(b) The product is composed of at least 75 percent peat by weight, with the remaining 25 percent comprised of such soil substances as are commonly intermixed with peat as found in its natural state. It is derived from three nonmoss substances; namely, Pifine (Paille Finne), or commonly referred to as maiden cane grass, cut grass, and saw grass, Pifine comprises the bulk of the plant residue present in the product.

(c) Three provisions of the Commission's Trade Practice Rules for the Peat Industry govern the use of the term "Peat Moss" in this particular situation. First, there is the definition of the word "peat," which is as follows:

"Peat". Any partly decomposed vegetable matter "which is accumulated under water or in a water-saturated environment through decomposition of mosses, sedges, reeds, tule, trees, or other plants."

(d) The second pertinent provision is Rule 2, which prohibits use of the word "Peat" to describe any product "which is not in fact composed predominantly of peat to the extent that at least 75 percent (by weight) of the product is composed of peat, with such other materials as may be present in the content, and constituting the remaining percentage, being comprised of such soil substances as are customarily intermixed with peat as found in its natural state."

(e) Third, Rule 3 covers use of the terms "Moss Peat" and "Peat Moss", and has been codified under § 185.3 of this Title 16.

(f) On the basis of the foregoing facts, the Commission expressed the opinion that the proposed terminology complies with the requirements of Rule 3(b) of the Trade Practice Rules for the "Peat Industry". However, the opinion also noted that some of the art work used the words "Peat Moss" without qualification or without conspicuous qualification. Such a representation, the Commission said, would not be in compliance with Rule 3(b). Concluding its opinion, the Commission said: "It is necessary under the pertinent rule * * to disclose the kinds of peat of which (the) product is composed i.e., Pifine and Sedge, and that such disclosure be of equal size and conspicuousness and be placed in immediate conjunction with the words 'Peat Moss' whenever they are used in labeling or advertising. If

the proposed terminology is used in such manner, the Commission would interpose no objection thereto."

[34 F.R. 20334, Dec. 30, 1969]

§ 15.397 Origin of dresses partly made in United States and Haiti.

(a) The Commission rendered an advisory opinion in regard to the proper marking of dresses partly made in the United States, Puerto Rico, and Haiti.

(b) The fabric will be of American origin representing 73 percent of total production costs; cutting and sorting in Puerto Rico-8 percent of production costs; sewing in Haiti-8 percent of production costs; hem sewing, ironing, final checking and sorting, packing and attaching hand tags in the United States11 percent of production costs.

(c) The question considered involved which of the following three labels must be applied to the dresses:

(1) "Made in U.S.A."

(2) "Made in Haiti"

(3) "Made in Haiti with U.S. component parts".

(d) The first claim constitutes an affirmative representation that the product is made in its entirety in the United States. Since a substantial portion of the manufacturing process on the dresses is performed in Haiti, it would be improper to use the "Made in U.S.A." claim without clearly disclosing that the dresses are sewn in Haiti.

(e) Similarly, a "Made in Haiti" claim would be misleading because the dresses are not made in their entirety in that particular country.

(f) Except for the word "made", the third proposed claim would be unobjectionable. There are two principal steps in the manufacturing process of dresses; namely, cutting and sewing. Since approximately one-half of the manufacturing process (the cutting) takes place in another country, a more accurate description of what is being done in Haiti would be to substitute the word "sewn" for the word "made". Thus, the claim as revised would read: "Sewn in Haiti with U.S. component parts".

(g) Although not specifically asked, the Commission further advised that in the absence of any affirmative representation that the dresses are entirely of United States' origin, it will not be necessary to disclose the fact that the dresses are sewn in Haiti. Finally, that this

opinion does not relieve anyone from complying with all applicable rules and regulations of the Bureau of Customs. [35 F.R. 418, Jan. 13, 1970]

§ 15.398 Advertising of hamburgers made of chuck and plate.

The Commission issued an advisory opinion relative to advertising of hamburger patties consisting of 85 percent chuck and 15 percent plate. The Commission advised that the use of the phrase "***'s Hamburgers are made with ground chuck” in advertising would be violative of section 12, Federa! Trade Commission Act.

