which any figures, words, letters, or symbols appear in conjunction with the catalog presentation of products which likely would be construed by consumerpurchasers or prospective consumer-purchasers as retail prices specified by the industry member, or which would be subject to use by the retail outlet to create such an impression in the minds of consumer-purchasers or prospective consumer-purchasers, when the industry member knows, or has good reason to believe, that such products customarily will be sold by such retail outlets at lower prices with consequent deception of the consumer-purchasers or prospective consumer-purchasers as to the usual retail price for such products.

NOTE: Except under the limitations and conditions prescribed by the McGuire Act (see footnote to § 23.19), any arrangement between an industry member and others, including retailer-customers of the industry member, whereby resale prices for products are fixed, maintained, or enhanced, is an unlawful restraint of trade violative of section 5 of the Federal Trade Commission Act.

§ 23.5 Misuse of terms “close-outs,” discontinued lines,” “special bargains,”

etc.

It is an unfair trade practice to offer for sale, sell, advertise, describe, or otherwise represent, industry products as "Close-Outs," "Discontinued Lines," or "Special Bargains," by use of such terms, or by words or representations of similar import, when such is not true in fact; or to so offer for sale, sell, advertise, describe, or otherwise represent, industry products where the capacity and tendency or effect thereof is to lead the purchasing or consuming public to believe such products are being offered for sale or sold at greatly reduced prices, or at so-called “bargain” prices, when such is not the fact.

§ 23.6 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 purchasers or prospective purchasers, 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.

§ 23.7

Use of the word “free.”

In connection with the sale, offering for sale, or distribution of the 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.

§ 23.8 Guarantees, warranties, etc.

(a) In the sale, offering for sale, or distribution of industry products, it is an unfair trade practice for any industry member

(1) To represent that any industry product is guaranteed unless, in close conjunction with such representation, the identity of the guarantor, the extent and nature of the guarantee, and any material conditions or limitations relating to the liability of the guarantor under the guarantee, are adequately and nondeceptively disclosed; or

(2) To offer or use any guarantee respecting an industry product under which the guarantor fails to observe his obligations thereunder; or

(3) To offer or use any guarantee which is otherwise deceptive or unfair. (b) This section shall be applicable not only to guarantees but also to warranties, to purported guarantees and warranties, and to any promise or representation in the nature of 8 guarantee or warranty.

§ 23.9 Misuse of term "certified," etc.

It is an unfair trade practice to describe, identify, or refer to an industry product as "Certified," or to use respecting it any other word or words of similar meaning or import, unless

(a) The identity of the certifier and the specific matters or qualities certified are clearly disclosed in conjunction therewith; and

(b) The certifier has examined such product, has made such certification, and is qualified to certify as to such matters and qualities; and

(c) There is available to the purchaser a certificate setting forth clearly and nondeceptively the name of the certifier and the matters and qualities certified. § 23.10 Misrepresentation as to origin and disclosure of foreign origin.

(a) It is an unfair trade practice to misrepresent the place of origin, production, or manufacture of industry products or their components.

(b) It is an unfair trade practice to offer for sale, sell, or distribute any industry product manufactured or produced in a foreign country, or any industry product containing a part or parts manufactured or produced in a foreign country, without affirmatively and clearly disclosing thereon, or in immediate conjunction therewith, by a truthful and nondeceptive mark, stamp, brand, or label, the country of origin of such product or part, where failure to so disclose the country of origin has the capacity and tendency or effect of misleading or deceiving the purchasing or consuming public in any material respect.

NOTE: Nothing in paragraph (b) of this section shall be construed as requiring disclosure as to the foreign origin of such small and primarily functional parts as rivets, screws, bolts, washers, springs, spring bars and spring rings; or as to the foreign origin of pearls, cultured pearls, diamonds, or any other precious or semi-precious stones, or glass insets which imitate precious or semiprecious stones, when same are primarily obtained from sources outside the United

States and its territories and possessions; or as to the foreign origin of any other part or parts which, by reason of further processing in this country, no longer retain the appearance and essential characteristics possessed by them at the time of their importation. Disclosure of the foreign origin of imitation pearls which have not been subjected to processing in this country to the extent of losing the appearance and essential characteristics possessed by them at the time of their importation must be made though such imitation pearls after importation have been strung and made into necklaces in this country.

