23
TRADE PRACTICE RULES
FOR THE
JUVENILE WHEEL GOODS MANUFACTURING
INDUSTRY
PROMULGATED JULY 30, 1936
STATEMENT BY THE COMMISSION
Trade practice conference rules for the Juvenile Wheel Goods Manu-
facturing Industry, a division of the Toy and Playthings Industry,
are promulgated by the Federal Trade Commission under its trade
practice conference procedure. The rules approved by the Commission
have been placed in Group I, as prohibiting illegal competitive prac-
tices. The rules in Group II are received by the Commission as expres-
sions of the industry. Application for the trade practice conference
was originally made by the Juvenile Wheel Goods Association. Upon
the application due proceedings were had, including hearings and con-
ferences with industry representatives and other interested or affected
parties.
Items manufactured by members of the industry include the fol-
lowing : Velocipedes and tricycles; sidewalk cycles (with wheels 14
inches in diameter and under) ; scooters ; three-wheel play cars (with
or without pedals) ; children’s automobiles; children’s wagons (coast-
ers, express, and play) ; children’s wheelbarrows ; baby walkers and
tenders; parts of children’s wheel goods for sale as such; and wheel
goods not specified by kind.
At the time the application was filed, it was reported that the
production by members of the industry in 1934, the latest period
for which figures were available, amounted to approximately $10,000,-
- It was estimated that between 5,000 and 10,000 persons were
employed in the industry.
RULE 1.
THE RULES
GROUP I *
The practice of selling goods below the seller’s cost, with the intent
and with the effect of injuring a competitor and where the effect may
be to substantially lessen competition or tend to create a monopoly
or unreasonably restrain trade, is an unfair trade practice; all ele-
ments recognized by good accounting practice as proper elements of
such cost shall be included in determining cost under this rule.
- See page VIII for headnote applicable to Group I Rules.
653742-468
24 FEDERAL TRADE COMMISSION
RULE 2 .
The secret payment or allowance of rebates, refunds, commissions,
or unearned discounts, whether in the form of money or otherwise,
or secretly extending to certain purchasers free samples or other
special services or privileges not extended to all purchasers under like
terms and conditions, with the intent and with the effect of injuring
a competitor and where the effect may be to substantially lessen com-
petition or tend to create a monopoly or to unreasonably restrain trade,
is an unfair trade practice.
RULE 3 .
The making, or causing or permitting to be made or published, any
false, untrue, or deceptive statement or representation, by way of
advertisement or otherwise, concerning the character of a member’s
business or the plan of operation thereof, or concerning the grade,
quality, quantity, substance, character, nature, origin, size, or prepara-
tion of any product of the industry, having the tendency or capacity
to mislead or deceive purchasers or prospective purchasers and the
tendency to injuriously affect the business of competitors, is an unfair
trade practice.
RULE 4 .
Directly or indirectly to give, or permit to be given, or offer to give,
money or anything of value to agents, employees, or representatives
of customers or prospective customers, or to agents, employees, or
representatives of competitors ‘ customers or prospective customers,
without the knowledge of their employers or principals, as an induce-
ment to influence their employers or principals to purchase or con-
tract to purchase industry products from the maker of such gift or
offer or to influence such employers or principals to refrain from deal-
ing or contracting to deal with competitors, is an unfair trade practice.
RULE 5.
Wilfully inducing or attempting to induce the breach of any law-
fully existing contract or contracts between competitors and their
customers by any false or deceptive means whatsoever, or wilfully
interfering with or obstructing the performance of any such con-
tractual duties or services, with the purpose and effect of unduly
hampering, injuring, or embarrassing competitors in their businesses.
is an unfair trade practice.
RULE 6.
The offering or giving of prizes, premiums, or gifts in connection
with the sale of products, or as an inducement thereto, by any scheme
TRADE PRACTICE RULES 25
which involves lottery, misrepresentation, or fraud, is an unfair trade
practice.
RULE 7.
The defamation of competitors by falsely imputing to them dis-
honorable conduct, inability to perform contracts, questionable credit
standing, or by other false representations, or the false disparagement
of the grade or quality of their goods, with the tendency or capacity
to mislead or deceive purchasers or prospective purchasers, is an
unfair trade practice.
