Last week, the Federal Trade Commission (“FTC”) approved final changes to its Guides for Advertising Allowances and Other Merchandising Payments (the “Guides”), also known as the Fred Meyer Guides. The Guides were originally issued in 1969, and subsequently revised in 1990, to help businesses comply with sections 2(d) and (e) of the Robinson Patman Act (the “Act”). The Act generally prohibits certain forms of price discrimination between suppliers and the merchants who resell their products. Sections 2(d) and (e), which are the focus of the Guides, are designed to prohibit disguised price discrimination in the form of promotional payments or services. In other words, a supplier is prohibited from paying allowances or furnishing services to merchants to promote the resale of the supplier’s products, unless the allowances or services are offered to all competing merchants on proportionally equal terms. The Act aims to help small businesses compete against chain stores by prohibiting anticompetitive price discrimination by suppliers, and certain other kinds of business discrimination. In December 2012, the FTC sought public comment on the Guides, and input on the overall costs and benefits and continuing need for the Guides.
In response to the comments solicited, the FTC approved moderate changes to the Guides in order to update them with respect to current technological developments, changes in marketing methods (such as widespread online marketing), and FTC enforcement priorities. The changes also reflect jurisprudential developments since the last revision of the Guides.
All of the comments provided to the FTC indicated a continuing need for the Guides. The following list is a general summary of the changes to the Guides. For additional information, read the Federal Register, which details the comments received and the FTC’s final changes.
Changes to the Guides (effective November 10, 2014):
- General: The FTC added references to the Internet to the lists of promotional media dispersed throughout the Guides to address and account for new methods of commerce associated with the growth of the Internet since the Guides were revised in 1990.
- Section 240.7 (Services and Facilities). This section of the Guides identifies the types of services and facilities offered to merchants covered by sections 2(d) and 2(e) of the Act. This section has been modified to provide an example of how to distinguish between services and facilities that are offered for a product’s initial sale to the merchant seller versus its resale to the end consumer. The following new example was added:
Example 1: A seller offers a supermarket chain an allowance of $500 per store to stock a new packaged food product and find space for it on the supermarket’s shelves, and a further allowance of $300 per store for placement of the new product on prime display space, an aisle endcap. The $500 allowance relates primarily to the initial sale of the product to the supermarket chain, and therefore should be assessed under section 2(a) of the Act. In contrast, the $300 allowance for endcap display relates primarily to the resale of the product by the supermarket chain, and therefore should be assessed under section 2(d).
Two additional examples were added to this section to address whether special packaging or package sizes are for promoting a product’s resale versus its initial sale.Continue Reading...