48 FEDERAL TRADE COMMISSION
TRADE PRACTICE RULES
FOR THE
SCHOOL SUPPLIES AND EQUIPMENT DISTRIBUTING
INDUSTRY
PROMULGATED NOVEMBER 12, 1936
STATEMENT BY THE COMMISSION
Trade practice rules for the School Supplies and Equipment Dis-
tributing Industry, as herein set forth, were today promulgated by
the Federal Trade Commission under its trade practice conference
procedure.
The application to amend or supplement the trade practice rules
previously promulgated by the Commission for this industry was
presented by the National School Supplies and Equipment Associa-
tion. In the course of the proceedings, the proposed new rules for
the industry were released by the Commission for a 15-day period
upon public notice whereby opportunity was afforded all interested
or affected parties to present to the Commission their views regarding
the same, including suggestions or objections, if any. A public hearing
to permit the offering of any such suggestions or objections was held..
Due consideration having been given this matter by the Commission,
the rules for this industry, as amended and set forth herein, were
approved by the Commission as to Group I; and as to Group II were
received by the Commission as expressions of the industry.
The rules this day promulgated by the Commission for this industry
supersede those previously promulgated on August 15, 1932.
RULE 1.
THE RULES
GROUP I *
Wilfully inducing or attempting to induce, by any false or deceр-
tive means whatsoever, the breach of any lawful contract or contracts
existing between competitors and their customers or their suppliers,
or wilfully interfering with or obstructing the performance of any
such contractual duties or services, with the purpose and effect of
unduly hampering, injuring, or embarrassing competitors in their
businesses, is an unfair trade practice.
RULE 2.
Defamation of competitors by falsely imputing to them dishonorable
* See page VIII for headnote applicable to Group I Rules.TRADE PRACTICE RULES 49
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, with the tendency, capacity, or effect of misleading or
deceiving purchasers, prospective purchasers, or the consuming public,
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 ad-
vertisement or otherwise, concerning the grade, quality, quantity, sub-
stance, character, nature, origin, size, or preparation of any product
of the industry, or in any other material respect, with the tendency,
capacity, or effect of misleading or deceiving purchasers, prospective
purchasers, or the consuming public, is an unfair trade practice.
RULE 4.
Wilfully enticing away the employees of competitors, with the pur-
pose and effect of unduly hampering, injuring, or embarrassing com-
petitors in their businesses, is an unfair trade practice.
RULE 5 .
(a) Prohibited Discriminatory Differentials, Rebates, Refunds, Dis-
counts, Credits, and Other Allowances .—-It is an unfair trade practice
for any member of the industry engaged in commerce,¹ in the course
of such commerce, to grant or allow, secretly or openly, directly or
indirectly, any price differentials, rebates, refunds, discounts, credits,
or other allowances which effectuate 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 commerce¹ and where
the effect thereof may be substantially to lessen competition or tend
to create a monopoly in any line of commerce¹ or to injure, destroy,
or prevent competition with any person who either grants or know-
ingly 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 ;
(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
1 See
footnote
,
p
.
460
.50 FEDERAL TRADE COMMISSION
gaged in selling goods, wares, or merchandise in commerce¹ 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 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,¹ in
the course of such commerce, to pay or grant, or to receive or accept,
anything of value as a commission, brokerage, or other compensation,
or any allowance or discount in lieu thereof, except for services ren-
dered in connection with the sale or purchase of goods, wares, or
merchandise, either to the other party to such transaction or to an
agent, representative, or other intermediary therein where such inter-
mediary 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
commerce¹ 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
compensation 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 payment
or consideration is available on proportionally equal terms to all other
customers competing in the distribution of such products or com-
modities.
(d) Prohibited Discriminatory Services or Facilities. It is an
unfair trade practice for any member of the industry engaged in
commerce¹ 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 con-
nected 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) Illegal Price Discrimination. It is an unfair trade practice
1 See footnote
,
p
.
460
.TRADE PRACTICE RULES 51
for any member of the industry or other person engaged in commerce¹
in the course of such commerce to discriminate in price in any other
respect contrary to Section 2 of the Clayton Act as amended by the
Act of Congress approved June 19, 1936 (Public, No. 692, 74th Con-
gress) , or knowingly to induce or receive a discrimination in price
which is prohibited by such section as amended.
RULE 6 .
The practice of selling industry products below the seller’s cost,
with the intent and with the effect of injuring a competitor and where
the effect may be substantially to lessen competition or tend to create
amonopoly or unreasonably restrain trade, is an unfair trade practice ;
all elements recognized by good accounting practice as proper elements
of such cost shall be included in determining cost under this rule.
RULE 7.
Directly or indirectly to give, or permit to be given, or offer to
give, money or anything of value to agents, employees, or representa-
tives 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 contract
to purchase industry products from the maker of such gift or offer or
to influence such employers or principals to refrain from dealing or
contracting to deal with competitors, is an unfair trade practice.
RULE 8 .
The circulation of threats of suit for infringement of patents or
trade-marks among customers or prospective customers of a com-
petitor, not made in good faith but for the purpose of harassing or
intimidating such customers or prospective customers or otherwise
prejudicing or injuring competitors in their businesses, is an unfair
trade practice.
RULE 9 .
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.
RULE 10.
Offering for sale merchandise at prices purported to be reduced
from what are in fact marked-up or fictitious prices, with the tendency
or capacity to mislead or deceive purchasers, prospective purchasers,
or the consuming public, is an unfair trade practice..
