TRADE PRACTICE RULES
FOR THE
1
LADIES ‘ HANDBAG MANUFACTURING INDUSTRY
PROMULGATED AUGUST 18, 1936
STATEMENT BY THE COMMISSION
Trade practice conference rules for the Ladies ‘ Handbag Manufac-
turing Industry, as herein set forth, are promulgated by the Commis-
sion under its trade practice conference procedure. Application for
the trade practice conference and approval of the rules was made by
the National Authority for the Ladies’ Handbag Industry, New York
City, the members of which were said to represent about 82 percent
of the total volume of sales in the industry. During the course of the
proceedings opportunity for the presentation of views of all persons
interested in or affected by the proposed rules was given and con-
ferences held with industry representatives.
According to information furnished by the applicant, the manufac-
ture of ladies ‘ handbags is carried on in the States of New York, Massa-
chusetts, Connecticut, Rhode Island, New Jersey, Pennsylvania, Mary-
land, Florida, Illinois, Wisconsin, Missouri, Washington, California,
Virginia, Texas, and Ohio. The wholesale sales volume for the industry
for the year ending March 25, 1935, was estimated at $33,000,000.
Between 12,000 and 15,000 persons were said to be employed in the
industry.
As contained herein, the rules are classified under Group I and
Group II. The rules under Group I are approved by the Commission
as prohibiting illegal competitive practices; those under Group II are
received by the Commission as expressions of the trade.
THE RULES
GROUP I *
:
RULE 1 .
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 grade, quality, quantity,
substance, character, nature, origin, size, or preparation of any product
of the industry, or concerning credit terms, values, policies, services,
or the nature or form of the business conducted, having the tendency
or capacity to mislead or deceive purchasers or prospective purchasers,
is an unfair trade practice.

• See page VIII for headnote applicable to Group I Rules .
  28 FEDERAL TRADE COMMISSION
  RULE 2 .
  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 disparage-
  ment of the grade or quality of the goods of competitors, their credit
  terms, values, policies, services, or the nature or form of the business
  conducted, with the tendency or capacity to mislead or deceive pur-
  chasers or prospective purchasers, is an unfair trade practice.
  RULE 3.
  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.
  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 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 con-
  tract 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 5.
  The circulation of threats of suit for infringement of patents or
  trade-marks among customers or prospective customers of a competi-
  tor, not made in good faith but for the purpose of harassing or in-
  timidating such customers or prospective customers or otherwise
  prejudicing or injuring competitors in their businesses, is an unfair
  trade practice.
  RULE 6 .
  :
  The secret payment or allowance of rebates, refunds, commissions,
  or unearned discounts, whether in the form of money or disguised
  as advertising allowances, forwarding or transportation charges, repair
  charges, or otherwise, or secretly extending to certain purchasers
  special services or privileges not extended to all purchasers under like
  terms and conditions, with the intent and with the effect of injuring
  competitors and where the effect may be to substantially lessen.com
  TRADE PRACTICE RULES 29
  petition or tend to create a monopoly or to unreasonably restrain
  trade, is an unfair trade practice.
  RULE 7.
  The practice of branding or marking or packing any products, or
  causing the same to be branded or marked or packed, in a manner which
  is calculated to or does deceive or mislead purchasers, prospective pur-
  chasers, or the consuming public with respect to the brand, grade,
  quality, value, quantity, origin, size, substance, character, nature,
  material, content, or preparation of such products, is an unfair trade
  practice.
  RULE 8 .
  7
  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 9 .
  The imitation of the trade-marks, trade names, or other marks of
  identification of competitors, having the tendency or capacity to mis-
  lead or deceive purchasers or prospective purchasers, is an unfair
  trade practice.
  RULE 10. )
  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 11 .
  Wilfully inducing or attempting to induce the breach of any law-
  fully existing contract or contracts between competitors and their
  customers or their suppliers by any false or deceptive means whatso-
  ever, 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 12 .
  Withholding from or inserting in the invoice, bill of lading, or
  other document of title statements which make the invoice, bill of
  lading, or other document of title 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, prospective purchasers,
  or the consuming public, is an unfair trade practice.
  RULE 13.
  For any member of the industry knowingly to aid or abet another
  in the use of unfair trade practices is an unfair trade practice.
  30 FEDERAL TRADE COMMISSION
  P
  RULE 14.
  The publishing or circulating by any member of the industry of
  false or misleading price quotations, price lists, or terms of sale, having
  the tendency or capacity to mislead or deceive purchasers, prospective
  purchasers, or the consuming public, is an unfair trade practice.
  RULE A.
  GROUP II *
  The industry disapproves of the practice of accepting the return of
  merchandise after the same has been in the hands of the purchaser
  for an unreasonable length of time.
  RULE B.
  It is the judgment of the industry that each member should inde-
  pendently keep proper and accurate records for determining his costs.
  Promulgated by the Federal Trade Commission August 18, 1936.
• See page VIII for headnote applicable to Group II Rules.

110 FEDERAL TRADE COMMISSION
(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
promotional 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 fur-
nished by or through such customer in connection with the process-
ing, handling, sale, or offering for sale of any products or commodi-
ties manufactured, 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 commodities.
(d) Prohibited Discriminatory Services or Facilities. It is an un-
fair trade practice for any member of the industry engaged in com-
merce¹ to discriminate in favor of one purchaser against another pur-
chaser or purchasers of a commodity bought for resale, with or with-
out processing, by contracting to furnish or by furnishing, or by con-
tributing 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.
( e) Illegal Price Discrimination. It is an unfair trade practice for
any member of the industry or other person engaged in commerce, ¹
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.
Promulgated by the Federal Trade Commission March 18, 1938.
1 See footnote, p. 460.111
TRADE PRACTICE RULES
FOR THE
CARBON DIOXIDE MANUFACTURING INDUSTRY
PROMULGATED MARCH 19, 1938
STATEMENT BY THE COMMISSION
Trade practice rules for the Carbon Dioxide Manufacturing Indus-
try, as herein set forth, are promulgated by the Federal Trade Com-
mission under its trade practice conference procedure.