RULE 8 .
The circulation of threats of suit for infringement of patents 01
trade-marks among customers or prospective customers of a com-
petitor, not made in good faith but for the purpose or with the effect
of harassing or intimidating such customers or prospective customers
or unfairly prejudicing or injuring competitors in their businesses, is
an unfair trade practice.
RULE 9 .
Securing information from competitors concerning their businesses
by false or misleading statements or representations or by false im-
personation of one in authority and the wrongful use thereof to unduly
hinder or stifle the competition of such competitors is an unfair trade
practice.
RULE 10.
The selling by manufacturers in this industry of regular lines of
merchandise as ” close-outs” for the purpose of inducing purchasers
to believe they are receiving bargains when such is not the case, with
the tendency or capacity to mislead or deceive purchasers or pros-
pective purchasers, is an unfair trade practice.
RULE 11.
Price discrimination contrary to Section 2 of the Clayton Act as
amended by the Act of Congress approved June 19, 1936 (Public, No.
692, 74th Congress) is an unfair trade practice.
RULE 12.
The shipping or delivering of products which do not conform to
the samples submitted or representations made prior to securing the
orders, without the consent of the purchasers to such substitution and
with the effect of deceiving or misleading purchasers, is an unfair
trade practice.
RULE 13 .
The imitation of the trade marks, trade names, or other marks of
identification of competitors, having the tendency or capacity to
26 FEDERAL TRADE COMMISSION
mislead or deceive purchasers or prospective purchasers, is an unfair
trade practice.
RULE 14.
For any manufacturer in this industry knowingly to aid or abet
a person, firm, or corporation in the use of unfair trade practices is
an unfair trade practice.
RULE 15.
Withholding from or inserting in the invoice statements which
make the invoice a false record, wholly or in part, of the transaction
represented on the face thereof, with the purpose or effect of misleading
or deceiving purchasers or prospective purchasers, is an unfair trade
practice.
RULE 16.
For any person, firm, partnership, corporation, or association to enter
into or take part, directly or indirectly, in any agreement, understand-
ing, combination, conspiracy, or concerted action with one or more
other persons, firms, partnerships, corporations, or associations to fix,
maintain, or enhance prices or to fix or control terms of sale with
respect to any product or products of the industry or allied products,
or to unreasonably restrain trade, or by any other unlawful means to
fix, maintain, or enhance prices, to fix or control terms of sale, or
otherwise to unreasonably restrain trade, is an unfair trade practice;
and it is not contemplated or intended that any other rule in this trade
practice agreement shall be construed or used to effectuate or promote
any of the practices condemned in this rule.
RULE A.
GROUP II *
It is the judgment of the industry that each member should independ-
ently keep proper and accurate records for determining his costs.
RULE B.
The practice of shipping goods on approval or on consignment or
pretended consignment, which goods have not been previously re-
quested or ordered, is condemned by the industry.
RULE C.
It is the judgment of the industry that it is in the interest of the
public that each manufacturer, while fixing individually his own prices,
shall openly publish the current list prices of his products with descrip-
tions and specifications thereof and that he promptly and openly
publish any revisions thereof.
Promulgated by the Federal Trade Commission July 30, 1936. - See page VIII for headnote applicable to Group II Rules.
228 FEDERAL TRADE COMMISSION
gaged in selling goods, wares, or merchandise in commerce² from
selecting their own customers in bona fide transactions and not
in restraint of trade ;
(4) That nothing herein contained shall prevent price changes
from time to time where made in response to changing conditions
affecting either (a) the market for the goods concerned, or (b)
the marketability of the goods, such as, but not limited to, actual
or imminent deterioration of perishable goods, 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 member of the industry engaged in commerce, in the
course of such commerce, to pay or grant, or to receive or accept, any-
thing 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 merchan-
dise, either to the other party to such transaction or to an agent, rep-
resentative, 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.
