posed merger, if consummated, would be in violation of an outstanding Commission order prohibiting the purchasing company from making certain acquisitions.

(b) A large integrated company manufacturing commercial products applied for clearance to acquire a smaller company engaged in operations in the same product line in the Western States. The larger company was, and is now, subject to a Commission order prohibiting certain acquisitions for a designated period of time without prior Commission approval.

(c) Both manufacturers were in direct competition in the geographical trading area. However, each held a relatively small share of the market involved. It was represented that the small concern had exhausted all other possibilities of selling to another purchaser, save to one or more of the other integrated manufacturers in the industry. The seller, who was suffering personal hardships because of illness in his family, had to leave the business and the area which it served.

(d) On the basis of the information and data supplied, the Commission cleared the request for clearance of the proposed acquisition.

[33 F.R. 2892, Feb. 13, 1968]

§ 15.188 Premerger clearance denied: Merger of firms in same industry would raise questions.

(a) The Commission issued advisory opinions on September 27, 1962, March 28, 1963, and September 12, 1963, in which commutual requests for premerger clearance from liability under section 7, amended Clayton Act, by a small dairy in financial difficulty were denied as to acquisition by a larger company in the same industry, but were finally approved permitting acquisition by a diversified corporation in another industry.

(b) A small dairy in financial difficulty desiring to be acquired by a larger company in the same field applied for clearance of the proposed acquisition. The larger company, an integrated processor and distributor of dairy products, was the respondent in a complaint in litigation with the Commission.

(c) The applicant was advised the proposed acquisition would raise questions similar to those involved in the proceeding and that the pendency of the proceedings made it inappropriate to express any further views. Reconsideration was requested. In response, the Com

mission informed the applicant of the decision in the Foremost Dairies case, Docket 6495 and again advised that the acquisition would raise serious questions under section 7 of the Clayton Act. Further, the Commission pointed out that it recognized the problems of small dairies and suggested further efforts to sell to a local or regional purchaser.

(d) Later, the small dairy requested consideration of its proposed acquisition by a large, diversified corporation in the food industry. The Commission advised it would contemplate no action if the transaction was consummated. The Commission added its advice should not be construed as affecting any position it had previously taken against the acquiring corporation nor as in any way prejudicing any pending or future action it might take against the acquiring corporation regarding other acquisitions.

[33 F.R. 2892, Feb. 13, 1968] § 15.189

Premerger clearance: Precarious financial condition.

(a) The Commission issued an advisory opinion on March 20, 1963, in which a request for premerger clearance from liability under section 7, amended Clayton Act, was approved permitting acquisition of a company on the verge of insolvency.

(b) A manufacturer of consumer goods desiring to be acquired by a larger producer in the same field requested clearance of the proposed acquisition. His company had suffered declining sales for a number of years and was in a precarious financial condition to the point of being on the verge of insolvency. Further, reasonable attempts to sell to others had been made but there was no other purchaser which could preserve the competitive force possessed by the requesting manufacturer.

(c) The requesting party was advised that if the sale were consummated, the Commission would contemplate no action based on this transaction alone. The Commission added that its decision was based on representations that the smaller firm was in such dire financial straits that it faced impending backruptcy. Further, the Commission stated it was expressing no opinion regarding prior acquisitions or on restrictive practices, if any, by the purchaser or any other company which may have contributed to the requesting party's failing condition. [33 F.R. 2892, Feb. 13, 1968]

§ 15.190 Random distribution of "bonus certificates" with purchase.

(a) The Commission in an advisory opinion stated that the random inclusion of "bonus certificates" in egg cartons would be violative of section 5 of the Federal Trade Commission Act.

(b) The seller proposed to include "bonus certificates" in cartons of eggs offered for sale. The certificates were decribed as being worth "so many eggs or $5 in cash." They would be randomly distributed so that some cartons would contain eggs plus a bonus certificate of value, while others would contain eggs only, or eggs plus a certificate of little or no value.

(c) The Commission was of the view that this would be merchandising by lottery, a practice which the Commission has long held to be unfair within the meaning of section 5 of the Federal Trade Commission Act.

[33 F.R. 3054, Feb. 16, 1968]

§ 15.191 Advertisements which appear in news format.

(a) The Commission rendered an advisory opinion involving the question of whether it is deceptive to publish an advertisement in the format of a news article without disclosing it is an advertisement, as required in the Commission's press release of November 28, 1967.