In the course of the proceedings a general trade practice conference
for the industry was held. Thereafter the proposed rules were made
available upon public notice to all interested or affected parties, afford-
ing them opportunity to present their views to the Commission, includ-
ing suggestions or objections, if any. Upon further consideration of
the entire matter, final Commission action was taken and the rules
in the form appearing herein were approved by the Commission as to
Group I, and in respect to Group II were received by the Commission
as expressions of the industry.
The products of the industry consist of carbon dioxide in its several
forms and uses. When produced for sale as liquid carbon dioxide it is
stored, sold, and distributed under pressure in steel cylinders, which
when empty are returned by the consumer of the product to the pro-
ducer or distributor for refilling. Solid carbon dioxide, known as dry
ice, is marketed for use as a refrigerant and also for use in converters
or liquefiers as a carbonating agent. Both the liquid and the solid
carbon dioxide when used for carbonating purposes are utilized in the
form of carbonic gas.
The rules as promulgated cover the sale and distribution of carbon
dioxide in all its forms, and regardless of the uses to which it is or
may be put.
Manufacturers, members of the industry, sell and distribute such
carbon dioxide products throughout various parts of the country to
wholesale and retail dealers, bottlers, ice cream manufacturers, bever-
age dispensers, and others. Total invested capital of the manufacturers
approximates $25,000,000, and their annual sales about $10,000,000.
RULE 1.
THE RULES
GROUP I *
Wilfully inducing or attempting to induce, by any false or decep
* See page VIII for headnote applicable to Group I Rules.112 FEDERAL TRADE COMMISSION
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 by any such means, with the purpose
and effect of unduly hampering, injuring, or prejudicing competitors
in their businesses, is an unfair trade practice.
RULE 2 .
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 3 .
The defamation of competitors by falsely imputing to them dishon-
orable 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, or conditions of employment, with the tendency, capacity,
or effect of misleading or deceiving purchasers, prospective purchasers,
or the consuming public, is an unfair trade practice.
RULE 4.
It is an unfair trade practice for any member of the industry, by
means of any monopolistic practices or through combination, con-
spiracy, coercion, boycott, threats, or any other unlawful means, di-
rectly or indirectly, to interfere with a competitor’s right to purchase
his products and supplies from whomsoever he chooses, or to sell the
same to whomsoever he chooses.
RULE 5 .
The practice of imitating or causing to be imitated, or directly or
indirectly promoting the imitation of, the trade-marks, trade names,
or other exclusively owned symbols or marks of identification of
competitors, having the capacity, tendency, or effect of misleading
or deceiving purchasers, prospective purchasers, or the consuming
public, is an unfair trade practice.
RULE 6.
The false or deceptive marking or branding of products of the in-
dustry, with respect to the grade, quality, quantity, use, size, material,
content, origin, preparation, manufacture, or distribution of such
products, or in any other material respect, is an unfair trade practice.TRADE PRACTICE RULES 113
RULE 7.
The unauthorized use of the carbon dioxide containers of a com-
petitor with the purpose and effect of thereby misleading or deceiving
purchasers, prospective purchasers, or the consuming public, or with
the purpose and effect of unduly hampering, injuring, or prejudicing
such competitor in his business, is an unfair trade practice.
(NOTE.-Owing to the responsibility of the owners of containers involv-
ing compliance with Interstate Commerce Commission Specifications 3 or
3-A requiring periodic testing of such containers, the industry recom-
mends that containers which bear a competitor’s identification marks
should not be used without owner’s permission evidenced by bill of sale,
lease, or other instrument, in writing. )
RULE 8 .
Making, or causing to be made or published, any false, misleading,
or deceptive statement or representation, by way of advertisement or
otherwise, concerning the grade, quality, quantity, substance, char-
acter, use, size, material, content, nature, origin, preparation, manu-
facture, or distribution of any industry product, or in any other
material respect, is an unfair trade practice.
RULE 9.
(a) Prohibited Discriminatory Rebates, Refunds, Discounts, Cred-
its, and Other Price Differentials. 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 indi-
rectly, any rebate, refund, discount, credit, or other price differential,
where such rebate, refund, discount, credit, or other price differential
effects a discrimination in price between different purchasers of goods
of like grade and quality and 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 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
manufacture, sale, or delivery resulting from the differing methods
or quantities in which such commodities are to such purchasers
sold or delivered ;
1See footnote, p. 460.114 FEDERAL TRADE COMMISSION
(3) That nothing herein contained shall prevent persons en-
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
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,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 mer-
chandise, either to the other party to such transaction or to an agent,
representative, 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 commerce¹ to pay or contract for the payment of advertising or
promotional 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 fur-
nished by or through such customer in connection with the process-
ing, handling, sale, or offering for sale of any products or commodi-
ties manufactured, 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 commodities.
(d) Prohibited Discriminatory Services or Facilities. It is an un-
fair trade practice for any member of the industry engaged in com-
merce¹ to discriminate in favor of one purchaser against another pur-
chaser or purchasers of a commodity bought for resale, with or with-
out processing, by contracting to furnish or by furnishing, or by con-
tributing 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.
1 See footnote, p. 460.TRADE PRACTICE RULES 115
( e) Illegal Price Discrimination. It is an unfair trade practice for
any member of the industry or other person engaged in commerce,¹
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 10.
The sale or offering for sale of any product of the industry by any
false or deceptive means or device which has the tendency and capacity
or effect of misleading or deceiving purchasers, prospective purchasers,
or the consuming public as to the quality, quantity, substance, or size
of such product, or in any other material respect, is an unfair trade
practice.
RULE 11 .
It is an unfair trade practice for any member of the industry to
use the practice of shipping goods on consignment or pretended con-
signment for the purpose and with the effect of artificially clogging
trade outlets and unduly restricting 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 : Pro-
vided, however, That nothing herein shall be construed or used as re-
stricting or preventing consignment shipping or marketing of com-
modities in good faith and without artificial interference with com-
petitors ‘ use of the usual channels of distribution in such manner as
thereby to suppress competition or restrain trade.
