The Code of Federal Regulations of the United States of America

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 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 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 obsolescence of seasonal goods, actual or imminent deterioration of perishable goods, distress sales under court process, or sales in good faith in discon

tinuance 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, or the services or facilities furnished by a competitor.

NOTE: In complaint proceedings, justincation of price differentials under subparagraphs (2), (4) and (5) of this paragraph of this section is a matter of affirmative defense to be established by the person or concern charged with price discrimination. (b) Examples of price differential practices. 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

(1) The commerce requirements specified in paragraph (a) of this section are present; and

(2) 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 competition with the industry member or with the customer receiving the benefit of the price differential, or with customers of either of them; and

(3) The price differential is not justified by cost savings (see paragraph (a) (2) of this section); and

(4) The price differential is not made in response to changing conditions affecting the market for or the marketability of the goods concerned (see paragraph (a) (4) of this section); and

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

Example No. 1. 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 No. 2. 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.

(c) 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.

(d) 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.

(e) 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.

(f) 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.

NOTE: Paragraph (f) of this section is a restatement of section 2 (f) of the Clayton Act as amended. In a complaint proceeding under this section of said act, 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 subparagraphs (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 prices knew the nature and extent of such differences and knew 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.

(g) Purchases by U. S. GovernmentApplicability of Robinson-Patman Antidiscrimination Act to same. In an opinion submitted to the Secretary of War under date of December 28, 1936, the U. S. Attorney General advised that the Robinson-Patman Antidiscrimination Act "is not applicable to Government contracts for supplies." (38 Opinions, Attorney General 539.)

COMMITTEE ON TRADE PRACTICES

§ 25.201 Industry committee.

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

(b) Mechanical air-conditioning units or systems for commercial, industrial, or home use.

NOTE 1. As above used, the word "installation" makes reference to services the performance of which requires engineering knowledge and skill. Thus, window air-conditioning units and mechanical refrigeration units which are of such size and type as to require but a "plug in" to an established electric power system are not to be considered as products to which these rules have application.

NOTE 2. As above used, the words “airconditioning units or systems" make reference to units or systems which are either capable of lowering, or of both lowering and raising, the temperature of the air within an enclosure and simultaneously effecting a substantial degree of control of the humidity and circulation of the air in such enclosure.

Units or systems which are designed to raise, but not lower, the temperature of air within an enclosure are not products to which these rules have application.

NOTE 3. The above is to be construed as definement of the nature of activities to which the rules have application and is not intended as definement of the kind of products which may be designated "air conditioners" or "refrigeration units or systems." GROUP I

§ 26.1 Deception (general).

In connection with the sale and installation of industry products, it is an unfair trade practice to use, or cause or promote the use of, any trade promotional literature, advertising matter, mark, brand, label, or device, or any other type of oral or written representation, which has the capacity and tendency or effect of deceiving purchasers, or prospective purchasers as to the construction, design, model, origin, manufacture, quality, absence of noise in operation, strength, durability, life expectancy, utility, cost of operation, or safety of such products, or of their capacity to cool or refrigerate, or in any other material respect; or to mislead purchasers or prospective purchasers with respect to the need for repair, maintenance, or replacement of parts of such products after their purchase and use, or with respect to any services offered concerning maintenance of the products. § 26.2 Guarantees, warranties, etc.

In the sale, offering for sale, or installation of industry products, it is an unfair trade practice to use, or cause to be used, any guarantee or warranty which is false, misleading, deceptive, or unfair to the purchasing or consuming public, whether in respect to quality, construction, serviceability, or performance of any industry product.

(a) The foregoing inhibitions of this section are to be considered as applicable with respect to any guarantee or warranty in which the terms and conditions relating to the obligation of the guarantor or warrantor are impractical of fulfillment.

(b) It is also an unfair trade practice to make or offer any guarantee or warranty respecting an industry product unless the nature and extent of the undertaking, and any and all material conditions and limitations applicable thereto, are clearly and conspicuously stated in immediate conjunction there

with, and unless the obligations of the guarantor or warrantor with respect to the guarantee or warranty are scrupulously fulfilled.

§ 26.3

Prohibited discrimination.1

(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 the 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;

NOTE: This proviso shall not be construed as permitting an industry member to allow a price differential to a customer, whether in the form of a quantity price discount, rebate, or other form, through billing as a single order an aggregate of the amount of two or more orders of such customer on

1 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 the industry member makes separate deliveries, when the price differential allowed is not based on a net savings in cost of manufacture, sale, or delivery of the products to said customer resulting from the different method and quantity in which the products are sold and delivered to said customer, or is more than due allowance for such net savings; nor is this proviso to be construed as permitting an industry member to allow a price differential to a customer, whether in the form of a quantity price discount, rebate, or other form, when, pursuant to agreement or understanding by the industry member and the customer, delivery of the products purchased is to be delayed or made in installments so as to involve storage cost to the industry member, and when as a result of such cost or otherwise, the price differential allowed is not based on a net savings in cost of manufacture, sale, or delivery of the products to said customer resulting from the different method and quantity in which the products are sold and delivered to said customer, or is more than due allowance for such net savings.

(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.

(b) Prohibited brokerage and commissions. It is an unfair trade practice for any industry member 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.

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 industry member 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.

(e) Inducing or receiving an illegal discrimination in price. It is an unfair trade practice for any industry member 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) Exemptions. The inhibitions of this section shall not apply to purchases of their supplies for their own use by schools, colleges, universities, public libraries, churches, hospitals, and charitable institutions not operated for profit.

NOTE: In complaint proceedings charging discrimination in price or services or facilities furnished, and upon proof having been made of such discrimination, the burden of rebutting the prima facie case thus made by showing justification shall be upon the person charged; and unless justification shall be affirmatively shown, the Commission is authorized to issue an order terminating the discrimination: Provided, however, That nothing contained in this section 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 fur

nished by a competitor. See section 2-b, Clayton Act.

§ 26.4 Substitution of products.

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

(a) Shipping, delivering, or installing 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.

§ 26.5 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.

NOTE: Illustrative of the type of misrepresentation inhibited by this section is the practice of an industry member advertising or otherwise claiming that a product has been approved by a governmental authority or private agency, or meets certain specifications or standards, when in fact the product has not been so approved or does not meet the certain specifications or standards. § 26.6 Deceptive prices.

(a) The publishing or circulating of false or misleading price quotations, price lists, or terms or conditions of sale, with the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers, is an unfair trade practice.

(b) It is also an unfair trade practice to make or publish, directly or indirectly, any false, misleading, or deceptive statements or representations, through advertising or otherwise, concerning installment sales contracts used or their terms and conditions, including down payments, interest, carrying charges, etc., or respecting any other matters relative to such contracts or their terms and conditions.

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