[35 F.R. 418, Jan. 13, 1970]

(a) The Commission issued an advisory opinion relative to proposed weekly drawings for wigs.

(b) The wigs are purchased at $5 each wholesale and retailed to consumers at $50. None have ever been sold at retail below this price. It is proposed to establish a method by which each buyer of a wig would be assured of a wig at a price of $50 or less. The method of operation would be as follows: Customers would be divided into groups of 10. Each week, each such customer in each such group would pay $5, and a drawing would be had, the winner to receive a wig. The next week, the nine remaining persons in the group of 10 would each pay $5, and one of them would receive a wig. This process would continue, until finally the last person in the group would pay the full price of $50 for the wig.

(c) The Commission expressed the view that the proposed course of action 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 the Federal Trade Commission Act, section 5. 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.

[35 F.R. 418, Jan. 13, 1970]

§ 15.400 Labeling of imported magnetic recording tape.

(a) Modifying the position announced in Advisory Opinion Digest No. 366 (§ 15.366), the Commission advised that:

(1) Tape accompanying an imported tape recorder, if packaged to show country of origin, is not required to express quantity of contents as described in Advisory Opinion Digest No. 366 (§ 15.366), provided the description of contents does not constitute an unfair or deceptive practice which would violate the Federal Trade Commission Act.

(2) Cartridge tapes may be expressed in terms of playing time in lieu of a linear measurement.

(3) Imported packaged magnetic recording tapes may continue to be distributed provided the country of origin is appropriately shown.

(b) This action was taken to conform the opinion with the Commission's Statement of General Policy and Interpretation, § 503.2 of this chapter.

[35 F.R. 2655, Feb. 6, 1970]

§ 15.401 Designation of landscaping material by volume on containers.

(a) In a previous advisory opinion the Commission advised that to designate the contents on containers of landscaping material by cubic measurement rather than by weight would be objectionable under section 5, Federal Trade Commission Act.

(b) The proposal considered involved the marketing of a processed clay material in physical form varying from pieces of approximately 2 inches down to 10 of an inch in diameter for use as a landscaping material, particularly around shrubs, trees, walkways and other non-grassed areas. Because the density of the product by volume is less and the area of coverage by weight greater than competing materials used for the same purpose it was represented that it would be more beneficial and informative to consumers to stipulate the container contents in cubic measurement instead of by the traditional contents by weight designation. Specifically, the Commission was asked:

(1) May the product be marketed by showing the contents of the bags in which it is contained by way of cubic measurement and not by weight, leaving off all reference to weight?

(2) Also, may the area the material will cover in square inches, feet, or yards to a specified depth be shown on the bags?

(c) The Commission expressed the view that the product, being used mainly for ground covering purposes, is classified as a type of lawn and garden commodity and as such is not considered a "consumer commodity" as defined by the Fair Packaging and Labeling Act. Whether the proposed labeling would be an unfair or deceptive act must, therefore, be tested against the criteria of section 5, FTC Act. Controlling in matters of this nature is whether the proposed course of action is fair to consumers according to recognized principles, not that it might be unfair according to tradition and the morals of the market place. The concept of "Unfair or deceptive acts or practices" stresses business integrity, encourages legitimate trading, and protects consumers against commercial spoliation.

(d) The Commission expressed the view that it would be more beneficial and informative to consumers if the contents were designated on the product containers by both weight and volume. Although not essential, it would also be beneficial and informative to consumers if the extent of area coverage to a predetermined depth by weight and by volume were included in such content designation.

(e) The Commission further advised that its opinion is confined to so much of the request as falls within its jurisdiction and the extent, if any, to which another governmental agency, either local, State, or Federal, may be concerned is a matter to be determined by reference to that agency.

[35 F.R. 2655, Feb. 6, 1970]

§ 15.402 Marking of shoe soles composed of ground leather.

(a) The Commission issued an advisory opinion in regard to the proper marking of a material to be used in the manufacture of shoe soles.

(b) The material in question is not leather but a man-made fibrous leather material bonded with an adhesive. It will be manufactured and sold in its natural form to manufacturers for use as shoe soles and/or heels. Shoe manufacturers will in all probability dye or stain the material so as to give it the appearance of leather or any other material as desired. Under no circumstances will

the manufacturer of the material have any control over its appearance once it has been sold to shoe manufacturers.