RULE 12.
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 13.
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 produets from the maker of such gift or offer
1 See footnote, p. 460.
مل116 FEDERAL TRADE COMMISSION
or to influence such employers or principals to refrain from dealing
or contracting to deal with competitors, is an unfair trade practice.
RULE 14.
The offering or giving of prizes, premiums, or gifts in connection
with the sale of products, or as an inducement thereto, by any scheme
which involves lottery, misrepresentation, or fraud, is an unfair trade
practice.
RULE 15.
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 16 .
Withholding from or inserting in invoices, bills of lading, delivery
receipts, or other documents of title any statements 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,
bills of lading, delivery receipts, or other documents of title, with the
purpose or effect of thereby misleading or deceiving purchasers, pros-
pective purchasers, or the consuming public, is an unfair trade practice.
RULE 17.
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 elements
recognized by good accounting practice as proper elements of such cost
shall be included in determining cost under this rule.
RULE 18 .
It is an unfair trade practice for any person, firm, partnership,
corporation, or association to enter into or take part in, directly or
indirectly, any agreement, understanding, combination, or conspiracy
with one or more persons, firms, partnerships, corporations, or asso-
ciations to fix, maintain, or enhance prices, or to suppress competition
in respect of any product or products of the industry or other prod-
ucts, or to fix, maintain, or enhance prices or suppress competition by
any other unlawful means.
RULE 19.
For any member of the industry knowingly to aid or abet another
member, or any other person, firm, or corporation, in the use of unfair
trade practices is an unfair trade practice.TRADE PRACTICE BULES 117
RULE A.
GROUP II *
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 com-
pose their differences. If unable to do so they should, if possible,
submit these disputes to arbitration.
RULE B.
Contracts are business obligations which should be performed 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 C.
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 good reason, 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.
RULE D.
Where products of the industry are sold at wholesale and retail in
the same establishment, the failure on the part of such member cor-
rectly to differentiate between or identify the two types of transactions,
where the result may be to create confusion and deception as to the
character of the transaction in the minds of purchasers or prospective
purchasers, is condemned by the industry.
RULE E.
The use of buying power to force uneconomic or unjust terms of
sale upon sellers, and the use of selling power to force uneconomic
or unjust terms of sale upon buyers, are condemned by the industry.
RULE F.
In the judgment of the industry the practice of filling or using,
for the distribution of liquid carbon dioxide, cylinders or containers
which do not meet the requirements of Interstate Commerce Commis-
sion Specifications 3 or 3-A, and the practice of using converters or
liquefiers which do not conform to the safety regulations of the locality
in which they are used, may be dangerous to life and property, and
such practices are therefore condemned by the industry. In localities
in which no official applicable safety regulations are in effect it is
recommended as a proper practice to follow in the interest of safety
* See page VIII for headnote applicable to Group II Rules.118 FEDERAL TRADE COMMISSION
+
that converters or liquefiers used be such as have been manufactured
or constructed to meet the requirements of the Unfired Pressure Vessel
Code of the American Society of Mechanical Engineers (A. S. M. Ε. )
in effect at the time of such manufacture or construction, or which
have otherwise been manufactured or constructed in accordance with
adequate safety requirements. The use of converters or liquefiers is not
prohibited or condemned by this rule, but safety precautions are
deemed necessary and desirable in the interest of the public and for
the welfare of the industry and are therefore recommended.
RULE G.
The industry records its approval of the distribution among mem-
bers of the industry of information covering delinquent and slow
return of cylinder accounts, as well as delinquent and slow credit
accounts, insofar as such may be lawfully done.
RULE H.
To promote a business practice fair to both buyer and seller and
to avoid unnecessary claims for evaporation during transportation,
the industry recommends that buyers and sellers at the time of sale
of carbon dioxide in solid form agree upon the place at which delivery
should be made and weight taken.
Promulgated by the Federal Trade Commission. March 19, 1938.

136 FEDERAL TRADE COMMISSION
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.
( e) Illegal Price Discrimination. It is an unfair trade practice for
any member of the industry or other person engaged in commerce,2
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.
A Committee on Trade Practices is hereby created by the indus-
try to cooperate with the Federal Trade Commission and to per-
form such acts as may be legal and proper to put these rules into
effect.
Promulgated by the Federal Trade Commission July 7, 1938.
2 See footnote, p. 460.137
TRADE PRACTICE RULES
FOR THE
TOMATO PASTE MANUFACTURING INDUSTRY
PROMULGATED SEPTEMBER 3, 1938
STATEMENT BY THE COMMISSION
Trade practice rules for the Tomato Paste Manufacturing Industry,
as herein set forth, are promulgated by the Federal Trade Commission
under its trade practice conference procedure.
The product of the industry to which the rules relate is tomato
paste, a canned tomato product extensively used in cooking.
The total value of the production of tomato paste is estimated to be
about $6,400,000 annually. The 1937 pack approximated 1,700,000
cases .
In the course of the proceedings an industry conference was held
in San Francisco, California, under the Commission’s auspices, and pro-
posed trade practice rules were submitted by members of the industry.
Thereafter tentative action was taken by the Commission on the rules
so submitted and a draft of proposed rules was made available upon
public notice of at least fifteen days, in pursuance of which all inter-
ested and affected parties were afforded opportunity to present such
pertinent facts, suggestions, or objections as they desired and to be
heard in respect to the proposed rules. Such hearing was held in
Washington and all matters submitted orally and in writing were
received and filed in the proceeding.
Thereafter, and upon consideration of the entire matter, final action
was taken and the rules in the form appearing in Group I and Group II
were respectively approved and received by the Commission.
