to establish or maintain any policy or practice or commit any act for the purpose or with the effect of restraining, persuading, or otherwise causing any other distributor to refrain from submitting to any buyer, price quotations, terms, and conditions of sale, independently arrived at or determined: Provided, however, That nothing contained in this section shall be construed as prohibiting any manufacturer of construction machinery from including in any of its or his sales contracts with any distributor of such machinery a provision for the marketing of the machinery of such manufacturer exclusively through such distributor within any particular territory specified in such sales contracts, insofar as such sales contracts are not in restraint of trade or otherwise in violation of law.

NOTE: In substance this section and proviso have been taken from a portion of the Federal Trade Commission's modified cease and desist order in Docket No. 5026 against Associated Equipment Distributors and certain of its members.

[Rule 12]

§ 167.13 Coercing adherence to published rental rates or trade-in values. It is an unfair trade practice for any distributor to persuade, influence, or otherwise cause distributors to adhere to such rental rates or trade-in values as are compiled, collated, and published, from time to time, by the industry, irrespective of whether such rates or values are based on past transactions in the industry or other data or information. Such rental rates and trade-in values may only be used for informational purposes, subject to the prohibitions contained in this part.

NOTE: For Group II rule, see 11 F.R. 7890.

168.19 168.20

False and misleading price quotations, etc.

Use of "loss leaders."

Coercing purchase of one product as a prerequisite to the purchase of other products.

Consignment distribution.
Commercial bribery.

Defamation of competitors or disparagement of their products. Inducing breach of contract.

Unfair threats of infringement suits. Selling below cost.

Combination or coercion to fix prices, suppress competition, or restrain trade.

Discrimination.

Discriminatory returns.

AUTHORITY: §§ 168.1 to 168.20, inclusive, issued under sec. 5, 38 Stat. 719, as amended; 15 U.S.C. 45.

SOURCE: $ 168.1 to 168.20, inclusive, contained in File No. 21-394, Federal Trade Commission, July 30, 1946, effective 30 days from July 30, 1946, 11 F.R. 8144.

§ 168.1 Misrepresentation in general. It is an unfair trade practice to use, or cause or promote the use of, any trade promotional literature, advertising matter, mark, brand, label, designation, or representation, however disseminated or published, which has the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers with respect to the grade, quality, quantity, price, value, composition, ingredients, nutritional value, character, nature, size, use, preparation, manufacture, or distribution of any product of the industry, or in any other material respect. [Rule 1]

NOTE: Among the inhibitions of this section, but not in limitation thereof, is "false advertisement," as defined in section 15 of the Federal Trade Commission Act, of any "food" or other product within the scope of such section.

§ 168.2 Misrepresentation as to character of business. It is an unfair trade practice for any member of the industry, in the course of or in connection with the distribution or sale of industry products, to represent, directly or indirectly, that it is a wholesaler of industry products when such is not the fact, or in any other manner to misrepresent the character, extent, or type of its business. [Rule 2]

§ 168.3 Deception through failure to differentiate between wholesale and retail transactions. Where industry prod

ucts are sold at wholesale and at retail in the same establishment of a member of the industry, the commingling of the two types of business in such manner as to have the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers is an unfair trade practice. [Rule 3]

§ 168.4 Deception as to available supply of advertised merchandise. The advertising or offering for sale of small or inadequate supplies of well-known brands or products at greatly reduced or bargain prices, without disclosure of the inadequacy of the supply available at such prices and with the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers, is an unfair trade practice. [Rule 4]

§ 168.5 Misuse of word "free," etc. It is an unfair trade practice to use the term "free," or any other term of similar import or meaning, to describe, designate, or refer to any industry product which is not given to the recipient thereof without cost and unconditionally. [Rule 5]

§ 168.6 Use of lottery schemes. The offering or giving of prizes, premiums, or gifts in connection with the sale of industry products, or as an inducement thereto, by any scheme which involves lottery or scheme of chance, is an unfair trade practice. [Rule 6]

§ 168.7 Imitation or simulation of trade-marks, trade names, etc. The imitation or simulation of the trade-marks, trade names, brands, or labels of competitors, with the capacity and tendency or effect of misleading or deceiving purchasers, prospective purchasers, or the consuming public, is an unfair trade practice. [Rule 7]

§ 168.8 False invoicing. It is an unfair trade practice to withhold from or insert 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 or prospective purchasers. [Rule 8]

