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 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 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 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.

§ 22.4 Push money.

It is an unfair trade practice for any industry member to pay or contract to pay anything of value to a salesperson employed by a customer of 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 chance; 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 to substantially 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, as amended by the Robinson-Patman 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, as amended by the RobinsonPatman Act.

§ 22.5 Fictitious prices.

It is an unfair trade practice to sell or offer for sale industry products at prices purported to be reduced from what are in fact fictitious prices, or to sell or offer for sale such products at a purported reduction in price when such purported reduction is in fact fictitious or is otherwise misleading or deceptive.

§ 22.6 False invoicing, billing, etc.

It is an unfair trade practice for a member of the industry to engage in false invoicing which has the capacity and tendency or effect of misleading or deceiving purchasers, prospective purchasers, or the consuming public, by withholding from, altering, or inserting

in, invoices, billings, or sales slips any statements or information by reason of which omission, alteration, or insertion a false record is made, wholly or in part, of the transactions represented on the face of the invoices, billings, or sales slips.

§ 22.7 Coercing the 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 substantially to lessen competition or tend to create a monopoly or unreasonably to restrain trade, is an unfair trade practice. § 22.8 Misrepresentation in general.

It is an unfair trade practice for any industry member to make or cause to be made, directly or indirectly, in newspaper or periodical advertisements, sales promotional literature, by television, radio, or in connection with any demonstration or course of instruction or otherwise, any statement or representation, however published, which has the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers;

(a) With respect to the identity of any product of the industry, or its manufacture, distribution, or marketing;

(b) With respect to the brand, composition, grade, quality, quantity, or size of any product of the industry;

(c) With respect to the availability of the supply of a particular product or products of the industry;

(d) With respect to the permanency of service by the seller, or savings available to the purchaser of, or subscribers to, socalled "Home Freezer Plans," which involve the sale of industry products; or (e) In any other material respect.

NOTE: Among the inhibitions of this section 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. Furthermore, nothing in the rules in this part is to be construed as relieving anyone of the necessity of complying with the provisions of the Federal Food, Drug, and Cosmetic Act in respect to labeling or any other matter coming within the purview of that act.

§ 22.9 Defamation of competitors or false 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 grade, quality, or manufacture of the products of competitors, or of their business methods, selling prices, values, credit terms, policies, services, or conditions of employment is an unfair trade practice.

§ 22.10 Enticing away employees of competitors.

Knowingly enticing away employees or sales representatives of competitors under any circumstance having the capacity and tendency or effect of substantially injuring or lessening present or potential competition is an unfair trade practice: Provided, That nothing in this section shall be construed as prohibiting employees from seeking more favorable employment, or as prohibiting employers from hiring or offering employment to employees of competitors in good faith and not for the purpose of injuring, destroying, or preventing competition.

§ 22.11 Substitution of products.

It is an unfair trade practice for a member of the industry to make an unauthorized substitution of products, where such substitution has the capacity and tendency or effect of misleading or deceiving the purchasing or consuming public, by:

(a) Shipping or delivering industry 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 advising the purchaser of the substitution and obtaining his consent thereto prior to making shipment or delivery; or

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

§ 22.12 Inducing breach of contract.

(a) Knowingly inducing or attempting to induce the breach of existing lawful contracts between competitors and their customers or their suppliers, or interfering with or obstructing 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, is an unfair trade practice.

(b) Nothing in this section is intended to imply that it is improper for any in

dustry member to solicit the business of a customer of a competing industry member; nor is the section 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.

§ 22.13 Use of lottery schemes, etc.

It is an unfair trade practice to sell, distribute, or promote the sale or distribution of any industry product by means of a game of chance, gift enterprise, or lottery scheme.

§ 22.14 Prohibited forms of trade restraints (unlawful price fixing, etc.)*

It is an unfair trade practice for any member of the industry, 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 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.

same

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 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.

§ 22.15

Use of the word "free." In connection with the sale, offering for sale, or distribution of industry products, it is an unfair trade practice to use the word "free," or any other word or words of similar import, in advertisements or in other offers to the public, as descriptive of an article of merchandise, or service, which is not an unconditional gift, under the following circumstances:

(a) When all the conditions, obligations, or other prerequisites to the receipt and retention of the "free" article of merchandise or service offered are not clearly and conspicuously set forth at the outset so as to leave no reasonable probability that the terms of the offer will be misunderstood; and, regardless of such disclosure:

(b) When, with respect to any article of merchandise required to be purchased in order to obtain the "free" article or service, the offerer (1) increases the ordinary and usual price of such article of merchandise, or (2) reduces its quality, or (3) reduces the quantity or size thereof.

NOTE: The disclosure required by paragraph (a) of this section shall appear in close conjunction with the word "free" (or other word or words of similar import) wherever such word first appears in each advertisement or offer. A disclosure in the form of a footnote, to which reference is made by use of an asterisk or other symbol placed next to the word "free," will not be regarded as compliance.

§ 22.16 Misrepresenting products as conforming to standard.

In connection with the sale or offering for sale of industry products, it is an unfair trade practice to represent, through advertising or otherwise, that such products conform to any standards recognized in or applicable to the industry when such is not the fact.