These rules do not in any respect supplant, or relieve anyone of
the necessity of complying with, the legal requirements of the pure
food laws or other provision of law. They are established under statutes
administered by the Federal Trade Commission for the purpose of
more effectively stamping out unfair practices in the interest of the
public, and to assist in general law enforcement to this end.
THE RULES
GROUP I*
RULE 1. Misrepresentation of Industry Products .
:
The practice of selling, packing, advertising, or representing tomato
* See page VIII for headnote applicable to Group I Rules.138 FEDERAL TRADE COMMISSION
paste or related products, or any simulation or imitation thereof, in a
manner which is calculated to mislead or deceive or has the tendency
and capacity or effect of misleading or deceiving purchasers, prospeс-
tive purchasers, or the consuming public with respect to the char-
acter, nature, content, grade, quality, quantity, origin, substance,
material, preparation, or manufacture of such products, or in any
other material respect, is an unfair trade practice.
RULE 2. Specifications-Tomato Paste .
For the purpose of and as used in these rules :
(a) Tomato Paste (Salsa di Pomodoro, ” Salsa ” ) is understood to
be the product resulting from the concentration of the screened or
strained fleshy and liquid portions of ripe tomatoes, except those por-
tions from skin and core trimmings ; with or without the addition of
salt, and with or without the addition of basil leaf. The finished
product shall contain not less than 22% of tomato solids.
(b ) Should such minimum of 22% tomato solids hereafter be raised
to a higher percentage or proportion by applicable provisions of law
or by rules or regulations in pursuance thereof, then such higher
percentage so fixed shall be considered the minimum under these
rules, in lieu of such 22% specified in paragraph (a) of this rule.
(c ) Heavy Tomato Paste ( ” Concentrato” ) is understood to be
tomato paste containing not less than 33% of tomato solids.
(d) It is an unfair trade practice for any member of the industry
or other seller to cause the concentration or content of his tomato
paste to be misrepresented, or by any other means to represent, di-
rectly or indirectly, that the product is of a certain concentration of
22% or more tomato solids when such is not true in fact.
RULE 3. Misrepresentation as to Tomato Paste .
It is an unfair trade practice to sell, offer for sale, advertise, describe,
or otherwise represent, directly or indirectly, any product as being
tomato paste (Salsa di Pomodoro, ” Salsa “) , heavy tomato paste
( ” Concentrato “) , or other similar tomato paste product, when such
product does not conform to the specifications hereinabove set forth
in Rule 2 .
RULE 4. Misrepresentation as to Artificial Color.
It is an unfair trade practice to sell, offer for sale, advertise, or
otherwise represent, directly or indirectly, any product of the industry
containing added artificial color without then and there making full
and nondeceptive disclosure of the presence of such added artificial
color.
The use of any coloring matter whatsoever shall not be permittedTRADE PRACTICE RULES 139
when the same is introduced for the purpose or with the effect of
concealment or masking damage or inferiority, or of adulterating the
product or rendering the same deleterious.
RULE 5. Misrepresentation as to Tomato Content of Product.
It is an unfair trade practice to sell, offer for sale, advertise, de-
scribe, or otherwise represent, directly or indirectly, any product of
the industry as containing a higher tomato solids content than is
actually the case.
RULE 6. Deceptive Depictions.
The use of photographs, cuts, engravings, illustrations, or pictorial
or other depictions, or devices, of industry products, in catalogues,
sales literature, advertisements, or other representations, in such man-
ner as to have a capacity and tendency or effect of misleading or
deceiving the purchasing or consuming public as to the origin, manu-
facture, grade, quality, quantity, size, composition, material, coloring,
or content of any products of the industry, or ingredient thereof, or
in any other material respect, is an unfair trade practice.
RULE 7. Defamation of Competitors and Disparagement of Their Prod-
ucts.
The defamation of competitors by falsely imputing to them dishon-
orable 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, poli-
cies, or services, is an unfair trade practice.
RULE 8. Substituting Inferior Products for Those Ordered .
The practice of using or substituting any product of the industry
inferior in grade or quality to that specified by the purchaser, without
the consent of said purchaser to such use or substitution or with the
tendency, capacity, or effect of otherwise misleading or deceiving pur-
chasers, prospective purchasers, or the consuming public, is an unfair
trade practice.
RULE 9. Commercial Bribery.
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
dealing or contracting to deal with competitors, is an unfair trade
practice.140 FEDERAL TRADE COMMISSION
RULE 10. Inducing Breach of Contract .
Knowingly inducing or attempting to induce the breach of existing
lawful contracts between competitors and their customers or their
suppliers by any false or deceptive means whatsoever, or knowingly
interfering with or obstructing the performance of any such con-
tractual duties or services by any such means, with the purpose and
effect of unduly hampering, injuring, or prejudicing competitors in
their businesses, is an unfair trade practice.
RULE 11. Enticing Away Employees of Competitors.
Wilfully enticing away the employees of competitors, with the
purpose and effect of unduly hampering, injuring, or prejudicing
competitors in their businesses, is an unfair trade practice.
RULE 12. Selling Below Cost .
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 a
monopoly 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 13.
( 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 discrim-
ination in price between different purchasers of goods of like grade
and quality, where either or any of the purchases involved therein
are in commerce, and where the effect thereof may be substantially
to lessen competition or tend to create a monopoly in any line of com-
merce, or to injure, destroy, or prevent competition with any person
who either grants or knowingly receives the benefit of such discrim-
ination or with customers of either of them : Provided, however-
2
(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
manufacture, sale, or delivery resulting from the differing methods
1 Paragraph (a) of Rule 13 shall not be construed as embracing practices prohibited by
paragraphs (b ) , (c ) , and (d) of this rule.TRADE PRACTICE RULES 141
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 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 . rabid auoititait
(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
2 See footnote, p. 460.142 FEDERAL TRADE COMMISSION
modity so purchased upon terms not accorded to all purchasers on
proportionally equal terms.
( e ) Illegal Price Discrimination. It is an unfair trade practice for
any member of the industry or other person engaged in commerce, 2
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 14. Misrepresentation as to Basil, Etc.
