[Code of Federal Regulations]
[Title 16, Volume 1]
[Revised as of January 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 16CFR240.10]

[Page 165-167]
 
                     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. 240.10  Availability to all competing customers.

    (a) Functional availability:
    (1) The seller should take reasonable steps to ensure that services 
and facilities are useable in a practical sense by all competing 
customers. This may require offering alternative terms and conditions 
under which customers can participate. When a seller provides 
alternatives in order to meet the availability requirement, it should 
take reasonable steps to ensure that the alternatives are proportionally 
equal, and the seller should inform competing customers of the various 
alternative plans.
    (2) The seller should insure that promotional plans or alternatives 
offered to retailers do not bar any competing retailers from 
participation, whether they purchase directly from the seller

[[Page 166]]

or through a wholesaler or other intermediary.
    (3) When a seller offers to competing customers alternative services 
or allowances that are proportionally equal and at least one such offer 
is useable in a practical sense by all competing customers, and refrains 
from taking steps to prevent customers from participating, it has 
satisfied its obligation to make services and allowances ``functionally 
available'' to all customers. Therefore, the failure of any customer to 
participate in the program does not place the seller in violation of the 
Act.

    Example 1: A manufacturer offers a plan for cooperative advertising 
on radio, TV, or in newspapers of general circulation. Because the 
purchases of some of the manufacturer's customers are too small this 
offer is not useable in a practical sense by them. The manufacturer 
should offer them alternative(s) on proportionally equal terms that are 
useable in a practical sense by them.
    Example 2: A seller furnishes demonstrators to large department 
store customers. The seller should provide alternatives useable in a 
practical sense on proportionally equal terms to those competing 
customers who cannot use demonstrators. The alternatives may be services 
useable in a practical sense that are furnished by the seller, or 
payments by the seller to customers for their advertising or promotion 
of the seller's product.
    Example 3: A seller offers to pay 75 percent of the cost of 
advertising in daily newspapers, which are the regular advertising media 
of the seller's large or chain store customers, but a lesser amount, 
such as only 50 percent of the cost, or even nothing at all, for 
advertising in semi-weekly, weekly, or other newspapers or media that 
may be used by small retail customers. Such a plan discriminates against 
particular customers or classes of customers. To avoid that 
discrimination, the seller in offering to pay allowances for newspaper 
advertising should offer to pay the same percent of the cost of 
newspaper advertising for all competing customers in a newspaper of the 
customer's choice, or at least in those newspapers that meet the 
requirements for second class mail privileges. While a small customer 
may be offered, as an alternative to advertising in daily newspapers, 
allowances for other media and services such as envelope stuffers, 
handbills, window banners, and the like, the small customer should have 
the choice to use its promotional allowance for advertising similar to 
that available to the larger customers, if it can practicably do so.
    Example 4: A seller offers short term displays of varying sizes, 
including some which are useable by each of its competing customers in a 
practical business sense. The seller requires uniform, reasonable 
certification of performance by each customer. Because they are 
reluctant to process the required paper work, some customers do not 
participate. This fact does not place the seller in violation of the 
functional availability requirement and it is under no obligation to 
provide additional alternatives.

    (b) Notice of available services and allowances: The seller has an 
obligation to take steps reasonably designed to provide notice to 
competing customers of the availability of promotional services and 
allowances. Such notification should include enough details of the offer 
in time to enable customers to make an informed judgment whether to 
participate. When some competing customers do not purchase directly from 
the seller, the seller must take steps reasonably designed to provide 
notice to such indirect customers. Acceptable notification may vary. The 
following is a non-exhaustive list of acceptable methods of 
notification:
    (1) By providing direct notice to customers;
    (2) When a promotion consists of providing retailers with display 
materials, by including the materials within the product shipping 
container;
    (3) By including brochures describing the details of the offer in 
shipping containers;
    (4) By providing information on shipping containers or product 
packages of the availability and essential features of an offer, 
identifying a specific source for further information;
    (5) By placing at reasonable intervals in trade publications of 
general and widespread distribution announcements of the availability 
and essential features of promotional offers, identifying a specific 
source for further information; and
    (6) If the competing customers belong to an identifiable group on a 
specific mailing list, by providing relevant information of promotional 
offers to customers on that list. For example, if a product is sold 
lawfully only under Government license (alcoholic beverages, etc.), the 
seller may inform only its customers holding licenses.
    (c) A seller may contract with intermediaries or other third parties 
to provide notice. See Sec. 240.11.


[[Page 167]]


    Example 1: A seller has a plan for the retail promotion of its 
product in Philadelphia. Some of its retailing customers purchase 
directly and it offers the plan to them. Other Philadelphia retailers 
purchase the seller's product through wholesalers. The seller may use 
the wholesalers to reach the retailing customers that buy through them, 
either by having the wholesalers notify these retailers, or by using the 
wholesalers' customer lists for direct notification by the seller.
    Example 2: A seller that sells on a direct basis to some retailers 
in an area, and to other retailers in the area through wholsesalers, has 
a plan for the promotion of its product at the retail level. If the 
seller directly notifies competing direct purchasing retailers, and 
competing retailers purchasing through the wholesalers, the seller is 
not required to notify its wholesalers.
    Example 3: A seller regularly promotes its product at the retail 
level and during the year has various special promotional offers. The 
seller's competing customers include large direct-purchasing retailers 
and smaller retailers that purchase through wholesalers. The promotions 
offered can best be used by the smaller retailers if the funds to which 
they are entitled are pooled and used by the wholesalers on their behalf 
(newspaper advertisements, for example). If retailers purchasing through 
a wholesaler designate that wholesaler as their agent for receiving 
notice of, collecting, and using promotional allowances for them, the 
seller may assume that notice of, and payment under, a promotional plan 
to such wholesaler constitutes notice and payment to the retailer. The 
seller must have a reasonable basis for concluding that the retailers 
have designated the wholesaler as their agent.