1 See footnote
,
p
.
460
.52 FEDERAL TRADE COMMISSION
RULE 11.
The use of the word ” free” where not properly or fairly qualified
when the article is in fact not free, with the tendency or capacity to
mislead or deceive purchasers, prospective purchasers, or the consum-
ing public, is an unfair trade practice.
RULE 12.
The selling or offering for sale of merchandise packed in odd-sized
or odd-shaped containers or packages, simulating in size or shape
standard size or shaped containers or packages, designed to hold and
known to the purchasing public as standard containers or packages,
with the tendency, capacity, or effect of misleading or deceiving pur-
chasers, prospective purchasers, or the consuming public as to the con-
tents of such containers or packages and with the tendency to injuri-
ously affect the business of competitors, is an unfair trade practice.
RULE 13.
The practice of shipping or delivering products which do not con-
form to the samples submitted or representations made prior to secur-
ing the orders, without the consent of the purchasers to such substitu-
tions and having the tendency, capacity, or effect of deceiving or
misleading purchasers, prospective purchasers, or the consuming pub-
lic, is an unfair trade practice.
RULE 14.
For any person, firm, or corporation to give anything of value to
those employed in any capacity involving special trust (such as in-
structor, purchaser, agent, supervisor, or school official), without the
knowledge of their employers, upon the condition or understanding,
express or implied, that its goods be recommended or used by such
person in preference to the goods or equipment of a competitor or
competitors of that person, firm, or corporation, with the tendency to
injuriously affect the business of competitors, is an unfair trade prac-
tice : Provided, That nothing in this resolution shall prevent any
person, firm, or corporation from selling its goods to anyone upon
whatever terms it sees fit, but without any condition or understanding,
express or implied, as to the recommendation or use of said goods or
equipment.
RULE 15.
The imitation of the trade-marks, trade names, brands, labels, or
other marks of identification of competitors, having the tendency,
capacity, or effect of misleading or deceiving purchasers, prospective
purchasers, or the consuming public, is an unfair trade practice.
RULE 16.
Securing information from competitors concerning their businessesTRADE PRACTICE RULES 53
by false or misleading statements or representations or by false im-
personations 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 17 .
In connection with the sale or offering for sale of products of the
industry, representing through advertising or otherwise that such
products conform to any standards recognized in or applicable to the
industry when such is not the fact, with the tendency, capacity, or
effect of misleading or deceiving purchasers, prospective purchasers,
or the consuming public, is an unfair trade practice.
RULE 18 .
It is an unfair trade practice for any member of the industry to
use the practice of shipping goods on consignment for the purpose and
with the effect of artificially clogging trade outlets and unduly re-
stricting competitors’ use of said trade outlets in getting their goods
to consumers through regular channels of distribution, or with such
purpose to entirely close said trade outlets to such competitors so as
to substantially lessen competition or tend to create a monopoly or to
unreasonably restrain trade : Provided, however, That nothing herein
shall be construed or used as restricting or preventing consignment
shipping or marketing of commodities in good faith and without
artificial interference with competitors’ use of the usual channels of
distribution in such manner as thereby to suppress competition or
restrain trade.1
RULE 19.
1
Withholding from or inserting in the invoice statements which make
the invoice a false record, wholly or in part, of the transaction repre-
sented on the face thereof, with the purpose or effect of misleading
or deceiving purchasers, prospective purchasers, or the consuming
public, is an unfair trade practice.
RULE 20.
The practice of using any product of the industry as a ” loss leader “
to induce the purchase of other merchandise, the sale of which mer-
chandise is used to recoup the loss sustained on the ” loss leader ” prod-
uct so sold, with the tendency or capacity of misleading or deceiving
purchasers, prospective purchasers, or the consuming public, and which
unfairly diverts trade from or otherwise injures competitors, is an
unfair trade practice.
RULE 21 .
For any person, firm, or corporation to hold himself or itself out
to the public as a wholesaler when such is not the fact, or in any other54 FEDERAL TRADE COMMISSION
manner to misrepresent the character, extent, or type of his business,
with the tendency or capacity to mislead or deceive purchasers, pros-
pective purchasers, or the consuming public, is an unfair trade practice.
RULE A.
GROUP II *
The industry records its approval of distributing to its members
information covering delinquent and slow accounts insofar as this may
be lawfully done.
RULE B.
(a) 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.
(b) The industry approves the practice of making the terms of sale
a part of all published price schedules .
RULE C.
It is the judgment of the industry that each member should inde-
pendently keep proper and accurate records for determining his own
costs.
RULE D.
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.
RULE E.
All members of this industry shall protect the consumer not only
as far as is required by law, but as required by good morals and the
best ethics of business.
RULE F.
The industry condemns fake or fictitious bids made for the purpose
of deceiving competitors and securing undue advantage. If plans and
specifications are changed and new bids called for after the original
bids have been submitted and opened, the same fairness should obtain
as with the original bid.
RULE G.
In cases of competitive bidding, the practice of receiving or making
so-called ” blind bids,” which discount the lowest competitive bid
* See page VIII for headnote applicable to Group II Rules.TRADE PRACTICE RULES 55
regardless of the amount, tends to destroy competitive bidding, and
is condemned by the industry.
• A Committee on Trade Practices of five members is hereby
created by the industry 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 November 12, 1936.
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