for allocating advertising funds if the seller offers small retailers that pay more than the lowest newspaper rate an alternative that enables them to obtain the same percentage of their advertising cost as large retailers. If the $1.00 per line allowance is based on 50 percent of the newspaper's lowest contract rate of $2.00 per line, the seller should offer to pay 50 percent of the newspaper advertising cost of smaller retailers that establish, by invoice or otherwise, that they paid more than that contract rate.

Example 7: A seller offers each customer promotional allowances at the rate of one dollar for each unit of its product purchased during a defined promotional period. If Buyer A purchases 100 units, Buyer B 50 units, and Buyer C 25 units, the seller maintains proportional equality by allowing $100 to Buyer A, $50 to Buyer B, and $25 to Buyer C, to be used for the Buyers' expenditures on promotion.

§ 240.10 Availability to all competing

customers.

(a) Functional availability:

(1) The seller should take reasonable steps to ensure that services and facilities are useable in a practical sense by all competing customers. This may require offering alternative terms and conditions under which customers can participate. When a seller provides alternatives in order to meet the availability requirement, it should take reasonable steps to ensure that the alternatives are proportionally equal, and the seller should inform competing customers of the various alternative plans.

(2) The seller should insure that promotional plans or alternatives offered to retailers do not bar any competing retailers from participation, whether they purchase directly from the seller or through a wholesaler or other intermediary.

(3) When a seller offers to competing customers alternative services or allowances that are proportionally equal and at least one such offer is useable in a practical sense by all competing customers, and refrains from taking steps to prevent customers from participating, it has satisfied its obligation to make services and allowances "functionally available" to all customers. Therefore, the failure of any customer to participate in the program does not place the seller in violation of the Act.

Example 1: A manufacturer offers a plan for cooperative advertising on radio, TV, or in newspapers of general circulation. Because the purchases of some of the manufacturer's customers are too small this offer is not useable in a practical sense by them. The manufacturer should offer them alternative(s) on proportionally equal terms that are useable in a practical sense by them.

Example 2: A seller furnishes demonstrators to large department store customers. The seller should provide alternatives useable in a practical sense on proportionally equal terms to those competing customers who cannot use demonstrators. The alternatives may be services useable in a practical sense that are furnished by the seller, or payments by the seller to customers for their advertising or promotion of the seller's product.

Example 3: A seller offers to pay 75 percent of the cost of advertising in daily newspapers, which are the regular advertising media of the seller's large or chain store customers, but a lesser amount, such as only 50 percent of the cost, or even nothing at all, for advertising in semi-weekly, weekly, or other newspapers or media that may be used by small retail customers. Such a plan discriminates against particular customers or classes of customers. To avoid that discrimination, the seller in offering to pay allowances for newspaper advertising should offer to pay the same percent of the cost of newspaper advertising for all competing customers in a newspaper of the customer's choice, or at least in those newspapers that meet the requirements for second class mail privileges. While a small customer may be offered, as an alternative to advertising in daily newspapers, allowances for other media and services such as envelope stuffers, handbills, window banners, and the like, the small customer should have the choice to use its promotional allowance for advertising similar to that available to the larger customers, if it can practicably do so.

Example 4: A seller offers short term displays of varying sizes, including some which are useable by each of its competing customers in a practical business sense. The seller requires uniform, reasonable certification of performance by each customer. Because they are reluctant to process the required paper work, some customers do not participate. This fact does not place the seller in violation of the functional availability requirement and it is under no obligation to provide additional alternatives.

(b) Notice of available services and allowances: The seller has an obligation to take steps reasonably designed to provide notice to competing customers of the availability of promotional services and allowances. Such

notification should include enough details of the offer in time to enable customers to make an informed judgment whether to participate. When some competing customers do not purchase directly from the seller, the seller must take steps reasonably designed to provide notice to such indirect customers. Acceptable notification may vary. The following is a non-exhaustive list of acceptable methods of notification:

(1) By providing direct notice to customers;

(2) When a promotion consists of providing retailers with display materials, by including the materials within the product shipping container;

(3) By including brochures describing the details of the offer in shipping containers;

(4) By providing information on shipping containers or product packages of the availability and essential features of an offer, identifying a specific source for further information;

(5) By placing at reasonable intervals in trade publications of general and widespread distribution announcements of the availability and essential features of promotional offers, identifying a specific source for further information; and

(6) If the competing customers belong to an identifiable group on a specific mailing list, by providing relevant information of promotional offers to customers on that list. For example, if a product is sold lawfully only under Government license (alcoholic beverages, etc.), the seller may inform only its customers holding licenses.

(c) A seller may contract with intermediaries or other third parties to provide notice. See § 240.11.

Example 1: A seller has a plan for the retail promotion of its product in Philadelphia. Some of its retailing customers purchase directly and it offers the plan to them. Other Philadelphia retailers purchase the seller's product through wholesalers. The seller may use the wholesalers to reach the retailing customers that buy through them, either by having the wholesalers notify these retailers, or by using the wholesalers' customer lists for direct notification by the seller.