It is an unfair trade practice to cause any tomato paste or related
product to be represented, directly or indirectly, as containing basil
leaf or any other ingredient when such is not true in fact; or when
such basil leaf or other specified ingredient has been omitted in pack-
ing from various or sundry cans of the product so represented.
GROUP II*
RULE A. Disclosure of Solids Content.
The practice, by each member of the industry, of making clear and
nondeceptive disclosure to the purchasing public of the percentage
or proportion of tomato solids present in his product, thereby disclos-
ing whether his tomato paste contains only the minimum percentage
of tomato solids or some higher percentage, is recommended as a
proper and desirable practice to follow in the interest of affording
consumers and other purchasers correct information as to the concen-
tration of the product, and of avoiding confusion, deception, and mis-
representation in respect thereto.
RULE B. Repudiation of Contracts .
Lawful contracts are business obligations which should be performed
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 C. Fake or Fictitious Bids.
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 D. Truthful Disclosure of Quality of Products.
In the interest of consumer protection, the industry records itself
2 See footnote, p. 460.
* See page VIII for headnote applicable to Group II Rules.TRADE PRACTICE RULES 143
as favoring, and recommends, the practice of members making fair
and truthful disclosure, in their advertising, labeling, sales literature,
and other selling representations, of the quality and content of their
products.
RULE E. Dissemination of Credit Information.
The industry records its approval of distributing information cover-
ing delinquent and slow accounts insofar as it may be lawfully done.
Promulgated by the Federal Trade Commission September 3, 1938.

144 FEDERAL TRADE COMMISSION
TRADE PRACTICE RULES
FOR THE
OLEOMARGARINE MANUFACTURING INDUSTRY
PROMULGATED SEPTEMBER 27, 1938
STATEMENT BY THE COMMISSION
Trade practice rules for the Oleomargarine Manufacturing Industry,
as herein set forth, are promulgated by the Federal Trade Commission
under its trade practice conference procedure.
The product of the industry to which the rules relate is oleomar-
garine in its various forms, the total production of which, according
to authoritative sources, for the fiscal year ended June 30, 1938, was
411,725,009 pounds.
In the course of the proceedings an industry conference was held in
Chicago, Illinois, under the Commission’s auspices, and proposed trade
practice rules were submitted by members of the industry. Thereafter
tentative action was taken by the Commission on the rules so submitted
and a draft of proposed rules was made available upon public notice
of at least fifteen days, in pursuance of which all interested and
affected parties were afforded opportunity to present such pertinent
facts, suggestions, or objections as they desired and to be heard in
respect to the proposed rules. Such hearing was held in Washington
and all matters submitted orally and in writing were received and
filed in the proceeding.
Thereafter, and upon consideration of the entire matter, final action
was taken and the rules in the form appearing herein under Group I
and Group II were respectively approved and received by the Com-
mission.
These rules do not in any respect supplant, or relieve anyone of the
necessity of complying with, the legal requirements of the pure food
laws or other provision of law. They are established under statutes
administered by the Federal Trade Commission for the purpose of
more effectively stamping out unfair practices in the interest of the
public, and to assist in general law enforcement to this end.
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

• See page VIII for headnote applicable to Group I Rules.
  TRADE PRACTICE RULES 145
  deceptive statement or representation, by way of advertisement or
  otherwise, concerning the grade, quality, quantity, use, material, con-
  tent, origin, nutritive value, preparation, manufacture, or distribution
  of oleomargarine, or in any other material respect.
  RULE 2. Misbranding.
  The false or deceptive marking or branding of oleomargarine with
  any word, phrase, name, trade-mark, label, picture, design, device, or
  other representation, with respect to the grade, quality, quantity, use,
  content, origin, preparation, manufacture, or distribution of such
  oleomargarine, or in any other material respect, is an unfair trade
  practice.
  RULE 3. Substitution of Products Not Conforming to Specifications .
  The substitution and delivery to customers, without the consent of
  the purchaser, of oleomargarine which does not conform to formula
  specifications, samples, or representations upon which the purchase
  order is based; or the substitution or delivery, with or without the
  consent of the purchaser, of oleomargarine which does not conform to
  applicable Federal or State laws or regulations ; with the purpose or
  with the tendency and capacity or effect of misleading or deceiving,
  directly or indirectly, the purchasing or consuming public, is an un-
  fair trade practice.
  RULE 4. Misrepresentation as to Milk Content .
  Falsely representing, directly or indirectly, through advertising or
  otherwise, that any type of oleomargarine contains milk when, in fact,
  the cream or any other food content has been extracted therefrom, for
  the purpose or with the tendency, capacity, or effect of misleading or
  deceiving purchasers, prospective purchasers, or the consuming public,
  is an unfair trade practice.
  RULE 5. Misrepresentation as to Fat Content.
  It is an unfair trade practice for any member of the industry to
  sell, or offer for sale through advertising or otherwise, any oleomargar-
  ine the fat content of which is less than that specified in applicable
  regulations, duly promulgated by authority of law, for the purpose,
  or with the tendency, capacity, or effect, of misleading or deceiving
  purchasers, prospective purchasers, or the consuming public.
  RULE 6. Compliance with State and Federal Specification Require-
  ments .
  It is an unfair trade practice to sell or distribute, or cause to be sold
  or distributed, any oleomargarine manufactured in conformity with
  formula specifications of buyers or customers or otherwise, when such
  146 FEDERAL TRADE COMMISSION
  formula specifications or manufacture is violative of applicable Federal
  or State laws or regulations and where the tendency and capacity or
  the effect thereof is, directly or indirectly, to mislead or deceive the
  purchasing or consuming public.
  RULE 7. 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 repre-
  sentatives of competitors’ customers or prospective customers, without
  the knowledge of their employers or principals, as an inducement to
  influence their employers or principals to purchase or contract to
  purchase products manufactured or sold by such industry 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 8. Unlawful Interference with Raw Material Purchases.