(c) 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 pro-
motional 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 com-
pensation or in consideration for any services or facilities furnished
by or through such customer in connection with the processing, han-
dling, sale, or offering for sale of any products or commodities manu-
factured, sold, or offered for sale by such member, unless such pay-
ment 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 un-
fair trade practice for any member of the industry engaged in com-
merce 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 by furnishing, or by
contributing to the furnishing of, any services or facilities connected
with the processing, handling, sale, or offering for sale of such com-
modity so purchased upon terms not accorded to all purchasers on
proportionally equal terms.
2 See footnote, p. 460.TRADE PRACTICE RULES 229
(e) 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 Rule 19.
RULE 20. Aiding or Abetting Use of Unfair Trade Practices .
It is an unfair trade practice for any person, firm, or corporation to
aid, abet, coerce, or induce another, directly or indirectly, to use or
promote the use of any unfair trade practice specified in these rules.
GROUP II *
RULE A. Publication of Price Lists .
The industry approves the practice of each individual member of
the industry independently publishing and circulating to the pur-
chasing trade his own price lists fully setting forth his terms of sale.
RULE B. Return of Merchandise .
The practice, by members of the industry, of selling merchandise
and later permitting the purchaser to return it for credit or refund
of purchase price, without just cause, creates waste and loss, increases
the cost of doing business, to the detriment of both the industry and
the public, and is condemned by the industry, subject, however, to the
general limitation that members of the industry shall not engage in
any combination or conspiracy in restraint of trade or use any other
illegal methods in the regulation, control, or prevention of the return
of merchandise.
RULE C. Repudiation of Contracts .
Lawful contracts are business obligations which should be per-
formed in letter and in spirit. The repudiation of contracts by sellers
on a rising market or by buyers on a declining market is condemned
by the industry.
RULE D. Arbitration.
The industry approves the practice of handling business disputes
between members of the industry and their customers in a fair and
reasonable manner, coupled with a spirit of moderation and good
will, and every effort should be made by the disputants themselves
to compose their differences. If unable to do so they should, if possible,
submit these disputes to arbitration.
Promulgated by the Federal Trade Commission August 19, 1939.
See footnote, p. 460.
* See page VIII for headnote applicable to Group II Rules .230 FEDERAL TRADE COMMISSION
TRADE PRACTICE RULES
FOR THE
PUBLIC SEATING INDUSTRY
PROMULGATED OCTOBER 3, 1939
STATEMENT BY THE COMMISSION
Trade practice rules for the Public Seating Industry, as hereinafter
set forth, are promulgated by the Federal Trade Commission under
its trade practice conference procedure.
The rules provide for the elimination and prevention of false adver-
tising, deceptive selling methods, and certain other unfair trade prac-
tices, and are issued in the interest of protecting the purchasing public
and maintaining fair competitive conditions in the industry. They
constitute a revision and extension of the rules which had heretofore
been issued by the Commission for this industry on June 23, 1931,
and take the place of such previously issued rules.
The products of the industry to which the rules relate include fixed
or connected seating for such public places as theaters, auditoriums,
lodges, assembly halls, shoe stores, stadia, and other similar buildings
and structures ; various types of pewing, chancels, choir stalls and
related furniture and accessories for ecclesiastical purposes ; seats
and benches for courthouses, hospitals, etc.; various types of school
furniture ; portable chairs with folding seats in both single and mul-
tiple units and portable folding seating in single units for other than
household use. These products are fabricated or assembled from wood,
plywood, iron, steel, non-ferrous metals, or any combination of these
materials. Members of the industry are engaged in manufacturing or
distributing the above-mentioned products. The manufacturers ‘ sales
aggregate approximately $25,000,000 annually, according to informa-
tion furnished the Commission.
The proceeding for the establishment of new trade practice rules
was instituted upon application of the industry. In the course thereof
a draft of the rules as proposed for the industry was made available
upon public notice issued by the Commission to all interested or
affected parties, affording them opportunity to present their views,
including such pertinent information, suggestions or objections as they
desired to submit, and to be heard in the premises. Accordingly, public
hearing pursuant to such notice was held in Washington on August
17, 1939, and all matters submitted in the proceeding were duly re-
ceived and considered.
