71

non-fair trade states, it would be more appropriate to circulate them under the heading "Suggested Prices" rather than "Fair Trade Prices." In the alternative, the danger of involving dealers in illegal resale price maintenance could be avoided by expressly noting on the franchise agreement those states wherein the provisions relating to maintenance of fair trade prices cannot be given effect.

Additionally, the Commission noted the provision that the distributor will establish, with the aid of the latest marketing information, a reasonable yearly sale volume objective of $ and this volume will be a consideration in yearly franchise renewal. The Commission advised that it could see no objection to the establishment of such quotas so long as they are reasonable. However, the distributor was advised that much of the legality of any franchise system depends upon the manner in which the agreements are implemented and enforced, for if apparently reasonable reservations of rights by the distributor are in practice administered in an unreasonable manner, so as to unfairly encroach upon the freedoom of the licensees, an agreement which is legal on its face can become illegal in effect.

NOTE.

The Commission revoked the Advisory Opinion reported in this digest as of August 2, 1967. This action was based upon the belief that the Opinion was being abused by the party to whom it was issued, not because of any concern over accuracy of the advice contained therein.

Advisory Opinion Digest No. 73

Statute Involved: Section 5, Federal

Trade Commission Act.

Rejection of description "Golden" for non-gold thimble.

Released: July 22, 1966.

The Federal Trade Commission has rendered an advisory opinion objecting to both the description "golden" for a non-gold thimble, and the accompanying explanatory phrase "electroplated with real gold."

"Since the thimble in question is not composed throughout of 24 karat gold, unqualified use of the word 'golden' would be improper," the FTC's advisory opinion stated.

Further advising that "the phrase, 'electroplated with real gold,' would constitute neither adequate qualification of the word 'golden,' nor a proper representation standing alone," the Commission pointed out that the gold flashing on the thimbles is between three and seven millionths of an inch thick and that “a coating of gold of less than 7/1,000,000 of an inch in thickness is too thin and insubstantial to warrant the description 'gold electroplate.'"

36-138 O 70 Vol. 37

72

Advisory Opinion Digest No. 74

Statute Involved: Section 2(d) and Tripartite promotional assistance

2(e), amended Clayton Act. Released: July 22, 1966.

program involving background music and reproducing equip

ment.

The Federal Trade Commission has given conditional approval to a promotional concern's plan to provide a music service to supermarkets which would include "spot" advertisements paid for by their suppliers.

The requesting party would set up a background music network specializing in supermarkets. It would own the equipment and install same without charge to the store operator. About every 22 minutes a "spot" advertisement paid for by advertiser-suppliers to the store would be made over the network, for each of which, each participating store outlet would receive a small commission.

In addition, the requesting party will offer an in-store promotion service to advertiser-suppliers so that they may provide proportionally equal treatment for nonparticipating stores, who will receive either in-store advertising materials or cash payments based on a designated formula.

Most of the advertisements would feature products sold in the stores. In some stores, announcements regarding house brands could be made by means of separate circuits. Advertisers would pay for the service on a per spot-per store basis. The contracts between the parties are to contain a clause to the effect that suppliers agree not to discriminate between participating and nonparticipating customers.

In the advisory opinion the Commission said that "implementation of the plan probably would not result in violation of Commission administered statutes. This approval is being given conditionally and is contingent on the plan when in operation actually providing on a realistic basis for promotional assistance to all competitors entitled to it under Sections 2 (d) and (e) of the Robinson-Patman Amendment to the Clayton Act.”

NOTE.-Modified by Commission action of July 11, 1968. See Appendix.

Advisory Opinion Digest No. 75

Statute Involved: Section 2(d)

amended Clayton Act.

Publisher's display allowance plan given conditional approval.

Released: July 27, 1966.

A magazine publisher has received conditional approval from the Federal Trade Commission of its promotional assistance program proposed for the New York City area.

The Commission said its understanding is that the program would operate substantially as follows:

73

Each competing retail magazine seller in or out of the area would be notified of the program by first class mail by the publisher and afforded the opportunity to choose either of two plans for each publication of the publisher he sells.

Under Plan 1, the dealer would be given a rebate of 10% of the cover price for each copy of a magazine sold, provided he maintained. two displays (full cover exposed, flat stack or vertical display) of the publication through its "on sale" period in (1) the maximum traffic. area of his newsstand and (2) on the main or auxiliary racks. Under Plan 2, the dealer would be given a rebate of 5% on the same basis as under Plan 1 for maintaining one display in the maximum traffic area. "Maximum traffic area" means: where the retailer sells most of his magazines where the largest display of magazines is located.

In the event of a sell-out of an issue, the dealer would agree to reorder immediately. Both the publisher and its distributor would spot check on dealer compliance. A dealer would submit quarterly reports together with statements of performance to the publisher to claim his rebate.

The Commission's advice was that "implementation of the Program as described probably would not result in violation of laws administered by the Commission provided (1) the program is offered to eligible new entrants into magazine retailing when they receive their initial shipment of magazines and (2) the notice to dealers is changed to include a definition of 'maximum traffic area' conforming to the meaning set forth above."