(b) The factual situation presented to the Commission involved the publication of a column in a newspaper which advertised the cuisine facilities of several restaurants. Written in narrative form, the writeup about each restaurant usually identified the chef and/or head waiter, gave a brief description of how a certain meal is prepared, and contained other factual information concerning the hours during which meals are served, whether dancing is permitted, whether cocktails are served, and some general indication of the price range of the meal. (c) In its opinion, the Commission concluded: * the column uses the format and has the general appearance of a news feature and/or article for public information which purports to give an independent, impartial and unbiased view of the cuisine facilities of a particular restaurant. Since the column in fact consists of a series of commercial messages which are paid for by the advertisers, the Commission is of the opinion that it will be necessary to clearly and conspicuously disclose it is an advertisement, as outlined in the aforemen

tioned press release. This conclusion would not be altered even though the column carried the exact cost of each meal being advertised, or if it listed the price range of the various meals." [33 F.R. 3054, Feb. 16, 1968]

§ 15.192

Clearance denied for merger of competing milk companies.

(a) The Commission rendered an advisory opinion in which clearance was denied to an applicant to sell its milk processing and dairy products distribution assets to a large, integrated food producing, processing, wholesaling, and retailing concern. The proposed purchaser has a dairy products subsidiary in actual or potential competition with the applicant in the same market.

(b) The Commission noted that the proposed merger would combine the firm now appearing to rank fourth in sales in the market with the eighth to result in a firm in second or third position. It also appears that the present top four firms have about 40 percent of the sales in the market and therefore the proposed merger would further increase the market concentration.

(c) Because the proposed merger raises such serious questions of possible violation of section 7 of the amended Clayton Act, the Commission advised the applicant that premerger clearance cannot be granted. The Commission further stated that, if the merger occurs, the Commission may take the action it deems necessary to protect the public interest and prevent anticompetitive effects.

[33 F.R. 3170, Feb. 20, 1968]

§ 15.193 Substitution of merchandise unlawful even though equivalent in grade, quality, and appearance to that ordered by customers.

(a) The Commission was requested to render an advisory opinion with respect to the legality of substituting, on customer orders for a particular fabric, a fabric produced by another manufacturer without notifying customers of the intended substitution.

(b) It was represented that customers had long been supplied with a specific fabric and that sample display cards had been distributed to them advertising the availability of this fabric. The supplier recently discontinued production of the fabric and another supplier was located who will furnish a similar product said to be identical in pattern and of better

quality. It was proposed to supply customers with the new product without resampling their display cards or otherwise advising them of the substitution, the cost of which, it was asserted, would be prohibitive.

(c) The Commission advised that it could not give its approval to this proposed business practice. A forseeable result of substituting the product of one manufacturer for that of another would be to mislead customers into purchasing an article which they might not wish or intend to purchase, and which they might or might not purchase if they were informed as to its origin. Nor would the prejudice thus engendered be confined to customers; other distributors and manufacturers of a competing product would be injured when orders that would normally have come to them if the fabric were rightly named are diverted to the offending firm.

[33 F.R. 3170, Feb. 20, 1968]

§ 15.194 Use of uniform delivered pricing system effected by deducting freight allowances from f.o.b. price. (a) The Commission advised a west coast manufacturer of industrial parts that it would not be illegal to use either a conventional uniform delivered pricing system based on averaged cost factors or a uniform delivered pricing system which will be effected by granting socalled freight allowances to be deducted from the manufacturer's f.o.b. factory price.

(b) The facts with respect to the second alternative were that the manufacturer proposed to establish an f.o.b. factory price of, for purposes of illustration, $99.50. Actual freight to west coast customers may be $0.50 and such customers would receive no allowance. Thus they would pay the manufacturer $99.50 and the carrier $0.50, making a total of $100. Then, again using hypothetical figures for purposes of illustration, actual freight to a Denver customer may be $1. The manufacturer would grant such a customer a $0.50 freight allowance to be deducted from the f.o.b. price, thus leaving the customer paying the manufacturer a price of $99 and the carrier $1, making a total of $100. Continuing east, actual freight to a Kansas City customer may be $1.50. The freight allowance would be $1, leaving the customer paying the manufacturer $98.50 and the carrier $1.50, for a total again of $100. This would continue in graduated steps across

the country to where an east coast customer with actual freight costs of $3 would receive an allowance of $2.50, leaving him also paying a total of $100. The manufacturer advised that it was considering this alternative for administrative reasons, since it wished to pass title to the customers upon delivery to the carrier and have the customers handle all freight bills.

