37 "If, in fact," the advisory opinion commented, "the offer is available to more than a few selected persons, or continues for an extended or indefinite period of time, then the representations in the promotion letter would be false and deceptive." Advisory Opinion Digest No. 22 Statute Involved: Section 5, Fed eral Trade Commission Act. Released: March 30, 1966. Impropriety of Description "Made in U.S.A." for kit with substantial amount of foreign components. A recent advisory opinion made public today by the Federal Trade Commission notified a marketer of toys that it would not be permissible to use the labeling description "Made in U.S.A." for a tool kit containing two Japanese components. The kits will contain 20 items, 18 of American origin and 2 imported from Japan which will represent 16% of the total value of the entire kit. The Commission advised that "the claim 'Made in U.S.A.' would constitute an affirmative representation that the entire kit was of domestic origin. Since a substantial portion of the components therein would be of foreign origin, the Commission is of the opinion that it would be improper to label the kits as 'Made in U.S.A.'" Advisory Opinion Digest No. 23 Statute Involved: Section 2(c), amended Clayton Act. Released: April 1, 1966. Establishment of buying corporation by broker. An advisory opinion rendered recently by the Federal Trade Commission notified a broker-distributor of fresh fruits and vegetables that either of his proposed alternative plans to establish a buying corporation would involve grave risk of illegality. The businessman had inquired whether or not under the Perishable Agricultural Commodities Act and FTC law he may lawfully: (1) establish a corporation as an exclusive buying company for a purchaser for resale, this corporation to buy and be billed in its own name. The purchaser for resale would own one or more shares of the common stock of the buying company and would participate in the brokerage received by that company, or (2) establish a corporation as above for the above described purposes, the difference being that shippers would directly invoice and be paid by the purchaser for resale rather than the proposed corporation. 38 The Commission advised him that it had no comment on the Perishable Agricultural Commodities Act because it does not administer this law. "The immediately applicable statute is," continued the advisory opinion, "as you know, Section 2(c) of the Clayton Act, as amended by the RobinsonPatman Act, which makes unlawful the payment or receipt of brokerage or allowances in lieu thereof in certain commercial contexts. "In the Commission's view, either of the plans you propose, if adopted, would carry with them grave risk that the statute will be violated. "Absent any indication to the contrary, they appear to amount merely to a means whereby both the letter and the spirit of the statute are to be avoided." Advisory Opinion Digest No. 24 Statute Involved: Section 2(e), amended Clayton Act. Released: April 1, 1966. Tripartite promotional assistance program; advertisement reprint distribution by promoter. An advisory opinion made public today by the Federal Trade Commission informed a company of the "very serious possibility" that a proposed promotional plan would subject participating food supplier advertisers to a charge of law violation. The plan involved the distribution of reprints of advertisements to the public through retail food stores, the cost of the reprints to be shared by participating suppliers. No mention would be made of any specific retailer in the advertising and 10,000,000 reprints would be offered at no cost. Each retailer would receive the number requested provided the total ordered did not exceed this available supply. If the orders exceeded 10,000,000, this number would be divided by the total number of checkstands in stores requesting copies to determine how many each store would receive. It appears, the FTC's advisory opinion stated, "that no problem would arise under the laws administered by this Commission unless and until the requests for reprints exceed the available supply of 10,000,000. In such event, it is doubtful that the basis chosen for distribtuion of the reprints among competing retailers would result in the proportional equality required by the law [Section 2(e) of the Robinson-Patman Act]. While the Act does not specify any single standard for proportionalizing merchandising services and facilities, it does not appear that the required result will be achieved when the standard selected is the number of checkstands in the stores requesting copies. This standard bears no ascertainable relation to the volume of business which any of the retailers involved might conduct with any of the participating suppliers. In fact, it could result in a situation in which retailers who have a small volume with the participating suppliers would receive more reprints than competing retailers with a much larger volume solely because of a greater number of checkstands. We cannot conclude 39 then that the plan as it is presently proposed would necessarily result in the proportionally equal treatment of all competing customers that the law requires. Consequently, there is a very serious possibility that it would subject the participating suppliers to a charge of violation of Section 2(e) of the Robinson-Patman Act." NOTE.-Modified by Commission action of July 11, 1968. See Appendix. Advisory Opinion Digest No. 25 Statute Involved: Section 5, Fed Impropriety of description "14 K" for item not entirely gold. eral Trade Commission Act. Released: April 2, 1966. The Federal Trade Commission recently rendered an advisory opinion that it is improper to mark or describe an earring as having a "14 K post" when the post is not entirely gold. "Under Rule 22 (c) (1) of the Trade Practice Rules for the Jewelry Industry," the Commission advised, "an article may not be so designated unless it is 'composed throughout of an alloy of gold'; since this article will contain substantial electroplatings of base metals, it plainly is not composed throughout of gold." The requesting party had stated that the earring in question would be constructed as follows: 1. The ornamental front part would be basically brass, but no quality claim is contemplated as to this part of the article. 