repudiation of contracts.

Contracts, either written or oral, are business obligations which should be performed in letter and spirit. The repudiation of contracts by sellers on a rising market, or by buyers on a declining market, is equally reprehensible, and is condemned by the industry.

§ 76.104 False invoicing.

Withholding from or inserting in the invoice statements which make the invoice a false record, wholly or in part, of the transaction represented on the face thereof, is condemned by the industry. § 76.105

Arbitration.

The industry approves the practice of handling disputes in a fair and reasonable manner, coupled with a spirit of moderation and good will, and every effort should be made by the disputants themselves to arrive at an agreement. If unable to do so they should agree, if possible, upon arbitration under some one of the prevailing codes.

§ 76.106 Cost accounting.

It is the judgment of the industry that each member should install a proper and accurate method for determining his cost.

COMMITTEE ON TRADE PRACTICES

§ 76.201 Industry committee.

The provisions of § 16.1 of this subchapter shall be applicable to an industry committee established under this part. [21 F.R. 1174, Feb. 21, 1956]

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Willful delivery of an inferior product against a contract for a particular grade of waste paper by means of false packing that can not be readily discovered, the effect of which is to deceive the purchaser, or the substitution of an inferior grade of material against a contract calling for a particular grade without the permission of the purchaser and ultimate consumer with the intent and effect of deceiving the purchaser and ultimate consumer, is an unfair trade practice.

§ 81.2 Defamation of competitors.

The defamation of competitors by falsely imputing to them dishonorable conduct, inability to perform contracts, questionable credit standing, or by other false representations, or the false disparagement of the grade or quality of their goods, with the tendency and capacity to mislead or deceive purchasers or prospective purchasers, and the tendency to injuriously affect the business of such competitors, is an unfair trade practice.

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or principals to refrain from dealing or contracting to deal with competitors, is an unfair trade practice.

§ 81.4

Inducing breach of contract.

Willfully inducing or attempting to induce the breach of an existing contract, or the interference or attempted interference with the performance of any contractual duty for the purpose and effect of injuring or destroying the patronage, property, or business of a competitor is an unfair trade practice.

§ 81.5 Sales below cost.

The selling of goods below cost with the intent and with the effect of injuring a competitor, and where the effect may be to substantially lessen competition or tend to create a monopoly or to unreasonably restrain trade, is an unfair trade practice.

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Submission of false claims.

The submission of false claims to a supplier when same are not founded on actual mill reports or are not substantiated by authentic debit bills is condemned by the industry.

§ 81.103 False billing.

The issuance of fictitious bills of lading or other documents of title, or the willful inclusion of erroneous weights or other information therein, for the purpose of securing advances of money or full payment when the contract provides otherwise, is condemned by the industry. § 81.104 Negligence in concluding

agreements.

The practice of neglecting or failing to return signed contracts or confirmation of verbal or telephone agreements of purchase and sale with the end in view of later relying on the absence of any signed contract or memorandum as ground for repudiation of the agreement is condemned by the industry.

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