(c) With respect to the first question, the Commission advised that it was of the view that there could be no question of the manufacturer's right to unilaterally employ a uniform delivered pricing system, since if each buyer pays the same delivered price no question under the Clayton Act, as amended by the Robinson-Patman Act, would arise. While the factual situation under the second alternative is somewhat more complicated, the Commission was further of the view that it also would not result in a violation of law if implemented exactly as outlined above. In the Commission's view, the difference between the two systems is one of form rather than of substance and that it would make no legal difference whether the manufacturer computes its factory price and adds to it an amount equal to the average freight costs for delivering to all customers, as is done in the usual uniform delivered pricing system, or whether it accomplishes the same result by deducting an amount from the factory price which would have the effect of leaving each buyer paying an amount roughly equal to the same freight factor. In either event, it would seem that the manufacturer would have made freight a part of the price, so that each buyer's out-of-pocket costs would be exactly the

same.

(d) The Commission further cautioned, however, that since this opinion deals in a projected manner with hypothetical figures chosen for illustrative purposes, the computations later to be made based upon actual cost factors must in practice achieve the result claimed in that each buyer will pay exactly the same net price including the freight. Any other result, the Commission stated, would be outside the scope of this opinion.

[33 F.R. 3336, Feb. 24, 1968]

§ 15.195 Notice to magazine dealers as to availability of display allowance. (a) The Federal Trade Commission advised a seller of magazines that it could

see no objection to its proposed method of notifying dealers of the availability of a display allowance program on the assurance that all dealers would receive notice by the method selected.

(b) Under the proposal, the display allowance plan would be offered to all retailers on the same basis. Under the method of notification proposed, an advertisement would be published in a trade publication of general circulation among dealers announcing the main details of the proposal. A 1-inch reminder advertisement would then be published in three subsequent issues. Then the seller proposed to work with the distributor of the publications and the wholesalers to reach every retailer competing in the distribution of the publications.

(c) The Commission advised that while section 2(d) of the amended Clayton Act does not specifically require that all competing customers be individually notified regarding the particulars of a promotional program, it has repeatedly held that the statute contemplates that all competitors shall be accorded equal opportunity to participate. This construction has been incorporated in the Commission's Guides for Advertising Allowances, where sellers are advised that they should take some action to inform all customers competing with any participating customer that the plan is available. This may be done by any means the seller chooses, including letter, telegram, notice on invoices, salesmen, brokers, etc. While the Guides do add that if a seller wants to be able to show that he did make an offer to a certain customer, he is in a better position to do so if he made it in writing, the Commission added that it is clear that other methods are permitted if notice to all competing customers is given.

(d) The Commission concluded that it could see no objection to the proposed program of notification based on the assurance that it will reach all competing dealers of the publications. In this connection, however, the Commission further advised that whenever a seller selects any method of notification short of actual notice to each dealer, he bears full responsibility under the law for seeing that the method selected gives each dealer the notice to which he is entitled.

[33 F.R. 3336, Feb. 24, 1968]

§ 15.196

Commission holds not objectionable the advertising phrase "It works *** or we'll fix it free." The Commission rendered an advisory opinion whereby it concluded that a proposed phrase "It works *** or we'll fix it free." is not objectionable and thus may be used in advertising, and on boxes containing, products of a certain manufacturer. The Commission took account of information that the particular manufacturer does, in fact, repair without question and without charge of any kind (e.g., for parts, labor, "handling", or return postage) all of its products sent to it directly by owners or through retailers.

[33 F.R. 3374, Feb. 27, 1968]

§ 15.197

Use of term "Hand Made" to describe boot with a sealed sole.

(a) The Commission rendered an advisory opinion to the effect that the unqualified term "Hand Made" could not be used to describe a boot with a sealed sole.

(b) The requesting party is currently selling a completely hand made boot in which all parts are cut by hand and stitched together to form the uppers. It is hand lasted and then the sole is built up and stitched together by hand. The boot is labeled "Hand Made". The seller is now considering putting on a sealed sole to replace the leather sole. Other than that all operations will be identical, including the hand sewing of the heel counter. An opinion was requested as to whether a boot so constructed could still be labeled "Hand Made”.

(c) The opinion advised that in the Commission's view the seller could not use the unqualified term "Hand Made" to describe a boot with a sealed sole. He could, however, use the term to describe the part or parts which are sewn by hand in such manner as to make it clear, by use of an appropriate disclosure, that the sealed sole is not hand sewn.

[33 F.R. 3375, Feb. 27, 1968]

§ 15.198 Truckload discount for quantity purchases.

(a) The Commission rendered an advisory opinion involving a 5 percent discount that a manufacturer proposed to offer to all customers purchasing in truckload-lot quantities. The manufacturer requesting the opinion is subject to a cease and desist order prohibiting price discrimination under section 2(a) of the amended Clayton Act.