§ 22.17 Procurement of

confidential information.

competitors'

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.

§ 22.18 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 in this part, or of any other unfair method of competition or unfair or deceptive act or practice.

GROUP II

§ 22.101 Contractual obligations.

The industry condemns repudiation of contracts by sellers on a rising market or by buyers on a declining market. Lawful contracts of business obligations should be performed in letter and in spirit. § 22.102 Proper refrigeration.

The industry condemns practices at variance with essential health and sanitary temperature and refrigeration control requirements as constituting a menace to the public health and the general welfare of the consuming public and the industry. It recommends that the temperature and refrigeration of industry products should be maintained constantly and uniformly not higher than zero degrees Fahrenheit in order to prevent spoilage, deterioration, and contamination.

Misuse of words "gem," "reproduction," "replica," "synthetic," etc. Appendix-Listing and classification of rules for convenient reference by industry members.

AUTHORITY: The provisions of this Part 23 issued under secs. 6, 5, 38 Stat. 721, 719; 15 U.S.C. 46, 45.

SOURCE: The provisions of this Part 23 appear at 22 F.R. 4568, June 28, 1957, unless otherwise noted.

§ 23.0

Definitions.

As used in the rules in this part, the terms hereinafter set forth shall be understood to have the following meanings:

(a) Diamond. A diamond is a natural mineral consisting essentially of pure carbon crystallized in the isometric system and is found in many colors. Its hardness is 10; its specific gravity approximately 3.52; and it has a refractive index of 2.42.

(b) Pearl. A calcareous concretion consisting essentially of alternating concentric layers of carbonate of lime and organic material formed within the body of certain mollusks, the result of an abnormal secretory process caused by an irritation of the mantle of the mollusk consequent on the intrusion of some foreign body inside the shell of the mollusk,

or due to some abnormal physiological condition in the mollusk, neither of which has in any way been caused or induced by man.

(c) Cultured pearl. The composite product created when a nucleus (usually a sphere of calcareous mollusk shell) planted by man inside the shell or in the mantle of a mollusk is coated with nacre by the mollusk.

(d) Imitation pearl. A manufactured product (composed of any material or materials which simulates in appearance a pearl or cultured pearl.

§ 23.1 Deception (general).

(a) It is an unfair trade practice for an industry member to sell or offer for sale any industry product under any representation, description, circumstance, or condition having the capacity and tendency or effect of deceiving purchasers or prospective purchasers thereof as to the type, kind, grade, quality, quantity, metallic content, size, weight, cut, color, character, substance, durability, serviceability, origin, price, value, preparation, production, manufacture, or distribution of such industry product, or which has the capacity and tendency or effect of misleading or deceiving the purchasing or consuming public in any other material respect.

(b) The inhibitions of this section are applicable to all forms of advertising, whether in periodicals, on the radio or television, and whether written or oral, and to any form of marking or labeling of products or their containers. § 23.2 Misleading illustrations.

It is an unfair trade practice, in connection with the offering for sale, sale, or distribution of industry products, to use, as part of any packaging material, label, advertisement, or other sales promotion matter, any visual representation, picture, illustration, diagram, or other depiction which, either alone or in conjunction with any accompanying words or phrases, has the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers concerning the type, kind, grade, quality, quantity, metallic content, size, weight, cut, color, character, substance, durability, serviceability, origin, preparation, production, manufacture, or distribution of any industry product, or which has the capacity and tendency or effect of misleading or deceiving the purchasing

or consuming public in any material respect.

NOTE: Among practices inhibited by this section are illustrations and depictions of diamonds in greater than actual size without a clear and conspicuous disclosure of the fact that the illustrations or depictions are enlargements, when the failure to make such disclosure has the capacity and tendency or effect of deceiving purchasers or prospective purchasers of such diamonds or any products containing same.

§ 23.3 Misrepresentation as to character of business.

It is an unfair trade practice for any member of the industry to represent, directly or indirectly, through the use of any word or term in his corporate or trade name, in his advertising, or otherwise, that he is a producer, manufacturer, processor, wholesaler, or importer of products of the industry, or that he owns or controls a factory making or processing such products, or has connections abroad through which imports are secured, or maintains offices abroad, when such is not the fact, or in any other manner to misrepresent the character, extent, volume, or type of his business.

§ 23.4 Deceptive pricing.

(a) It is an unfair trade practice for any member of the industry to represent, directly or indirectly, in advertising or otherwise, that the price of an industry product has been reduced from what is in fact a fictitious price, or that such price is a reduced or a special price when it is in fact the regular selling price of such product, or that the regular price thereof is higher when such is not the fact, or otherwise falsely or deceptively to represent the past or current price of an industry product.

(b) It is an unfair trade practice for any member of the industry, directly or indirectly, to use or to supply to dealers, or to aid or assist in the use of, price tags, labels, or similar devices which are false or fictitious, or which such member has reason to believe are intended to be used or will be used by dealers or salesmen for the purpose of misleading or deceiving the purchasing or consuming public in regard to price, or in any other material respect.

(c) It is an unfair trade practice for any member of the industry to distribute catalogs to retail outlets in which retail prices for products are specified, or in