Thereafter, and upon consideration of the entire matter, final actionTRADE PRACTICE RULES 231
was taken by the Commission whereby it approved and received,
respectively, the rules appearing herein under Group I and Group II.
THE RULES
GROUP I*
RULE 1. Misrepresentation of Industry Products.
It is an unfair trade practice to make or publish, or cause to be made
or published, directly or indirectly, any false, misleading or deceptive
statement or representation (whether in the form of advertisement,
label, brand, guarantee, warranty, testimonial, endorsement, depiction,
illustration, or other form of representation, however disseminated or
published) :
(a) Concerning the grade, quality, quantity, substance, char-
acter, nature, origin, size or preparation of any products of the
Public Seating Industry; or
( b ) Concerning the manufacture, sale or distribution of any
such products ; or
(c) Concerning any other matter in relation to such products.
RULE 2. False Invoicing.
Withholding from or inserting in invoices or sales tickets any state-
ments 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 tickets, with the effect of thereby
misleading or deceiving the purchasing or consuming public, is an
unfair trade practice.
RULE 3. Use of False or Deceptive Selling Methods, Etc.
The use of false or deceptive selling methods which have the tendency
and capacity or effect of misleading or deceiving the purchasing or
consuming public is an unfair trade practice.
RULE 4. Misuse of Terms ” Close-outs, ” “ Obsolete Items, ” ” Discon-
tinued Lines,” Etc.
It is an unfair trade practice to advertise, describe or otherwise
represent regular lines of merchandise as ” Close-outs, ” ” Obsolete
Items, ” “Discontinued Lines,” or by words or representations of
similar import, when such are not true in fact ; or to so advertise,
describe or otherwise represent merchandise where the capacity and
tendency or effect thereof is to lead the purchasing or consuming pub-
lic to believe such merchandise is being offered for sale and sold at
greatly reduced prices or at so-called ” bargain” prices, when such
is not the fact.
* See page VIII for headnote applicable to Group I Rules.
653742-46-16232 FEDERAL TRADE COMMISSION
RULE 5. Defamation of Competitors or Disparagement of Their
Products .
The defamation of competitors by falsely imputing to them dis-
honorable conduct, inability to perform contracts, questionable credit
standing, or by other false representations, or the false disparagement
of the grade, quality or manufacture of the products of competitors
or of their business methods, selling prices, values, credit terms,
policies, or services, is an unfair trade practice.
RULE 6. 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, employees or representatives
of customers or prospective customers, or to agents, employees or rep-
resentatives of competitors ‘ customers or prospective customers, with-
out the knowledge of their employers or principals, as an inducement
to influence their employers or principals to purchase or contract to
purchase public seating products manufactured or sold by such in-
dustry member or the maker of such gift or offer, or to influence such
employers or principals to refrain from dealing in the products of
competitors or from dealing or contracting to deal with competitors.
RULE 7. Unfair Threats of Infringement Suits .
The circulation of threats of suit for infringement of patents or
trade-marks among customers or prospective customers of competitors,
not made in good faith but for the purpose or with the effect of haras-
sing or intimidating such customers or prospective customers, or of
unduly hampering, injuring, or prejudicing competitors in their busi-
nesses, is an unfair trade practice.
RULE 8. Procurement of Competitors ‘ Confidential Information by
Unfair Means and Wrongful Use Thereof.
It is an unfair trade practice for any member of the industry to
obtain information concerning the business of a competitor, by bribery
of an employee or agent of such competitor, by false or misleading
statements or representations, by the impersonation of one in authority,
or by any other unfair means, and to use the information so obtained
in such a manner as to injure said competitor in his business or to
suppress competition or unreasonably restrain trade.
RULE 9. Inducing Breach of Contract.
Inducing or attempting to induce the breach of existing lawful con-
tracts between competitors and their customers or their suppliers by
any false or deceptive means whatsoever, or interfering with or ob-
structing the performance of any such contractual duties or services
by any such means, with the purpose and effect of unduly hampering,TRADE PRACTICE RULES 233
injuring, or prejudicing competitors in their businesses, is an unfair
trade practice.
RULE 10. Enticing Away Employees of Competitors.