  It is an unfair trade practice for any member of the industry, by
  means of any monopolistic practices or through combination, con-
  spiracy, coercion, boycott, threats, or any other unlawful means,
  directly or indirectly, to interfere with a competitor’s right to pur-
  chase his raw materials and supplies from whomsoever he chooses, or
  to sell his product to whomsoever he chooses.
  RULE 9. Defamation of Competitors and Disparagement of their Prod-
  ucts .
  The defamation of a competitor by falsely imputing to him dishon-
  orable conduct, inability to perform contracts, questionable credit
  standing, or by other false representations, or the false disparage-
  ment of the grade, quality, or manufacture of the products of a com-
  petitor or of his business methods, selling prices, credit terms, policies,
  or services, is an unfair trade practice.
  RULE 10. False Invoicing.
  Withholding from or inserting in an invoice, billing, or statement
  any material information by reason of which omission or insertion
  a false record is made, wholly or in part, of the transaction which
  such invoice or billing or statement purports to represent, with the
  purpose or effect of thereby misleading or deceiving purchasers, pros-
  pective purchasers, or the consuming public, is an unfair trade practice.
  RULE 11. Inducing Breach of Contract.
  Inducing or attempting to induce the breach of existing lawful
  contracts between competitors and their customers or their suppliers,
  or between a competitor and his distributor or agent, by any false or
  TRADE PRACTICE RULES 147
  deceptive means whatsoever, or interfering with or obstructing the
  performance of any such contractual duties or services by any such
  means, with the purpose and effect of unduly hampering, injuring, or
  prejudicing competitors in their businesses, is an unfair trade practice.
  RULE 12. Enticing Away Employees of Competitors .
  Wilfully enticing away the employees of competitors, with the
  purpose and effect of unduly hampering, injuring, or prejudicing
  competitors in their businesses, is an unfair trade practice.
  RULE 13. Consignment Selling.
  It is an unfair trade practice for any member of the industry to
  ase the practice of shipping goods on consignment or pretended con-
  signment for the purpose and with the effect of artificially clogging
  trade outlets and unduly restricting 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 out-
  lets to such competitors so as to substantially lessen competition or
  tend to create a monopoly or to unreasonably restrain trade : Pro-
  vided, however, That nothing herein shall be construed or used as
  restricting or preventing consignment shipping or marketing of com-
  modities in good faith and without artificial interference with com-
  petitors ‘ use of the usual channels of distribution in such manner as
  thereby to suppress competition or restrain trade.
  RULE 14. Publication or Circulation of False or Misleading Price Quo-
  tations, Etc.
  The making, publishing, or circulating by any member of the indus-
  try of false or misleading price quotations, price lists, terms or condi-
  tions of sale, or reports as to production or sales, with the tendency,
  capacity, or effect of misleading or deceiving purchasers, prospective
  purchasers, or the consuming public, is an unfair trade practice.
  RULE 15. Selling Below Cost.
  The practice of selling oleomargarine 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 elements recognized by good accounting practice as proper elements
  of such cost shall be included in determining cost under this rule.
  RULE 16. ” Loss Leaders . “
  The practice of selling oleomargarine below the seller’s cost as a
  ‘ loss leader ” to induce the purchase of any other product of the in-
  dustry, the sale of the latter being used to recoup the loss sustained
  on the ” loss leader” product so sold, with the tendency or capacity
  to mislead or deceive purchasers, prospective purchasers, or the con-
  suming public, is an unfair trade practice.
  148 FEDERAL TRADE COMMISSION
  RULE 17.
  ( 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, payment of dealer’s license, or other form of price differ-
  ential, ¹ where such rebate, refund, discount, credit, payment of dealer’s
  license, or other form of price differential effects a discrim-
  ination in price between different purchasers of goods of like grade
  and quality, where either or any of the purchases involved therein
  are in commerce, and where the effect thereof may be substantially
  to lessen competition or tend to create a monopoly in any line of com-
  merce, or to injure, destroy, or prevent competition with any person
  who either grants or knowingly receives the benefit of such discrim-
  ination or with customers of either of them : Provided, however-
  2
  (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
  manufacture, 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 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, anything 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 merchant Paragraph ( a ) of Rule 17 shall not be construed as embracing practices prohibited by
  paragraphs (b ) , (c ) , and (d) of this rule.
  2 See footnote, p . 460.
  TRADE PRACTICE RULES 149
  dise, either to the other party to such transaction or to an agent, representative, 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 promotional 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, handling, sale, or offering for sale of any products or commodities manufactured, 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
  commodities.
  (d) Prohibited Discriminatory Services or Facilities. It is an unfair trade practice for any member of the industry engaged in commerce² 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 commodity so purchased upon terms not accorded to all purchasers on proportionally equal terms.
  (e) Illegal Price Discrimination.—It is an unfair trade practice for any member of the industry or other person engaged in commerce, 2 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 Congress) , or knowingly to induce or receive a discrimination in price
  which is prohibited by such section as amended.
  RULE A. Cost Records .
  GROUP II*
  It is the judgment of the industry that each member should independently keep proper and accurate records for determining his costs.
  RULE B. Repudiation of Contracts.
  Lawful contracts are business obligations which should be performed
  in letter and in spirit. The repudiation of contracts by sellers on a
  2 See footnote, p. 460.
• See page VIII for headnote applicable to Group II Rules.
  150 FEDERAL TRADE COMMISSION
  rising market or by buyers on a declining market is condemned by
  the industry.
  RULE C. Promotion of Use of American Agricultural Products.
  The industry recommends that the members thereof in the manufacture of their products encourage and promote the greater consumption of raw materials produced by American agriculture.
  Promulgated by the Federal Trade Commission September 27, 1938.

166 FEDERAL TRADE COMMISSION
RULE 8. Misrepresentation as to Egg Production Qualities of Poultry.
