FTC Updates Guides for Advertising Allowances and Other Promotional Payments | Practical Law

FTC Updates Guides for Advertising Allowances and Other Promotional Payments | Practical Law

The FTC approved final changes to its Fred Meyer Guides, which provide guidance on advertising allowances and other promotional payments under the Robinson-Patman Act.

FTC Updates Guides for Advertising Allowances and Other Promotional Payments

Practical Law Legal Update 6-582-6465 (Approx. 3 pages)

FTC Updates Guides for Advertising Allowances and Other Promotional Payments

by Practical Law Antitrust
Published on 29 Sep 2014USA (National/Federal)
The FTC approved final changes to its Fred Meyer Guides, which provide guidance on advertising allowances and other promotional payments under the Robinson-Patman Act.
On September 24, 2014, the FTC approved final changes to its Fred Meyer Guides (the Guides). The Guides explain how suppliers can comply with sections 2(d) and 2(e) of the Robinson-Patman Act which prohibit disguised price discrimination in the form of promotional payments or services. In particular, the Guides focus on how suppliers can provide promotional allowances and services to retailers on proportionally equal terms to avoid violating those provisions.
After seeking public comment, the FTC amended the Guides to bring them up to date with technological developments and current enforcement priorities as part of its systematic review of all FTC rules and guides. The amendments to the Guides are as follows:
  • Section 240.5 (Definition of competing customers): The FTC amended this section to include references to the Internet.
  • Section 240.7 (Services or facilities): The FTC added an example to this section to provide additional guidance on differentiating between a product's initial sale and its resale. The FTC also added two examples to clarify that special packaging or package sizes are considered promotional services only so long as they primarily promote a product's resale, not its original sale to a retailer.
  • Section 240.9 (Proportionally equal terms): The FTC revised Example 4 to provide that when identifying some customers in its advertising, a seller must make the same or alternative services available to other customers on proportionally equal terms.
  • Section 240.13 (Customer's and third party liability): The FTC amended this provision to reflect the Supreme Court's instruction that the Robinson-Patman Act should be focused on harm to competition. Accordingly, the FTC stated that where there is likely harm to competition, the FTC may bring a Section 5 action against a customer who knows or should know it is receiving disproportionate services or allowances. It also revised this section to acknowledge the possible applicability of section 2(a) and 2(f) of the Robinson-Patman Act to promotional allowances and the related risk of customer enforcement.
Despite receiving comments advocating amendments to Sections 240.2 (Applicability of the law), 240.4 (Definition of customer), 240.6 (Interstate commerce), 240.8 (Need for a plan), 240.10 (Availability to all competing customers), 240.11 (Wholesaler or third party performance of seller's obligations) and 240.14 (Meeting competition), the FTC declined to substantively amend these sections.
For more information on the Robinson-Patman Act, see Practice Note, Robinson-Patman Act: Overview.