§ 168.9 False and misleading price quotations, etc. The publishing or circulating by any member of the industry of false or misleading price quotations, price lists, or terms or conditions of sale,

with the capacity and tendency or effect of thereby misleading or deceiving purchasers or prospective purchasers, is an unfair trade practice. [Rule 9]

§ 168.10 Use of "loss leaders." The practice of selling any brand of confectionery, candy bar, chewing gum, or other confectionery product, or allied line, below the seller's cost as a "loss leader" to induce the purchase of other merchandise, the sale of the latter being used to recoup the loss sustained on the "loss leader" product so sold, with the capacity and tendency or effect of misleading or deceiving purchasers, prospective purchasers, or the consuming public, in an unfair trade practice. [Rule 10]

§ 168.11 Coercing purchase of one product as a prerequisite to the purchase of other products. The practice of coercing the purchase of one or more products as a prerequisite to the purchase of one or more other products, 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. [Rule 11]

§ 168.12 Consignment distribution. It is an unfair trade practice for any member of the industry to employ the practice of shipping industry products on consignment or pretended consignment for the purpose and with the effect of artificially clogging or closing trade outlets and unduly restricting competitors' use of said trade outlets in getting their products to consumers through regular channels of distribution, thereby injuring, destroying, or preventing competition or tending to create a monopoly or to unreasonably restrain trade. Nothing in this section shall be construed as restricting or preventing consignment shipping or marketing of industry products in good faith where suppression of competition, restraint of trade, or undue interference with competitors' use of the usual channels of distribution, is not effected. [Rule 12]

ers 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. [Rule 13]

§ 168.14 Defamation of competitors or disparagement of their products. 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 products of competitors in any respect, or of their business methods, selling prices, values, credit terms, policies, or services, is an unfair trade practice. [Rule 14]

§ 168.15 Inducing breach of contract. Inducing or attempting to induce the breach of existing lawful contracts between competitors and their customers or their contracts between competitors and their customers or their suppliers 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 prejudicing competitors in their business, is an unfair trade practice. [Rule 15]

§ 168.16 Unfair threats of infringement suits. The circulation of threats of suit for infringement of patents or trademarks among customers or prospective customers of competitors, not made in good faith but for the purpose or with the effect of thereby harassing or intimidating such customers or prospective customers, or of unduly hampering, injuring, or prejudicing competitors in their business, is an unfair trade practice. [Rule 16]

§ 168.17 Selling below cost. The practice of selling industry products below the seller's cost with the intent and with the effect of injuring a competitor and where the effect may be substantially to lessen competition or tend to create a monopoly or unreasonably restrain trade is an unfair trade practice. All elements recognized by good accounting practice as proper elements of such cost shall be

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included in determining cost under this section. The costs, however, which are referred to in this section are actual costs of the respective seller and not some other figure or average costs in the industry determined by an industry cost survey or otherwise. [Rule 17]

§ 168.18 Combination or coercion to fix prices, suppress competition, or restrain trade. It is an unfair trade practice for a member of the industry, or any other person:

(a) To use, directly or indirectly, any form of threat, intimidation, or coercion against any member of the industry or other person to unlawfully fix, maintain, or enhance prices, suppress competition, or restrain trade; or

(b) To enter into or take part in, directly or indirectly, any agreement, understanding, combination, conspiracy, or concerted action with one or more members of the industry, or with one or more other persons, to unlawfully fix, maintain, or enhance prices, suppress competition, or restrain trade. [Rule 18]

§ 168.19 Discrimination—(a) Prohibited discriminatory prices, or 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 (whether in the guise of samples or otherwise), 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 there

1 As here used, 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. (With respect to the Philippine Islands, the foregoing is subject to such statutory limitations as relate thereto.)

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of may be substantially to lessen competition or tend to create a monopoly in any line of commerce 1, 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;

(2) That nothing herein contained 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;

(3) That nothing herein contained 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;

1

(4) That nothing herein contained shall prevent price changes from time to time where made in response to changing conditions affecting either (i) the market for the goods concerned, or (ii) the marketability of the goods, such as, but not limited to, actual or imminent deterioration of perishable goods, obsolescence of seasonal goods, distress sales under court process, or sales in good faith in discontinuance of business in the goods concerned.

(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 commis

1 As here used, 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. (With respect to the Philippine Islands, the foregoing is subject to such statutory limitations as relate thereto.)

sion, 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 1 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 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 purchasers on proportionally equal terms.

(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.

(f) Purchases by schools, colleges, universities, public libraries, churches, hospitals, and charitable institutions not operated for profit. The foregoing provisions of this section relate to practices