2. The front part is attached to a post made for penetration of pierced ears and held in place by a clutch type back made basically of brass. No quality claim for the clutch type back is contemplated. 3. The post will be 14 karat gold. After being soldered to the ornamental front the entire article will be electroplated with copper, then electroplated with nickel, and finally electroplated with high karat gold. Advisory Opinion Statute Involved: Section 2(d), amended Clayton Act. Released: April 8, 1966. Digest No. 26 Paying advertising allowances based upon certain percentage of purchases from the supplier. The Commission announced today it had given approval to a proposed promotional plan which called for the payment of advertising allowances to all competing customers based upon 5% of the customer's annual dollar volume of purchases from the supplier paying the allowance. Its approval was granted after it had pointed out several steps which must be followed in the implementation of the plan. Under the terms of the plan which is designed to stimulate the sale of 36-138 O 70 Vol. 3-5 40 couch throws, the customer must place local advertisements promoting the sale of said products before he is entitled to the advertising allowance. Noting that no single way to proportionalize is prescribed by law and that any method which treats competing customers on proportionally equal terms may be utilized, the Commission pointed out that one of the most widely used and acceptable methods is to base the payments on the dollar volume of goods purchased during a specified period of time. Since that is precisely what the party requesting the advisory opinion proposes to do, namely, make advertising payments which amount to 5% of the customer's annual dollar volume of purchases of couch throws, the Commission gave its approval to the plan. Advisory Opinion Digest No. 27 Statute Involved: Section 5, Fed eral Trade Commission Act. Foreign origin matter-Affirmative misrepresentation of domestic origin. Released: April 8, 1966. The Commission was requested to advise whether or not it would be permissible to label boxes containing toy sets as "Made in U.S.A.” when some of the parts or components inside the box were imported. The Commission advised that it would not be proper to label these boxes as made in U.S.A. since that would constitute an affirmative representation that the contents were entirely made in this country, which is not the fact, unless, of course, the label also discloses in a clear and conspicuous manner the fact that certain of the contents are imported. Advisory Opinion Digest No. 28 Statute Involved: Section 5, Fed Selection of customers by a single trader. eral Trade Commission Act. Released: April 12, 1966. A recent Federal Trade Commission advisory opinion informed a publisher that no actionable trade restraints appeared to be involved in his proposal to select the customers to whom he will sell a menu and recipe pamphlet. As explained by the requesting party, the pamphlet will be published weekly and will contain authoritative information on buying, preparing and serving food products. It will be sold to selected food chains operating fewer than 500 retail outlets, whose general trading areas do not overlap. Copies of the pamphlet will be given free to customers of the food chains as a promotional device. The pamphlet will not mention any products by brand name, and will not be available as a medium for advertising by any supplier 41 or association of suppliers, nor will any of them contribute financially towards its publication or distribution. The Commission pointed out that the antitrust laws do not restrict the right of a seller who does not have monopoly power to select those customers to whom he will sell his product, provided that the right is not exercised for the purpose of monopolization or is otherwise linked to an unlawful course of conduct in restraint of trade. Advisory Opinion Digest No. 29 Statute Involved: Section 5, Fed eral Trade Commission Act. Disclosure of foreign origin not necessary. Released: April 12, 1966. An American concern proposing to market shaving brushes containing plastic handles imported from England has been informed by the Federal Trade Commission that it will not be necessary to disclose the English origin of the handles, assuming there is no affirmative representation they are domestic. The Commission added that its advisory opinion, of course, "does not relieve one from complying with any applicable statutes or regulations administered by the Bureau of Customs." The company intends to insert and cement the bristle into the imported handles here in the United States. The cost of the completed brush is $2.25 and the cost of the imported handle will be 35c. Advisory Opinion Digest No. 30 Statute Involved: Section 5, Fed- Origin disclosure on package for eral Trade Commission Act. Canadian-made automotive part. Released: April 13, 1966. An American concern has been advised of the Federal Trade Commission's disapproval of its proposal to use a modified version of its present cardboard containers to distribute in this country a replacement automotive part to be manufactured in Canada. The advisory opinion noted that the part will be marked "Made in Canada" but that, under normal conditions, the ultimate purchaser is not likely to observe this marking prior to purchase. On the cardboard container appear the company's American address plus a legend which it proposes to obliterate, "Made in USA." The Commission's advice was that permanent obliteration of this legend "on the outside of the cardboard containers would not be sufficient since the presence of your company's address on the container may lead many |