Advisory Opinion Digest No. 76

Statute Involved: Textile Fiber

Products Identification Act.

Released: July 27, 1966.

Foreign origin labeling of imported textile and non-textile fiber products repackaged and commingled.

The Federal Trade Commission today announced that it had recently rendered an advisory opinion dealing with disclosure of foreign origin of imported novelty items which will be repackaged in various combination sets in this country.

The items, both textile fiber and non-textile fiber products, which are labeled as to specific country of origin at the time of their importation, will be repackaged in sets in such a manner that the labels will not be visible to prospective purchasers.

As to sets composed entirely of imported non-textile fiber products, the Commission said "that a proceeding by it to require disclosure of origin on the package would not appear to be warranted, in the absence of any showing of material deception."

74

However, as to any combination set containing only imported textile fiber products, the Commission said the specific country of origin of these products must be disclosed in such a manner that it would be observed upon casual inspection by prospective purchasers before, not after, the purchase. The necessity of this disclosure is based upon the requirements of the Textile Fiber Products dentification Act and the rules issued thereunder. The disclosure, the Commission said, "does not necessarily have to be on the outside of the package; it could be inside the package, provided it would be clearly visible through the cellophane cover. The point is that the disclosure must be in some position on the package where it would be observed prior to the purchase, not afterward."

If imported textile fiber products are packaged in the same combination set with imported non-textile fiber products, the Commission advised that "it would also be necessary to disclose the foreign origin of the non-textile fiber components. Otherwise, prospective purchasers are likely to be misled into the mistaken belief, through the affirmative disclosure of the foreign origin of the textile fiber products, that the non-texile fiber products packaged therewith are of domesic origin."

Advisory Opinion Digest No. 77

Statute Involved: Section 2(d) and 2(e), amended Clayton Act. Released: August 2, 1966.

Tripartite promotional assistance programs-Recipe racks and a jigsaw puzzle with trading stamps as prize involved.

In advisory opinions announced today by the Federal Trade Commission, two promotional assistance programs devised by third parties for grocery retailers and suppliers have been approved if the proposed plans are implemented as represented.

Under the one plan, an independent promoter would supply food retailers with racks in which to display recipe cards and uniformly pay the retailer for providing space for each rack used. Manufacturer-suppliers (1) would furnish participating customers with cards-containing recipes calling for the use of the manufacturer's product and a picture of the finished recipe item or of the manufacturer's product-on a proportionally equal basis related to the retailer's volume of sales of the product, (2) pay the promoter for the cards at a per-card-supplied rate, and (3) offer the plan to each customer by means necessary to insure complete notification of the plan to all competing customers. After each initial distribution, retailers would receive as many additional cards as requested up to 1,000 per month per product.

The other plan, proposed by a separate promoter, would utilize a variation of the "jigsaw puzzle." Each time a shopper would pass the check-out

75

stand (no purchase would be required) of a participating grocery retailer, she would receive a card from which four assorted pieces of a reproduction of a label could be removed. Upon collecting pieces necessary to form a complete facsimile of either a private or name brand label, she would be awarded a prize of trading stamps, cash or merchandise. In each eight-week period the plan would be in operation, eight different products will be involved, six of which will be name brands of participating suppliers and two private labels selected by participating retailers. If the retailer does not have private labels to enter in the program, his cost will be reduced on a pro-rata basis or he may select eight name brand products and pay the regular price which will be the same to each retailer or supplier per product per 1,000 cards (the cost of the program will be defrayed out of this charge). Each retailer will receive the same in-store displays and advertising material and each supplier will have his product pictured on each give-away card. Necessary notification of the proposed plan will be given, and all competing retailers will be afforded the opportunity to participate.

The Commission pointed out to the promoters that "it remains the supplier's responsibility to assure that in fact the retailers who compete with one another are dealt with on proportionally equal terms." If the plans are implemented in such a manner, they "would appear to satisfy the supplier's obligation of proportionally equal treatment and the suppliers participating... would not thereby violate any Commission administered laws."

In reaching this conclusion, the Commission advised that it had relied particularly upon the below-described three representations by the promoters as to the manner in which the plans will be implemented.

In each of the two promotions, the requesting party informed the Commission that:

(1) All competing retailers would be notified of their right to participate in the plan; and

(2) The plan would be made available to all competing retailers and offered to those located on the periphery of a given marketing area who compete with the participating retailers.

The third representation relied upon by the Commission in the respective matters was that:

(Puzzle promotion) A reduction in cost or alternative choice of either name brand products would be provided participating retailers unable to enter two brand labels in the plan.

(Recipe card promotion) Small retailers who, for space or other reasons, cannot utilize the larger racks but wish recipe cards featuring one or two profitable items, will be provided with a "snap-on" shelf rack for this purpose.

NOTE.-Modified by Commission action of July 11, 1968. See Appendix.