(c) Specifically, the following questions were raised in regard to the proper marking of the material:

(1) When the material is used for shoe soles and/or heels but does not have the appearance of natural leather, need there be any marking or labeling whatsoever?

(2) In those instances where the material is used for shoe soles and/or heels and does have the appearance of natural leather, is it necessary to mark or label the material with a designation indicating that it is not natural leather?

(3) In all cases where the answer to question 2 is in the affirmative and assuming that the material is easily visible, is it sufficient to mark the shoe part made from this material with its trade name?

(4) If the answer to question 3 is in the negative, what would constitute adequate and sufficient disclosure of the nature of the material?

(d) In regard to the first question, where a manufacturer produces a leather-type product for use in shoes and knows or has reason to believe that after processing it will look like leather, the manufacturer must label the product as indicated in question 2.

(e) Second, when the material is used for shoe soles and does have the appearance of leather, it is necessary for the shoe manufacturers to mark or label such materials with a designation which clearly discloses either: (1) The material is simulated or imitation leather, or (2) the general nature of the material in such manner as to show it is not leather or split leather. This requirement is imposed by Guide II of the Shoe Guides, but it should be noted that heels are specifically exempted from the marking provisions thereof.

(f) Third, marking the shoe soles with the trade name would not be sufficient to remove the deception created by the false impression where the material is finished to have the appearance of leather. In short, there is nothing in the use of the trade name alone which would meet the requirements set forth in answer to question 2.

(g) In response to the fourth question, Guide VI of the Shoe Guides sets forth a number of terms which would be acceptable in describing the nature of the material when it is finished to have the appearance of leather. Those terms are

(a) The Federal Trade Commission rendered an advisory opinion in regard to the legality of labor unions entering into collective bargaining agreements with their employer manufacturers whereby the manufacturers will agree to cease importing products of the type they manufacture.

(b) It is alleged that the unions have made such a proposal to their employer manufacturers because of the increased imports which have resulted in decreased domestic production, increased domestic unemployment, loss of wages, etc. It is contemplated that penalties will be assessed against any manufacturer who violates the proposed agreement.

(c) The Commission concluded that the immunity afforded to labor unions for certain labor activities is lost if the union combines with non-labor groups to effect a restraint of trade not intimately related to wages, hours, and working conditions and otherwise prohibited by the antitrust laws or Federal Trade Commission Act.

[35 F.R. 2656, Feb. 6, 1970]

§ 15.404 Franchise sales promotion plan with pyramiding franchises and "Functional Override" commission implications.

(a) In a previous advisory opinion the Commission advised that a violation of section 5 of the Federal Trade Commission Act would result from the adoption of the following proposed franchise sales promotion plan.

(b) The plan centers around the sale of a fruit juice drink through franchise independent businessmen who will assist in the franchisor's growth by training additional franchisees. For such performance an original franchisee will be paid a "Functional Override", or commission, of 1 percent of the gross sales of those they recruit and train (direct franchisees) and one-half of 1 percent of the gross sales of those recruited and trained

by direct franchisees (indirect franchisees). In addition, original franchisees will be granted loan credits and cash bonuses for persons proposed and accepted as franchisees.

(c) Although the plan was not intended to have "pyramid sales" implications and the "Functional Override" was to stop with the indirect franchisees insofar as an original franchisee is concerned, a direct franchisee may become an original franchisee and indirect franchisees may become direct, and subsequently original, franchisees by sponsoring other persons as franchisees. This being so the "Functional Override" continues throughout the chain down to the last indirect franchisee recruited who would be unable to derive any benefits from the plan for the reason that the continually expanding pyramid of franchises would prevent the later franchisees from successfully recruiting still other participants.

