(b) Falsely representing the reason for making a substitution.

NOTE: Nothing in this section shall be construed as preventing, in the substitution of products, the application of such tolerances as are agreed upon between buyer and seller or are otherwise deemed reasonable and proper and where the misrepresentation or deception of purchasers is practiced or promoted in relation to the product or its deviation from samples or specifications. § 109.7 Prohibited sales below cost.

(a) The practice of selling products of the industry 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, sup> press, 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 purpose referred to and where the effect is, or where there is 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 obsolescent goods; (2) made under judicial process; or (3) 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 products 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, and delivery of the products. 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. 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.

§ 109.8 Inducing breach of contract.

It is an unfair trade practice for any industry member knowingly to induce or attempt to induce the breach of existing lawful contracts between competitors and their customers or their suppliers, or to interfere with or obstruct the performance of any such contractual duties or services, under any circumstances having the capacity and tendency or effect of substantially injuring or lessening present or potential competition.

NOTE: Nothing in this section is intended to imply that it is improper for any industry member to solicit the business of a customer of a competing industry member. However, the section is not to be construed as in anywise authorizing any agreement, understanding, or planned common course of action by two or more industry members not to solicit business from the customers of either of them, or from customers of any other industry member.

§ 109.9 Defamation of competitors or false disparagement of their prod ucts.

It is an unfair trade practice for any industry member

(a) To defame competitors by falsely imputing to them dishonorable conduct, inability to perform contracts, questionable credit standing, or by other false representations; or

(b) To falsely disparage competitors' products in any respect, or their business methods, selling prices, values, credit terms, policies, services, or conditions of employment.

§ 109.10 Procurement of competitors' confidential information by unfair means and wrongful use thereof.

It is an unfair trade practice for any member of the industry to obtain information concerning the business of a competitor by bribery of an employee or agent of such competitor, by false or misleading statements or representations, by the impersonation of one in authority, or by any other unfair means, and to use the information so obtained so as substantially to injure competition or unreasonably restrain trade.

§ 109.11 Commercial bribery.

It is an unfair trade practice for any industry member, directly or indirectly, to give, or offer to give, or permit or cause to be given, 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 competitors or from dealing or contracting to deal with competitors, or to effect any other advantage in favor of the industry member making such gift or offer with respect to the sale of industry products to such employers or principals.

§ 109.12 Prohibited forms of trade restraints (unlawful price fixing, etc.).'

It is an unfair trade practice for any industry member, either directly or indirectly, to engage in any planned common course of action, or to enter into or take part in any understanding, agreement, combination, or conspiracy, with

1 The inhibitions of this section are subject to Public Law 542, approved July 14, 1952, 66 Stat. 632 (the McGuire Act) 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.

one or more members of the industry, or with any other person or persons, to fix or maintain the price of any goods or otherwise unlawfully to restrain trade; or to 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, or to become a party to any such understanding, agreement, combination, or conspiracy.

§ 109.13 Prohibited discrimination.❜

(a) Prohibited discriminatory prices, or rebates, refunds, discounts, credits, etc., which effect unlawful price discrimination. It is an unfair trade practice for any industry member 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) That nothing contained in this paragraph shall prevent differentials

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."

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 proviso (2) depends upon net savings in cost based on all facts relevant to the transactions under the terms of this proviso. 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 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.

Examples with reference to this paragraph: The following are examples of price differential practices to be considered as subject to the prohibitions of this paragraph when involving goods of like grade and quality 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

(i) The commerce requirements specified in this paragraph are present; and

(ii) 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 com

petition with the industry member or with the customer receiving the benefit of the price differential, or with customers of either of them; and

(iii) The price differential is not justified by cost savings (see subparagraph (2) of this paragraph); and

(iv) 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 this paragraph); and

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

Example A. 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 B. 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.

(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, 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. 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.

(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 provisions of this section.

NOTE: Paragraph (e) 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, 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 new 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: Section 109.13 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 subsection (5) of paragraph (a) of this section and of the note to paragraph (d) of this section:

歌

"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."

§ 109.14 Aiding or abetting use of unfair trade practices.

It is an unfair trade practice for any industry member to aid, abet, coerce, or induce another, directly or indirectly, to use or promote the use of any unfair trade practice specified in §§ 109.0 to 109.14.

COMMITTEE ON TRADE PRACTICES

§ 109.201 Industry committee.

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

§ 110.1 Misrepresentation of industry products.

It is an unfair trade practice to make or publish, or cause to be made or published, directly or indirectly, any false, misleading or deceptive statement or representation, by way of advertisement or otherwise, concerning the grade, quality, quantity, use, size, material, content, thread count, origin, shrinkage properties, colorfastness, washability, production, manufacture or distribution of any product of the industry or concerning any component of such product, or in any other material respect. § 110.2 Misbranding.

The false or deceptive marking or branding of products of the industry with respect to the grade, quality, quantity, use, size, material, content, thread count, origin, shrinkage properties, colorfastness, washability, production, manufacture or distribution of such products, or in any other material respect, is an unfair trade practice.

§ 110.3 False invoicing.

Withholding from or inserting in invoices any statements or information by reason of which omission or insertion a false record is made, wholly or in part, of the transactions represented on the face of such invoices, with the effect of thereby misleading or deceiving purchasers, prospective purchasers or the consuming public, is an unfair trade practice.

§ 110.4 Deception as to origin.

In respect to any fabrics of the following types: Fabrics which have been woven or fabricated in a foreign country

and imported in the gray or other unfinished state and dyed or finished in the United States; or fabrics which have been imported in the finished state and dyed, redyed or refinished in the United States; is an unfair trade practice:

(a) To offer for sale, sell or distribute any such fabrics under marks, stamps, brands, labels or representations which have the capacity and tendency or effect of misleading or deceiving purchasers or the consuming public into the erroneous belief that such fabrics were woven or fabricated in the United States, or that they were not so dyed, finished, redyed or refinished in the United States, as the case may be; or

(b) To offer for sale, sell or distribute any such fabrics without the same being marked, stamped, branded or labeled so as to indicate clearly and nondeceptively (1) the country of origin of the fabric, and (2) that such fabrics were woven or fabricated in such country and were dyed or finished or redyed or refinished in the United States, as the case may be; the failure, refusal or omission to so mark, stamp, brand or label such fabrics having the tendency and capacity or result of thereby promoting, abetting or effectuating the marketing of such products under conditions which are misleading or deceptive to purchasers or the consuming public.

NOTE: Nothing in this section shall be construed as relieving any member of the industry or other party of the necessity of complying with the requirements of the customs laws or regulations, or other applicable provisions of law or regulation, relating to the marking of imported articles.

CROSS REFERENCE: For regulations of the Bureau of Customs, see 19 CFR Chapter I. § 110.5 Substitution of products.

The practice of shipping or delivering products which do not conform to samples submitted, to specifications upon which the sale is consummated, or to representations made prior to securing the order, without the consent of the purchasers to such substitutions and with the tendency, capacity or effect of misleading or deceiving purchasers, prospective purchasers or the consuming public, is an unfair trade practice.

§ 110.6 Inducing breach of contract.

Inducing or attempting to induce the breach of existing lawful contracts between competitors and their customers or their suppliers by any false or de