[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: 16CFR251.1]

[Page 168-170]
 
                     TITLE 16--COMMERCIAL PRACTICES
 
                   CHAPTER I--FEDERAL TRADE COMMISSION
 
PART 251_GUIDE CONCERNING USE OF THE WORD ``FREE'' AND SIMILAR 
REPRESENTATIONS--Table of Contents
 
Sec. 251.1  The guide.





    (a) General. (1) The offer of ``Free'' merchandise or service is a 
promotional device frequently used to attract customers. Providing such 
merchandise or service with the purchase of some other article or 
service has often been found to be a useful and valuable marketing tool.
    (2) Because the purchasing public continually searches for the best 
buy, and regards the offer of ``Free'' merchandise or service to be a 
special bargain, all such offers must be made with extreme care so as to 
avoid any possibility that consumers will be misled or

[[Page 169]]

deceived. Representative of the language frequently used in such offers 
are ``Free'', ``Buy 1-Get 1 Free'', ``2-for-1 Sale'', ``50% off with 
purchase of Two'', ``1[cent] Sale'', etc. (Related representations that 
raise many of the same questions include ``---- Cents-Off'', ``Half-
Price Sale'', ``\1/2\ Off'', etc. See the Commission's ``Fair Packaging 
and Labeling Regulation Regarding `Cents-Off' and Guides Against 
Deceptive Pricing.'')
    (b) Meaning of ``Free''. (1) The public understands that, except in 
the case of introductory offers in connection with the sale of a product 
or service (See paragraph (f) of this section), an offer of ``Free'' 
merchandise or service is based upon a regular price for the merchandise 
or service which must be purchased by consumers in order to avail 
themselves of that which is represented to be ``Free''. In other words, 
when the purchaser is told that an article is ``Free'' to him if another 
article is purchased, the word ``Free'' indicates that he is paying 
nothing for that article and no more than the regular price for the 
other. Thus, a purchaser has a right to believe that the merchant will 
not directly and immediately recover, in whole or in part, the cost of 
the free merchandise or service by marking up the price of the article 
which must be purchased, by the substitution of inferior merchandise or 
service, or otherwise.
    (2) The term regular when used with the term price, means the price, 
in the same quantity, quality and with the same service, at which the 
seller or advertiser of the product or service has openly and actively 
sold the product or service in the geographic market or trade area in 
which he is making a ``Free'' or similar offer in the most recent and 
regular course of business, for a reasonably substantial period of time, 
i.e., a 30-day period. For consumer products or services which fluctuate 
in price, the ``regular'' price shall be the lowest price at which any 
substantial sales were made during the aforesaid 30-day period. Except 
in the case of introductory offers, if no substantial sales were made, 
in fact, at the ``regular'' price, a ``Free'' or similar offer would not 
be proper.
    (c) Disclosure of conditions. When making ``Free'' or similar offers 
all the terms, conditions and obligations upon which receipt and 
retention of the ``Free'' item are contingent should be set forth 
clearly and conspicuously at the outset of the offer so as to leave no 
reasonable probability that the terms of the offer might be 
misunderstood. Stated differently, all of the terms, conditions and 
obligations should appear in close conjunction with the offer of 
``Free'' merchandise or service. For example, disclosure of the terms of 
the offer set forth in a footnote of an advertisement to which reference 
is made by an asterisk or other symbol placed next to the offer, is not 
regarded as making disclosure at the outset. However, mere notice of the 
existence of a ``Free'' offer on the main display panel of a label or 
package is not precluded provided that (1) the notice does not 
constitute an offer or identify the item being offered ``Free'', (2) the 
notice informs the customer of the location, elsewhere on the package or 
label, where the disclosures required by this section may be found, (3) 
no purchase or other such material affirmative act is required in order 
to discover the terms and conditions of the offer, and (4) the notice 
and the offer are not otherwise deceptive.
    (d) Supplier's responsibilities. Nothing in this section should be 
construed as authorizing or condoning the illegal setting or policing of 
retail prices by a supplier. However, if the supplier knows, or should 
know, that a ``Free'' offer he is promoting is not being passed on by a 
reseller, or otherwise is being used by a reseller as an instrumentality 
for deception, it is improper for the supplier to continue to offer the 
product as promoted to such reseller. He should take appropriate steps 
to bring an end to the deception, inlcuding the withdrawal of the 
``Free'' offer.
    (e) Resellers' participation in supplier's offers. Prior to 
advertising a ``Free'' promotion, a supplier should offer the product as 
promoted to all competing resellers as provided for in the Commission's 
``Guides for Advertising Allowances and Other Merchandising

[[Page 170]]

Payments and Services.'' In advertising the ``Free'' promotion, the 
supplier should identify those areas in which the offer is not available 
if the advertising is likely to be seen in such areas, and should 
clearly state that it is available only through participating resellers, 
indicating the extent of participation by the use of such terms as 
``some'', ``all'', ``a majority'', or ``a few'', as the case may be.
    (f) Introductory offers. (1) No ``Free'' offer should be made in 
connection with the introduction of a new product or service offered for 
sale at a specified price unless the offeror expects, in good faith, to 
discontinue the offer after a limited time and to commence selling the 
product or service promoted, separately, at the same price at which it 
was promoted with the ``Free'' offer.
    (2) In such offers, no representation may be made that the price is 
for one item and that the other is ``Free'' unless the offeror expects, 
in good faith, to discontinue the offer after a limited time and to 
commence selling the product or service promoted, separately, at the 
same price at which it was promoted with a ``Free'' offer.
    (g) Negotiated sales. If a product or service usually is sold at a 
price arrived at through bargaining, rather than at a regular price, it 
is improper to represent that another product or service is being 
offered ``Free'' with the sale. The same representation is also improper 
where there may be a regular price, but where other material factors 
such as quantity, quality, or size are arrived at through bargaining.
    (h) Frequency of offers. So that a ``Free'' offer will be special 
and meaningful, a single size of a product or a single kind of service 
should not be advertised with a ``Free'' offer in a trade area for more 
than 6 months in any 12-month period. At least 30 days should elapse 
before another such offer is promoted in the same trade area. No more 
than three such offers should be made in the same area in any 12-month 
period. In such period, the offeror's sale in that area of the product 
in the size promoted with a ``Free'' offer should not exceed 50 percent 
of the total volume of his sales of the product, in the same size, in 
the area.
    (i) Similar terms. Offers of ``Free'' merchandise or services which 
may be deceptive for failure to meet the provisions of this section may 
not be corrected by the substitution of such similar words and terms as 
``gift'', ``given without charge'', ``bonus'', or other words or terms 
which tend to convey the impression to the consuming public that an 
article of merchandise or service is ``Free''.

(38 Stat. 717, as amended; 15 U.S.C. 41-58)

[36 FR 21517, Nov. 10, 1971]