[Code of Federal Regulations]
[Title 16, Volume 1]
[Revised as of January 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 16CFR240.9]

[Page 165]
 
                     TITLE 16--COMMERCIAL PRACTICES
 
                   CHAPTER I--FEDERAL TRADE COMMISSION
 
PART 240_GUIDES FOR ADVERTISING ALLOWANCES AND OTHER MERCHANDISING 
PAYMENTS AND SERVICES--Table of Contents
 
Sec. 240.9  Proportionally equal terms.

    (a) Promotional services and allowances should be made available to 
all competing customers on proportionally equal terms. No single way to 
do this is prescribed by law. Any method that treats competing customers 
on proportionally equal terms may be used. Generally, this can be done 
most easily by basing the payments made or the services furnished on the 
dollar volume or on the quantity of the product purchased during a 
specified period. However, other methods that result in proportionally 
equal allowances and services being offered to all competing customers 
are acceptable.
    (b) When a seller offers more than one type of service, or payments 
for more than one type of service, all the services or payments should 
be offered on proportionally equal terms. The seller may do this by 
offering all the payments or services at the same rate per unit or 
amount purchased. Thus, a seller might offer promotional allowances of 
up to 12 cents a case purchased for expenditures on either newspaper 
advertising or handbills.

    Example 1: A seller may offer to pay a specified part (e.g., 50 
percent) of the cost of local advertising up to an amount equal to a 
specified percentage (e.g., 5 percent) of the dollar volume of purchases 
during a specified period of time.
    Example 2: A seller may place in reserve for each customer a 
specified amount of money for each unit purchased, and use it to 
reimburse these customers for the cost of advertising the seller's 
product.
    Example 3: A seller should not provide an allowance or service on a 
basis that has rates graduated with the amount of goods purchased, as, 
for instance, 1 percent of the first $1,000 purchased per month, 2 
percent of the second $1,000 per month, and 3 percent of all over that.
    Example 4: A seller should not identify or feature one or a few 
customers in its own advertising without making the same service 
available on proportionally equal terms to customers competing with the 
identified customer or customers.
    Example 5: A seller who makes employees available or arranges with a 
third party to furnish personnel for purposes of performing work for a 
customer should make the same offer available on proportionally equal 
terms to all other competing customers or offer useable and suitable 
services or allowances on proportionally equal terms to competing 
customers for whom such services are not useable and suitable. \1\
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    \1\ The discriminatory purchase of display or shelf space, whether 
directly or by means of so-called allowances, may violate the Act, and 
may be considered an unfair method of competition in violation of 
section 5 of the Federal Trade Commission Act.
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    Example 6: A seller should not offer to pay a straight line rate for 
advertising if such payment results in a discrimination between 
competing customers; e.g., the offer of $1.00 per line for advertising 
in a newspaper that charges competing customers different amounts for 
the same advertising space. The straight line rate is an acceptable 
method for allocating advertising funds if the seller offers small 
retailers that pay more than the lowest newspaper rate an alternative 
that enables them to obtain the same percentage of their advertising 
cost as large retailers. If the $1.00 per line allowance is based on 50 
percent of the newspaper's lowest contract rate of $2.00 per line, the 
seller should offer to pay 50 percent of the newspaper advertising cost 
of smaller retailers that establish, by invoice or otherwise, that they 
paid more than that contract rate.
    Example 7: A seller offers each customer promotional allowances at 
the rate of one dollar for each unit of its product purchased during a 
defined promotional period. If Buyer A purchases 100 units, Buyer B 50 
units, and Buyer C 25 units, the seller maintains proportional equality 
by allowing $100 to Buyer A, $50 to Buyer B, and $25 to Buyer C, to be 
used for the Buyers' expenditures on promotion.