Guides for the Beauty and Barber Equipment and Supplies Industry

FEDERAL TRADE COMMISSION

16 CFR Part 248

Guides for the Beauty and Barber Equipment and Supplies Industry

AGENCY: Federal Trade Commission.

ACTION: Elimination of guides.

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SUMMARY: The Guides for the Beauty and Barber Equipment and Supplies

Industry (the ``Beauty/Barber Guides'' or the ``Guides'') designate as

unacceptable certain advertising and trade practices relating to the

sale of products used by, and/or marketed through, ``industry members''

(as defined in Section 248.0 of the Guides) such as barber shops,

barber schools, beauty parlors, beauty salons, beauty clinics, and

organizations or corporations engaging in the manufacture or

distribution of industry products. Such products embrace a wide range

of beauty and barber preparations, as well as articles or items of

equipment, furnishings, and supplies for such establishments.

The Commission believes that the Beauty/Barber Guides do not

provide guidance substantially specific to the beauty and barber

equipment and supply industry. In addition, the Commission believes

that, in some instances, the Guides no longer accurately represent

current Commission policy, and would require extensive revision to be

made up-to date. Although such a revision and reissuance might be

warranted if there were evidence of widespread marketing abuses of the

type addressed by the Guides, the Commission has no such evidence. In

addition, the Commission believes that likely abuses, if any, are

adequately addressed under applicable antitrust, consumer protection,

and commercial tort laws, which are matters of public record.

Consequently, the Commission believes that there is no continuing need

for the Guides, and that they should be repealed in their entirety.

Although the Commission is eliminating the Guides, proceedings

still may be brought against businesses under Section 5(a)(1) of the

Federal Trade Commission Act (the ``FTC Act''), 15 U.S.C. 45(a)(1), for

engaging in unfair or deceptive acts or practices in or affecting

commerce in the advertising and sale of beauty and barber equipment and

supplies. Proceedings also may be brought under Section 5(a)(1) of the

FTC Act against businesses engaging in unfair methods of competition.

EFFECTIVE DATE: August 8, 1995.

ADDRESSES: Requests for copies of this document should be sent to the

Public Reference Branch, Room 130, Federal Trade Commission,

Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Douglas J. Goglia, Attorney, Federal Trade Commission, New York

Regional Office, 150 William Street, 13th Floor, New York, NY 10038,

(212) 264-1229.

SUPPLEMENTARY INFORMATION:

I. Introduction

As a part of its ongoing project to review all rules and guides,

the Commission invited comment on its Guides for the Beauty and Barber

Equipment and Supplies Industry, 16

[[Page 40268]]

CFR Part 248, on April 4, 1995.\1\ The notice contained, with minor

modification, the standard regulatory review questions relating to the

economic impact and continuing relevance of the Guides; burdens or

costs related to adherence to the Guides; benefits conferred on

industry members by the Guides; changes needed to minimize the economic

impact of the Guides; their relation to other federal, state, or local

laws or regulations; changes in relevant technology or economic

conditions since the Guides were issued; and the effects of those

changes on the Guides. The comment period ended on June 4, 1995, and

only one comment was received before that date.\2\ One additional

comment was received on June 16, 1995, after the comment period

expired.\3\

\1\ Request for Comments Concerning Guides for the Beauty and

Barber Equipment and Supplies Industry, 60 FR 17032, (April 4,

1995). The record in this proceeding has been designated P 958803 in

the Commission's Public Reference Branch.

\2\ The National Cosmetology Association (``NCA''), a national

association of cosmetologists, barbers, estheticians, nail

technicians, and owners of independent salons, stated that (1) the

Guides have been effective in protecting industry members from

problematic conduct, and (2) ``[m]ost industry members do not have

resources available to hire attorneys to counsel them with respect

to [trade regulation] laws. Thus the Guides are the principal means

by which the industry is continuously reminded of how those laws

apply to the industry.'' Comment of Messrs. William W. Scott, J.

Keith Ausbrook and Brian R. Henry, Counsel for the National

Cosmetology Association (June 2, 1995).

\3\ The Beauty and Barber Supply Institute, Inc. (``BBSI'')

stated that: `` we have no objection to the recommendation that Part

248--Guides For The Beauty And Barber Equipment And Supplies

Industry, be deleted in its entirety from the Code of Federal

Regulations.'' Letter from Douglas A. Kash, Esq. to Douglas Goglia,

Esq., June 22, 1995 (regarding Amendments to the Code of Federal

Regulations).

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II. Background

The Beauty/Barber Guides were first published on August 23, 1968

under the authority of Sections 5(a)(1) and 6(g) of the FTC Act, 5

U.S.C. 45(a)(1) and 46(g). They were intended by the Commission to

supersede trade practice rules for the Beauty and Barber Equipment and

Supplies Industry, which had been promulgated on August 9, 1941. They

designate as unacceptable certain advertising and trade practices

relating to the sale of products used by, and/or marketed through,

``industry members'' (as defined in Section 248.0 of the Guides) such

as barber shops, barber schools, beauty parlors, beauty salons, and

beauty clinics. Such products embrace a wide range of beauty and barber

preparations, as well as articles or items of equipment, furnishings,

and supplies for such establishments.

