NOTE 1: Industry members giving allowances for advertising or sales promotion must, in addition to according same to all competing customers on proportionally equal terms, exercise precaution and diligence in seeing that all such allowances are used by the customers for such purpose. Customers receiving such allowances must not use same for any other purpose.

When an allowance is made ostensibly for advertising or sales promotion of products and is not in fact used for that purpose the practice may constitute a price discrimination. In such case, the party giving the allowance may violate paragraph (a) of this section and the party receiving same may violate paragraph (f) of this section.

NOTE 2: When an industry member gives allowances to competing customers for advertising in a newspaper or periodical, the fact that a lower advertising rate for equivalent space is available to one or more, but not all, such customers, is not to be regarded by the industry member as warranting the retention by such customer or customers of any portion of the allowance for his or their personal use or benefit.

(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.

NOTE 1: See subsection (b) of section 2 of the Clayton Act, as amended, which is set forth in Note 1 to subparagraph (5) of paragraph (a) of this section.

NOTE 2: Among the practices inhibited by paragraph (e) of this section is that of an industry member according to one or more customers the privilege of returning for credit or refund any or all of the goods purchased by them and failing to accord the same privilege to another or other competing customers on proportionally equal terms. In this connection see Note 2 under cost justification proviso (2) (subparagraph (2) of paragraph (a) of this section).

(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.

86-033-68- -19

Substitution of products.

48.17

Enticing away employees of competitors.

48.18 Aiding or abetting use of unfair trade practices.

AUTHORITY: The provisions of this Part 48 issued under secs. 6, 5, 38 Stat. 721, 719; 15 U.S.C. 46, 45.

SOURCE: The provisions of this Part 48 appear at 24 F.R. 10195, Dec. 17, 1959, unless otherwise noted.

§ 48.0 The industry and its products defined.

(a) Products of the industry include tire and tube patches, plugs, boots, rubber or metal replacement or repair valves, valve cores, valve caps, patch kits, cement, clamps, friction tape, cold patches, vulcanizing, patches, tire chemical cleaners, solvents, and similar materials and tools used in the repair or

maintenance of tires and tubes. Tread rubber, tire liners, tire gauges, tire paint, and equipment used in removing tires from wheels or remounting thereon, are not included.

(b) Members of the industry are persons, firms, corporations, and organizations engaged in the manufacture and sale, or importation and sale, of any such products.

GROUP I

§ 48.1 Misrepresentation and deception in general.

It is an unfair trade practice to use, or cause or promote the use of, any statement, representation, guarantee, or warranty by way of advertising (through newspapers, magazines, circulars, booklets, or any other medium), labeling of containers, descriptions in catalogs, oral representations, or otherwise, which has the capacity and tendency or effect of misleading or deceiving purchasers, prospective purchasers, or the consuming public with respect to the grade, quality, quantity, substance, character, origin, type, size, preparation, manufacture, or distribution of any product of the industry, or of the character, permanence, or effectiveness of the repairs that can be made therewith.

§ 48.3

Inducing breach of contract.

(a) Knowingly inducing or attempting to induce the breach of existing lawful contracts between competitors and their customers or between competitors and their suppliers, or interfering with or obstructing the performance of any such contractual duties or services, under any circumstance 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 industry 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.

§ 48.4 Commercial bribery.

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, salesclerks, employees, or representatives of customers or prospective customers of an industry member, without the knowledge of the employers or principals of such agents, salesclerks, employees, or representatives, as an inducement:

(a) To influence such employers or principals to purchase or contract to purchase products manufactured or sold by the industry member; or

(b) To influence such employers or principals to refrain from dealing in the products of competitors or from dealing or contracting to deal with competitors;

or

(c) For the purpose of causing said agents, salesclerks, employees, or representatives to push and promote the resale of the industry member's products over competing products being offered for resale by the employers or principals of said agents, salesclerks, employees, or representatives. (See also § 48.14.) § 48.5 Defamation of competitors or false disparagement of their prod

ucts.