Example 2: A seller that sells on a direct basis to some retailers in an area, and to other retailers in the area through wholesalers, has a plan for the promotion of

its product at the retail level. If the seller directly notifies competing direct purchasing retailers, and competing retailers purchasing through the wholesalers, the seller is not required to notify its wholesalers.

Example 3: A seller regularly promotes its product at the retail level and during the year has various special promotional offers. The seller's competing customers include large direct-purchasing retailers and smaller retailers that purchase through wholesalers. The promotions offered can best be used by the smaller retailers if the funds to which they are entitled are pooled and used by the wholesalers on their behalf (newspaper advertisements, for example). If retailers purchasing through a wholesaler designate that wholesaler as their agent for receiving notice of, collecting, and using promotional allowances for them, the seller may assume that notice of, and payment under, a promotional plan to such wholesaler constitutes notice and payment to the retailer. The seller must have a reasonable basis for concluding that the retailers have designated the wholesaler as their agent.

Federal Trade Commission Act against a customer who knows, or should know, that it is receiving a discriminatory price through services or allowances not made available on proportionally equal terms to its competitors engaged in the resale of a seller's product. Liability for knowingly receiving such a discrimination may result whether the discrimination takes place directly through payments or services, or indirectly through deductions from purchase invoices or other similar

means.

Example 1: A customer should not induce or receive advertising allowances for special promotion of the seller's product in connection with the customer's anniversary sale or new store opening when the customer knows or should know that such allowances, or suitable alternatives, are not available on proportionally equal terms to all other customers competing with it in the distribution of the seller's product.

Example 2: Frequently the employees of sellers or third parties, such as brokers, perform in-store services for their grocery retailer customers, such as stocking of shelves, building of displays and checking or rotating inventory, etc. A customer operating a retail grocery business should not induce or receive such services when the customer knows or should know that such services (or usable and suitable alternative services) are not available on proportionally equal terms to all other customers competing with it in the distribution of the seller's product.

Example 3: Where a customer has entered into a contract, understanding, or arrangement for the purchase of advertising with a newspaper or other advertising medium that provides for a deferred rebate or other reduction in the price of the advertising, the customer should advise any seller from whom reimbursement for the advertising is claimed that the claimed rate of reimbursement is subject to a deferred rebate or other reduction in price. In the event that any rebate or adjustment in the price is received, the customer should refund to the seller the amount of any excess payment or allowance.

Example 4: A customer should not induce or receive an allowance in excess of that offered in the seller's advertising plan by billing the seller at "vendor rates" or for any other amount in excess of that authorized in the seller's promotional program.

(b) Third party liability: Third parties, such as advertising media, may violate section 5 of the Federal Trade Commission Act through double or fictitious rates or billing. An advertising medium, such as a newspaper, broad

cast station, or printer of catalogues, that publishes a rate schedule containing fictitious rates (or rates that are not reasonably expected to be applicable to a representative number of advertisers), may violate section 5 if the customer uses such deceptive schedule or invoice for a claim for an advertising allowance, payment or credit greater than that to which it would be entitled under the seller's promotional offering. Similarly, an advertising medium that furnishes a customer with an invoice that does not reflect the customer's actual net advertising cost may violate section 5 if the customer uses the invoice to obtain larger payments than it is entitled to receive.

Example 1: A newspaper has a "national" rate and a lower "local" rate. A retailer places an advertisement with the newspaper at the local rate for a seller's product for which the retailer will seek reimbursement under the seller's cooperative advertising plan. The newspaper should not send the retailer two bills, one at the national rate and another at the local rate actually charged.

Example 2: A newspaper has several published rates. A large retailer has in the past earned the lowest rate available. The newspaper should not submit invoices to the retailer showing a high rate by agreement between them unless the invoice discloses that the retailer may receive a rebate and states the amount (or approximate amount) of the rebate, if known, and if not known, the amount of rebate the retailer could reasonably anticipate.

Example 3: A radio station has a flat rate for spot announcements, subject to volume discounts. A retailer buys enough spots to qualify for the discounts. The station should not submit an invoice to the retailer that does not show either the actual net cost or the discount rate.

Example 4: An advertising agent buys a large volume of newspaper advertising space at a low, unpublished negotiated rate. Retailers then buy the space from the agent at a rate lower than they could buy this space directly from the newspaper. The agent should not furnish the retailers invoices showing a rate higher than the retailers actually paid for the space.

$240.14 Meeting competition.

A seller charged with discrimination in violation of sections 2 (d) and (e) may defend its actions by showing that particular payments were made or services furnished in good faith to meet equally high payments or equivalent

services offered or supplied by a competing seller. This defense is available with respect to payments or services offered on an area-wide basis, to those offered to new as well as old customers, and regardless of whether the discrimination has been caused by a decrease or an increase in the payments or services offered. A seller must reasonably believe that its offers are necessary to meet a competitor's offer.