Wilfully enticing away the employees of competitors, with the pur-
pose and effect of unduly hampering, injuring, or prejudicing com-
petitors in their businesses, is an unfair trade practice.
RULE 11. Substitution of Products .
The practice of shipping or delivering products which do not con-
form to samples submitted, to specifications upon which the sale is
consummated, or to representations made prior to securing the order,
without the consent of the purchasers to such substitutions and with
the tendency, capacity, or effect of misleading or deceiving purchasers,
prospective purchasers, or the consuming public, is an unfair trade
practice.
RULE 12.
( a) Prohibited Discriminatory Prices, or Rebates , Refunds, Dis-
counts, Credits, Etc.,¹ Which 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,¹ 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,2
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 juris-
diction of the United States ;
(2) That nothing herein contained shall prevent differentials
which make only due allowance for differences in the cost of manu-
facture, sale, or delivery resulting from the differing methods or
quantities in which such commodities are to such purchasers sold
or delivered;
(3) That nothing herein contained shall prevent persons en-
gaged in selling goods, wares, or merchandise in commerce from
selecting their own customers in bona fide transactions and not in
1 Paragraph ( a) of Rule 12 shall not be construed as embracing practices prohibited by
paragraphs ( b ) , ( c) , and (d) of this rule.
2 See footnote, p. 460.234 FEDERAL TRADE COMMISSION
restraint of trade ;
(4) That nothing herein contained shall prevent price changes
from time to time where made in response to changing conditions
affecting either (a) the market for the goods concerned, or (b ) the
marketability of the goods, such as, but not limited to, actual or
imminent deterioration of perishable goods, obsolescence of sea-
sonal 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 member of the industry engaged in commerce, in the
course of such commerce, to pay or grant, or to receive or accept, any-
thing 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, representa-
tive, 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.
(c) 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 pro-
motional 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 com-
pensation 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 con-
sideration is available on proportionally equal terms to all other cus-
tomers competing in the distribution of such products or commodities.
( d) Prohibited Discriminatory Services or Facilities. It is an un-
fair trade practice for any member of the industry engaged in com-
merce² to discriminate in favor of one purchaser against another pur-
chaser or purchasers of a commodity bought for resale, with or without
processing, by contracting to furnish or by furnishing, or by contribut-
ing 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 purchasers on proportionally
equal terms.
(e) 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
• See footnote, p. 460.TRADE PRACTICE RULES 235
receive a discrimination in price which is prohibited by the foregoing
provisions of this Rule 12.
( f) Purchases by Schools, Colleges, Universities , Public Libraries,
Churches , Hospitals, and Charitable Institutions Not Operated for
Profit. The foregoing provisions of this Rule 12 relate to practices
within the purview of the Robinson-Patman Antidiscrimination Act,
which Act and the application thereunder of this Rule 12 are subject
to the limitations expressed in the amendment to such Robinson-Patman
Antidiscrimination Act, which amendment was approved May 26, 1938,
and reads as follows :
“Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled, That nothing
in the Act approved June 19, 1936 (Public, Numbered 692,
Seventy-fourth Congress, second session) , known as the Robinson-
Patman Antidiscrimination Act, shall 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. ” (52 Stat. 446 ; Supp. 4 U. S. C. Title 15,
Sec. 13c. ) A
RULE 13. Aiding or Abetting Use of Unfair Trade Practices .
It is an unfair trade practice for any person, firm or corporation
to aid, abet, coerce or induce another, directly or indirectly, to use or
promote the use of any unfair trade practice specified in these rules.
GROUP II *
RULE A. Maintenance of Accurate Records .
It is the judgment of the industry that each member should independ-
ently keep proper and accurate records for determining his costs.
RULE B. Blind Bids .
In cases of competitive bidding, the practice of receiving or making
so-called ” blind bids,” which discount the lowest competitive bid
regardless of the amount, tends to destroy competitive bidding, and is
condemned by the industry.
*
A Committee on Trade Practices is hereby created by the in-
dustry to cooperate with the Federal Trade Commission and to
perform such acts as may be legal and proper to put these rules
into effect.
Promulgated by the Federal Trade Commission October 3, 1939.
* See page VIII for headnote applicable to Group II Rules