(d) A tabulation distributed through an operations manual to potential franchise purchasers indicates that an original franchisee may, in theory, benefit from the effort of at least twenty (20) other franchisees. This in the Commission's judgment is somewhat beyond the realm of possibility since an original franchise purchaser does not know the number of prior franchise purchasers nor the degree to which an available market has been saturated with franchises. The return to any given franchise participant will unquestionably be a great deal less than the theoretically achievable amount set forth. No single franchise participant can be certain what his return will be, if any, beyond perhaps that from his first few direct franchisees. Any further amount he might receive would accrue to him sheerly through chance. [35 F.R. 3067, Feb. 17, 1970]

§ 15.405 Disclosure of imported fabric used in American flags.

(a) The Commission issued an advisory opinion with regard to the manufacture of American flags made from imported cloth that it would be necessary to clearly and conspicuously disclose the foreign country of origin of the printed fabric used in the production process under section 4(b) (4) of the Textile Fiber Products Identification Act.

(b) According to the facts considered in this opinion the printed fabric will originate in either Japan or Taiwan, depending upon where the best price can

be obtained. The fabric will be shipped into the United States in a finished state in rolls of 50 to 100 yards per roll. Thereafter, it will be cut, hemmed on the side where cut, grommets attached, assembled, and packaged. The cost of the imported printed fabric or flag material will represent approximately 25 percent of total production costs. The remaining 75 percent will represent domestic labor and material costs. The latter consisting primarily of a pole upon which to hang the flag.

(c) Section 4(b)(4) of the Textile Fiber Products Identification Act provides, among other things, than an imported textile fiber product shall be misbranded if it is not labeled so as to show the name of the country where the product was processed or manufactured. [35 F.R. 3993, Mar. 3, 1970]

§ 15.406

Origin labeling on kits containing imported beads.

(a) The Commission rendered an advisory opinion concerning the proper labeling of a product line of craft kits containing imported glass beads.

(b) Under the facts considered, the box containing the various items in the craft kit would be marked "Manufactured by *" with the name of an American company and its address although some of the items representing 20 percent of the total cost will consist of glass beads imported from Japan and Czechoslovakia. Additionally, loose beads in glass bottles will be offered for sale, the imported beads here representing about 40 percent of the total cost. Advice was requested as to whether each bottle should be marked with the name of the country from which the beads were imported, such as "Made in Japan," "Made in Italy," or "Made in France" as the case might be.

(c) The Commission's advisory opinion reaffirmed the rule that "Made in U.S.A." markings are permissible only on products entirely of domestic origin. Therefore, "Manufactured by * *" with the name of the American company and its address, being synonomous, would be improper since 20 percent of the components of the kits consist of imported beads. However, in the absence of any affirmative representation as to the oriIgin of the kits and their contents, the Commission ruled that such failure to mark or mention the origin of the components on the outside of the box would

not be regarded as deceptive. This ruling will not prevail as to the glass beads being offered for sale to the public separately from the kits. In such circumstances, the country of origin of such items must be fully disclosed.

[35 F.R. 5174, Mar. 27, 1970]

§ 15.407

Association discussion limited to voluntary standardization not violative of outstanding cease and desist order.

(a) The Commission issued an advisory opinion in which an association of librarians was advised that contemplated meetings with various publishers for the limited purpose of discussing standardization of forms, definitions and cataloging would not be violative of Commission administered statutes or the terms of an outstanding cease and desist order prohibiting the publishers from meeting for the purpose of discussing industry selling practices and procedures. Because of the provisions of the order the publishers had heretofore refused to meet as a group.

(b) The Commission considered assurances that the proposed discussions would not involve matters of discounts, freight and other allowances, and other elements of price, and the fact that members of the association of librarians were book purchasers with a vital interest in the preservation of competition in the industry and the prevention of price fixing.

(c) The association was further advised that Commission approval was based upon an understanding that any agreements reached at such meetings are to be entirely voluntary actions of each party involved without compulsion in any form.

[35 F.R. 5542, Apr. 3, 1970]

§ 15.408 Debt collection forms and envelopes which simulate Government or other official documents.

(a) The Commission advised sellers of skip tracer and debt collection forms that a proposal to use forms simulating Government and other official documents would be regarded as violative of an outstanding cease-and-desist order and Commission administered statutes.

(b) In rejecting the proposal to use certain envelopes and forms, the Commission pointed out that:

(1) The general appearance of the proposed forms, when considered with numerous references to "Washington",