In the case of a producer of baby chicks mating with his flocks a
limited number of males having a record for transmitting high egg
production qualities while mating therewith other males having no
such record, it is an unfair trade practice to offer baby chicks for sale
from his flocks, through advertising or otherwise, in such manner as
to have the tendency and capacity or effect of misleading or deceiv-
ing purchasers or prospective purchasers into the belief that all of
such chicks possess the same high egg production qualities as the said
males of high pedigree, or that such flocks have been mated exclusively
with males having a record for transmitting high egg production
qualities, when such is not the fact.
RULE 9. Deceptive Use of ” Leaders . “
It is an unfair trade practice to offer for sale, advertise, or other-
wise represent baby chicks as being of a certain high grade or quality,
offered at claimed ” bargain prices ” and under circumstances which
have the capacity and tendency or effect of misleading or deceiving
purchasers or prospective purchasers into the belief that an adequate
supply of such chicks is available to purchasers at such prices, or that
all chicks so offered for sale or sold under such representations and
conditions are of the same high grade or quality, when such is not
true in fact.
RULE 10. Misuse of Words ” Hatchery,” “ Chickery, ” “ Chick Nur-
sery, ” ” Farm, ” “ Poultry Farm, ” ” Breeding Farm, ” “ Incu-
bators, ” Etc.
(a) It is an unfair trade practice for any person, partnership, or
corporation, by trade or corporate name, through advertising, or other-
wise, to hold himself or itself out as owning or operating a hatchery.
chickery, chick nursery, farm, poultry farm, breeding farm, incubators,
or the like, when such is not the fact.
(b ) In the sale or offering for sale of baby chicks, through adver-
tising or otherwise, it is an unfair trade practice for any person,
partnership , or corporation to represent that such chicks have been
produced by the said person, partnership, or corporation, or have been
produced under certain conditions, when such is not the fact.
RULE 11. Deceptive Guarantees or Representations as to Percentage
of Chicks Alive at Buyer’s Destination.
It is an unfair trade practice to make false, misleading, or deceptive
guarantees, warranties, or other representations to the effect that a
certain percentage of the chicks shipped will be alive at buyer’s desti-
nation, and then fail to adjust losses pursuant to representations made,
with the purpose or with the tendency and capacity or effect of mis-
leading or deceiving purchasers or prospective purchasers.TRADE PRACTICE RULES 167
1
RULE 12. Misrepresenting Chicks Sold at Auction, Through Shipment
to Fictitious Consignees, Through Agents, Salesmen, or Dealers,
Etc.
It is an unfair trade practice to cause baby chicks to be sold under
deceptive or misleading conditions, at auction sales, through shipment
to fictitious consignees, or through agents, salesmen, dealers, or other-
wise, whether by means of false, misleading, or deceptive statements
or representations or by means of deceptive concealment of material
facts.
RULE 13. Deceptive Testimonials .
It is an unfair trade practice for any member of the industry to
publish or use misleading or deceptive testimonials regarding excep-
tional results alleged to have been obtained by buyers of his chicks,
which testimonials are so worded as to have the tendency and capacity
or effect of inducing purchasers or prospective purchasers to believe
that all of such member’s chicks may be expected to produce similar
results for all buyers when such is not the fact.
RULE 14. Misuse of Word “ Free. ”
The use of the word ” free,” or the equivalent thereof, where not
properly or fairly qualified when the article is in fact not free, with
the tendency or capacity to mislead or deceive purchasers or pros-
pective purchasers, is an unfair trade practice.
RULE 15. Misrepresenting Chicks as from Stock Entered in Egg-Laying
Contests or Poultry Shows, Etc.
It is an unfair trade practice to advertise, guarantee, describe, or
otherwise represent that baby chicks sold or offered for sale are from,
or are closely related to, stock entered in egg-laying contests or poultry
shows, or the like, when such is not the fact.
RULE 16. Misuse of Terms ” Trapnest, ” ” Trapped, ” Etc.
It is an unfair trade practice to use the terms ” trapnest, ” ” trapped, “
or the like, in such manner as to have the tendency and capacity or
effect of misleading or deceiving purchasers or prospective purchasers
into the belief that all baby chicks sold or offered for sale are hatched
from eggs produced by hens that are actually being trapped, or have
been trapped for at least one year, when such is not the fact.
RULE 17. Deceptive Depictions.
It is an unfair trade practice to use photographs, cuts, engravings,
illustrations, or pictorial or other depictions or devices, in catalogues,
sales literature, or advertisements, or otherwise, in such manner as
to have the capacity and tendency or effect of misleading or deceiv-
ing purchasers or prospective purchasers as to the size, importance, or
location of the premises occupied by a member of the industry, as to
653742-46-12168 FEDERAL TRADE COMMISSION
such member’s equipment, as to his breeding flocks or poultry prod-
ucts, or as to any phase of his poultry hatching, breeding, or other
operations.
RULE 18. Deceptive Representations as to Earnings, Etc.
It is an unfair trade practice to make false, misleading, or deceptive
statements or representations regarding opportunities for making
money or actual or probable earnings of agents or dealers handling
hatching eggs, baby chicks, or other poultry, or of purchasers raising
baby chicks or other poultry, which products are being offered for sale
or sold by a member of the industry.
RULE 19. Deception as to Transportation Charges .
(a) It is an unfair trade practice to sell or offer to sell baby chicks,
through advertising or otherwise, in such manner as to mislead or
deceive purchasers or prospective purchasers into the belief that the
prices quoted for such chicks are the prepaid or delivered prices when
such is not the fact.
(b) It is an unfair trade practice, by failing correctly to inform
customers or by other deception, to cause purchasers to believe that
transportation costs will not be charged against them in C. O. D.
charges or otherwise, when such is not true in fact.
RULE 20. Publishing or Circulating of False or Misleading Price Quo-
tations, Price Lists, Etc.
The publishing or circulating by any member of the industry of
false or misleading price quotations, price lists, terms, or conditions
of sale, with the tendency and capacity or effect of misleading or
deceiving purchasers or prospective purchasers, is an unfair trade
practice.