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 quality, grade, origin, use, construction, design, manufacture, or distribution of the products of competitors, or of their business methods, selling prices, values, credit terms, policies, or services, is an unfair trade practice.

§ 48.6 False invoicing.

Withholding from or inserting in invoices or sales slips 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 or sales slips, with the capacity and tendency or effect of thereby misleading

or deceiving purchasers, prospective purchasers, or the consuming public, is an unfair trade practice.

§ 48.7

1

Prohibited forms of trade restraints (unlawful price fixing, etc.) 1 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. § 48.8 False and misleading price quotations, etc.

It is an unfair trade practice for any industry member, in the course of or in connection with the offering for sale, sale, or distribution of industry products, to publish or circulate to or among purchasers or prospective purchasers false price quotations, price lists, or terms or conditions of sale; or to publish, or circulate among purchasers or prospective purchasers, any price quotations, price lists, or terms or conditions of sale which have the capacity and tendency or

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.

effect of thereby misleading or deceiving purchasers or prospective purchasers in any material respect.

§ 48.9 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 a 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 obsolescent goods; (2) made under judicial process; or (3) made in bona fide discontinuance of business in the goods concerned.

(c) As used in the foregoing paragraphs 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 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 an, of the requirements of the Robinson-Patman

Act.

§ 48.10 Exclusive deals.

It is an unfair trade practice for any member of the industry engaged in commerce, in the course of such commerce, to lease or make a sale or contract for sale, of any industry product, for use, consumption, or resale within any place under the jurisdiction of the United States, or fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale, or such condition, agreement, or understanding, may be to substantially lessen competition or tend to create a monopoly in any line of commerce.

§ 48.11 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.

§ 48.12 Deception by means of "bogus independents."

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

(a) To represent, directly or by implication, that a certain seller of industry products is independent of, or in competition with, said member, when such is not the fact; or

(b) To fail to disclose that any seller of industry products is not independent of, or not in competition with, said member, under circumstances where the failure to make such disclosure has the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers.

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 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 or for multiple deliveries.

(3) That nothing contained in this section shall prevent persons engaged in selling goods, wares, or merchandise in

tween 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."

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, 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: Subsection (b) of section 2 of the Clayton Act, as amended, reads as follows: "Upon proof being made, at any hearing on a complaint under this section, that there has been discrimination in price or services or facilities furnished, the burden of rebutting the prima facie case thus made by showing justification shall be upon the person charged with a violation of this section, and unless justification shall be affirmatively shown, the Commission is authorized to issue an order terminating the discrimination: Provided, however, That nothing herein contained 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 furnished by a competitor.

(b) Examples of prohibited 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 paragraph (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 a discount of the same percentage to other customers on their purchases during such period.3

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.3

Example No. 3. A certain percentage discount for payment within a specified time is granted by an industry member to some customers on goods purchased by them from the industry member. Another customer or customers are, nevertheless, allowed to take an additional or larger discount when making payment to the industry member within the time prescribed.3

Example No. 4. An industry member sells goods to one or more of his customers at a lower price than he charges other customers therefor, basing his justification for the price difference on the fact that the favored customer or customers warehoused the goods they purchased from the member.3

Example No. 5. An industry member makes a sale of industry products to an outlet which is one of two or more outlets jointly owned and/or operated at a price less than the member charges for a like sale to another customer; or gives a rebate on the first mentioned sale to the parent organization owning and/or operating the outlet receiving the products so purchased and does not give such a rebate to the other customer.3

Example No. 6. An industry member makes a sale of industry products to a customer which is affiliated with a buying group at a price less than the member charges for a like sale to another customer which is not affiliated with a buying group; or gives a rebate on the first mentioned sale

3 This is to be considered as an example of a practice which is violative of paragraph (a) of this section only when the conditions specified in that part of paragraph (b) of this section which precede Example No. 1 are present.