§ 23.11 Misuse of terms "hand-made,” "hand-polished," etc.

(a) It is an unfair trade practice to represent, directly or by implication, that any industry product is hand-made or hand-wrought unless the entire shaping and forming of such product from raw materials and its finishing and decoration were accomplished by hand labor and manually-controlled methods which permit the maker to control and vary the construction, shape, design, and finish of each part of each individual product.

NOTE: As used here, "raw materials" include bulk sheet, strip, wire, and similar items that have not been cut, shaped, or formed into Jewelry parts, semi-finished parts, or blanks.

(b) It is an unfair trade practice to represent, directly or by implication, that any industry product is hand-forged, hand-engraved, hand-finished, or handpolished, or has been otherwise handprocessed, unless the operation described was accomplished by hand labor and manually-controlled methods which permit the maker to control and vary the type, amount, and effect of such operation on each part of each individual product.

§ 23.12 Deceptive use and imitation of trade or corporate names, trademarks, etc.

It is an unfair trade practice for any member of the industry to use any trade name, corporate name, trade-mark, or other trade designation, which has the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers as to the character, name, nature, or origin of any product of the industry, or of any material used therein, or which is false or misleading in any material respect.

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

§ 23.14 Consignment distribution.

(a) It is an unfair trade practice for any member of the industry to employ the practice of shipping industry products on consignment without the express request of prior consent of the purchasers.

(b) 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 purchasers through regular channels of distribution, thereby injuring, destroying or preventing competition or tending to create a monopoly or unreasonably to restrain trade.

(c) Nothing in this section shall be construed to authorize any understanding or agreement, combination or conspiracy, or planned common course of action, by and between industry members, mutually to conform or restrict their practice of shipping goods on consignment with the intent or effect of lessening competition.

stantially injuring or lessening present or potential competition, is an unfair trade practice.

or

(b) Nothing in this section is intended to imply that it is improper 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, 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.

§ 23.16 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 competitors' products in any respect, or of their business methods, selling prices, values, credit terms, policies, or services, is an unfair trade practice.

§ 23.17 Enticing away employees of competitors.

It is an unfair trade practice for any member of the industry wilfully to entice away employees or sales-contact personnel of competitors with the intent and effect of thereby unduly hampering or injuring competitors in their business and destroying or substantially lessening competition: Provided, That nothing in this section shall be construed as prohibiting such persons from seeking more favorable employment, or as prohibiting employers from hiring or offering employment to employees of a competitor in good faith and not for the purpose of inflicting injury on such competitor.

§ 23.18 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 agreement or understanding, including its duration, or the attendant circumstances, the effect may 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 sections 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, as amended by the Robinson-Patman Act.

§ 23.19 Prohibited forms of trade restraints (unlawful price fixing, etc.).1 It is an unfair trade practice for any member of the industry, either directly

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.

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.

§ 23.20 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, 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 obsolescent goods; (3) made under judicial process; or (4) made in bona fide discontinuance of business in the goods concerned.

(c) As used in paragraph (b) (1) through (4) 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 in

cluded 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.

§ 23.21

Prohibited discrimination.'

(a) Prohibited discriminatory prices, 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, 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 insti

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 oher place under the jurisdiction of the United States."

tutions 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 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 own commerce from selecting their 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 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: See subsection (b) of section 2 of the Clayton Act as amended, which is set forth in the note following paragraph (1) of this section.

(b) The following are examples of price differential practices to be considered as subject to the prohibitions of paragraph (a) of this section when involving goods of like grade and quality which are 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—