$240.15 Cost justification.

It is no defense to a charge of unlawful discrimination in the payment of an allowance or the furnishing of a service for a seller to show that such payment or service could be justified through savings in the cost of manufacture, sale or delivery.

PART 241-GUIDES FOR THE DOG AND CAT FOOD INDUSTRY

Sec. 241.1

Definitions.

241.2 Misuse of terms.

241.3 Misrepresentation in general. 241.4 Misrepresenting composition, form, suitability, or quality in labeling. 241.5 Misrepresenting composition, form, suitability, or quality in advertising. 241.6 Misrepresentation of color in advertising.

241.7 Misrepresentation of flavor in adver

tising.

241.8 Diet and nutrient misrepresentation. 241.9 Misrepresentation of medicinal and therapeutic benefits.

241.10 Human food representation. 241.11 Misrepresentation

methods.

of

(a) Industry product means a food for dogs or cats and includes all types of dry, semimoist, frozen, canned, and other commercial foods manufactured or marketed for consumption by domesticated dogs or cats. The term also includes special candy for such dogs and cats but does not include animal medicines or remedies.

(b) Industry member means a person, firm, corporation, or organization engaged in the importation, manufacture, sale or distribution of an industry product.

(c) Ingredients are the constituent materials making up a food for dogs or cats. Except as otherwise prescribed in this part the names and definitions of ingredients adopted by the Association of American Feed Control Officials will be used in the administration of this part, except that with respect to products which have been certified by the Department of Agriculture under the provisions of 9 CFR 355.1-355.42, the definitions set forth in those regulations will be used. [Guide 1]

§241.2 Misuse of terms.

241.12 Defamation of competitors or false disparagement of their products.

241.13 Misrepresentation of the character and size of business, extent of testing, etc.

2]

or

trade

§ 241.3 Misrepresentation in general.

Industry members should not use or cause or promote the use of any promotional materials, advertising, labels, insignia, brand or trade names which have the capacity, and tendency or effect of misleading or deceiving purchasers or prospective purchasers:

(a) With respect to the composition, substance, content, identity, quantity, appearance, consistency, form, shape, color, flavor, cost, value, origin, grade,

quality, suitability, nutritional properties, methods of manufacture, manner of processing, or novelty of an industry product or ingredient thereof;

or

(b) In any other material respect. [Guide 3]

§241.4 Misrepresenting

composition,

form, suitability, or quality in labeling.

An industry member should not use on the label of an industry product a statement of identity, vignette, or any other representation, pictorial or otherwise, which has the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers with respect to the composition, form, suitability, quality, color, or flavor of the product or any of its ingredients. More specifically:

(a) A label should contain sufficient information to enable a purchaser or prospective purchaser to determine the nature and composition of the product and the purposes for which it is suitable. As a prospective purchaser usually cannot ascertain by inspection whether an industry product will satisfy all of the nutritional requirements of a dog or cat, labeling respecting a product which is suitable only for particular purposes, e.g., as an intermittent or supplemental food, a special food for puppies, a protein supplement, or as a maintenance food for mature dogs, or is otherwise not a complete food, should not contain direct or implied representations which are misleading with respect to the purposes for which the product is suitable. To avoid misleading prospective purchasers in this respect it is generally necessary to disclose clearly and conspicuously the particular purposes for which the product is suitable or that the product is not a complete food.

(b) When used as part of a product name or statement of identity, the name of a particular ingredient should not be set forth in such a manner as to mislead prospective purchasers into believing that there is a greater proportion of such ingredient in the product than there is in fact. For example, if a product is composed of 80 percent meat byproducts and 15 percent beef, and 5 percent other ingredients, and is des

(a) A product should not be described in advertising as "all meat" or "100 percent meat," or "all tuna, or "all chicken," or otherwise represented as being composed wholly of a named ingredient if it contains other ingredients such as the byproducts of meat, poultry, or fish. However, for the purpose of this provision, water sufficient for processing, required decharacterizing agents, and trace amounts of preservatives and condiments shall not be considered ingredients.

(b) The name or names of ingredients derived from animals, poultry or fish, such as "meat," "beef," "tuna," ," or "chicken and eggs" should not be used as a complete description of the composition of an industry product unless the product contains at least 95 percent by weight of the named ingredient or combination of such ingredients. If the product contains more than one ingredient derived from animals, poultry, or fish, the name of a preferred ingredient should not be given precedence or undue prominence so as to create the impression that the product contains a

The word "advertising" or "advertisement" as used in this part includes any written or verbal statement, notice presentation, illustration, or depiction, other than labeiling, which is directly or indirectly designed to effect the sale of any industry product, or to create an interest in the purchase of any such product, whether same appears in a newspaper, magazine, or other periodical, in a catalog, letter, or sales promotional literature, in a radio or television broadcast, or in any other media.