RULE 21. Misrepresenting Offer as ” Special. “
It is an unfair trade practice to represent an offer as ” special” when
it is in fact a ” regular” offer.
RULE 22. Fictitious Prices.
Offering baby chicks for sale at prices purported to be reduced
from what are in fact fictitious prices, or offering such chicks for sale
at a purported reduction in price when such purported reduction is
in fact fictitious, with the tendency and capacity or effect of mislead-
ing or deceiving purchasers or prospective purchasers, is an unfair
trade practice.
RULE 23. Misrepresenting Offer as Limited to Time, Etc. i
It is an unfair trade practice to represent an offer to be limited as
to time or otherwise when such is not the fact .TRADE PRACTICE RULES 169
RULE 24. Bogus Independents .
It is an unfair trade practice to sell or offer to sell industry prod-
ucts through a pretended independent concern in such manner as to
mislead or deceive purchasers or prospective purchasers into the er-
roneous belief that such concern is independent and in competition
with that member of the industry owning or controlling such concern.
RULE 25. Schemes Involving Lottery, Misrepresentation, or Fraud.
The offering or giving of prizes, premiums, or gifts in connection
with the sale of industry products, or as an inducement thereto, by
any scheme which involves lottery, misrepresentation, or fraud is an
unfair trade practice.
RULE 26. Misuse of Word ” Guarantee, ” Etc.
It is an unfair trade practice to use the word “guarantee, ” or any
other word, expression, or representation of similar import, in such
manner as to have the tendency and capacity or effect of misleading
or deceiving purchasers or prospective purchasers.
RULE 27. Defamation of Competitors or Disparagement of Their Prod-
ucts.
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, poli-
cies, or services, is an unfair trade practice.
RULE 28. ” Loss Leaders .”
The practice of selling any product of the industry below the seller’s
cost as a ” loss leader ‘ to induce the purchase of any other product of
the industry, the sale of the latter being used to recoup the loss sus-
tained on the ” loss leader” product so sold, with the tendency or
capacity to mislead or deceive purchasers or prospective purchasers,
is an unfair trade practice.
RULE 29. Inducing Breach of Contract.
Inducing or attempting to induce the breach of existing lawful
contracts between competitors and their customers or their suppliers
by any false or deceptive means whatsoever, or interfering with or
obstructing the performance of any such contractual duties or services
by any such means, with the purpose and effect of unduly hampering,
injuring, or prejudicing competitors in their businesses, is an unfair
trade practice.
RULE 30. Enticing Away the Employees of Competitors .
Wilfully enticing away the employees of competitors, with the pur170 FEDERAL TRADE COMMISSION
pose and effect of unduly hampering, injuring, or prejudicing com-
petitors in their businesses, is an unfair trade practice.
RULE 31. Espionage .
The securing of information from competitors concerning their busi-
nesses by false or misleading statements or representations or by false
impersonation 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 32. Coercing Purchase of One Product as a Prerequisite to the
Purchase of Other Products .
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 33. Consignment Selling.
It is an unfair trade practice for any member of the industry to
use the practice of shipping goods to dealers or distributors on con-
signment or pretended consignment for the purpose and with the
effect of artificially clogging trade outlets and unduly restricting com-
petitors ‘ 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 substan-
tially lessen competition or tend to create a monopoly or to unrea-
sonably restrain trade : Provided, however, That nothing herein shall
be construed or used as restricting or preventing consignment ship-
ping 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.
RULE 34. Selling Below Cost.
The selling or offering for sale of baby chicks or ” started chicks “
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 com-
petition or tend to create a monopoly or unreasonably restrain trade,
is an unfair trade practice; all elements recognized by good account-
ing practice as proper elements of such cost shall be included in deter-
mining cost under this rule.
RULE 35.
( 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,TRADE PRACTICE RULES 171
credit, or other form of price differential,¹ where such rebate, refund,
discount, credit, or other form of price differential effects a discrim-
ination in price between different purchasers of goods of like grade
and quality, where either or any of the purchases involved therein
are in commerce, and where the effect thereof may be substantially
to lessen competition or tend to create a monopoly in any line of com-
merce, or to injure, destroy, or prevent competition with any person
who either grants or knowingly receives the benefit of such discrim-
ination 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
manufacture, 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 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
1
Paragraph
(
a
)
of Rule 35 shall
not be
construed as
embracing
practices prohibited
by
paragraphs
(
b
)
,
(
c
)
,
and
(
d
)
of
this rule
.
See footnote
,
p
.
460
.172 FEDERAL TRADE COMMISSION
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.
(e) Illegal Price Discrimination. It is an unfair trade practice for
any member of the industry or other person engaged in commerce,2
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 36. Aiding or Abetting Use of Unfair Trade Practices .
For any member of the industry knowingly to aid or abet another
member, or any other person, firm, or corporation, in the use of unfair
trade practices, is an unfair trade practice.
RULE A.
GROUP II *
The industry condemns the practice of disposing of baby chicks
by shipping them to fictitious consignees or without an order or other
consent of the consignee, necessitating the sale of such undeliverable
shipments at public auction by agents of the common carrier in order
to secure payment for transportation costs. Such practice is deemed
by the industry to be harmful to the chicks and to facilitate the spread
of disease.
RULE B.
The industry condemns the practice of failing to give proper notice
2See footnote, p. 460.
* See page VIII for headnote applicable to Group II Rules.TRADE PRACTICE RULES 173
to purchasers of baby chicks of any change in the shipping schedule of
an order thereby causing inconvenience and loss to purchasers.
RULE C.
The industry condemns the practice of failing to ship baby chicks
to customers as promptly as has been agreed upon, which practice.
frequently results in injury to the chicks and inconvenience and loss
to customers .
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 com-
pose their differences. If unable to do so they should, if possible, submit
these disputes to arbitration.
RULE E.
Lawful contracts are business obligations which should be performed
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.
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 December 31 , 1938 .
NOTE : Proceedings to revise and extend the rules for this industry had been undertaken
when this book went to press.