Like other Commission guides, the Beauty/Barber Guides were

``intended to encourage voluntary compliance with the law by those

whose practices are subject to the jurisdiction of the Commission, and

were published in the belief that a businessman who is fully informed

of the legal pitfalls he may encounter can conduct his affairs so as to

avoid such difficulties.'' \4\ The Guides provide instruction regarding

the use of trade names, symbols, and depictions; the defamation of

competitors or the false disparagement of their products; false

invoicing; push money; discriminatory advertising or promotional

allowances, or services or facilities; commercial bribery; enticing

away employees of competitors as a means of restraining competition;

inducing breach of contract; exclusive dealing arrangements; and price

discrimination.

\4\ Statement by the Commission, 33 FR 11987 (August 23, 1968).

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III. Discussion

The Commission has concluded that the Beauty/Barber Guides do not

provide guidance substantially specific to the beauty and barber

equipment and supply industry. In general, the Guides merely restate

basic principles of consumer protection and commercial tort law. In

addition, certain sections describe conduct that may be proscribed by

Section 2 or 3 of the Clayton Act, as amended by the Robinson-Patman

Act, and certain conduct that may, in limited circumstances, violate

Section 5 of the FTC Act or Section 2 of the Sherman Act. However, in

some instances, the Guides no longer accurately reflect Commission

policy and enforcement standards. Consequently, the Commission believes

that there is no continuing need for the Guides, and that they should

be repealed.

Sections 248.1-248.4 and 248.6

Sections 248.1 of the Guides prohibits industry members from using,

or causing or promoting the use of statements, representations,

guarantees,\5\ testimonials, or endorsements ``which ha[ve] a capacity

and tendency or effect of misleading or deceiving purchasers. * * *''

Likewise, Sec. 248.2 prohibits industry members from misrepresenting,

directly or indirectly, the character of their businesses or the types

of services they offer; Sec. 248.3 prohibits the use of deceptive

plaques and certificates in connection with the ``distribution,

promotion or sale (including utilization in connection with services)

of industry products''; Sec. 248.4 proscribes deceptive pricing; an

Sec. 248.6 prohibits industry members from ``withhold[ing] from, or

insert[ing] in, invoices or sales slips, any statements, or information

by reason of which omission or insertion a false record is made * * *

of the transactions represented on the face of such invoices or sales

slips, with the capacity and tendency or effect of thereby misleading

or deceiving purchasers, prospective purchasers, or the consuming

public in any material respect.'' Each of these Guide sections

addresses trade practices which are actionable under Section 5 of the

FTC Act pursuant to the Commission's general Policy Statement on

Deception (``Deception Statement''), set forth in the appendix to

Cliffdale Associates, Inc., 103 F.T.C. 110, 174 (1984) (Letter from FTC

Chairman James C. Miller III to the Honorable John D. Dingell (October

14, 1993)), or the Commission's Unfairness Statement set forth in the

appendix to International Harvester, Inc., 104 F.T.C. 949, 1061, 1073-

74 (1984) (Letter from Commission Chairman Michael Pertschuk and

Commissioners Paul Rand Dixon, David A. Clanton, Robert Pitofsky, and

Patricia P. Bailey to the Honorable Wendell H. Ford and the Honorable

John C. Danforth (December 17, 1980)). Moreover, the conduct proscribed

by the aforementioned Guide sections may be actionable under Section

43(a) of the Lanham Act, \6\ applicable state unfair competition

statutes, and the commonlaw of commercial torts.\7\

\5\ The Commission has adopted Guides for the Advertising of

Warranties and Guarantees which provide detailed guidance with

respect to guarantee and warranty representations. See 16 CFR Part

239. Accordingly, to the extent Section 248.1 of the Beauty/Barber

Guides relates to Guaratees, it is no longer necessary.

\6\ 15 U.S.C. 1125(a).

\7\ See generally, Restatement (Third) of Unfair Competition,

Chapter 2 (1995) (hereinafter ``Restatement'').

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In addition, Sections 248.1, 248.6, and other sections of the

Guides specifically refer to the Commission's former ``capacity and

tendency or effect of misleading or deceiving'' standard for deception,

which was superseded by the Commission's Deception Statement.

Accordingly, these sections fall to reflect the Commission's current

policy regarding deception.

Section 248.5

Section 248.5 of the Guides prohibits industry members from using

or imitating a competitor's trade or corporate name, trademarks, or

other trade designations, where such use ``has the tendency or effect

of misleading purchasers or prospective purchasers as

[[Page 40269]]

to the character, name, nature, or origin of any product of the

industry or is false or misleading in any other material respect.'' The

conduct proscribed by Section 248.5--``passing off''--has been held to

violate Section 5 of the FTC Act,\8\ and Commission policy regarding

such conduct is a matter of public record. Accordingly, there is no

need for Section 248.5, which merely restates that policy and does not

provide instruction specifically relevant to the beauty and barber

equipment and supply industry. Moreover, the conduct prohibited by

Section 248.5 is addressed by Section 43(a) of the Lanham Act,

applicable state unfair trade statutes, and common law theories of

trademark infringement.\9\

\8\ See, e.g., Waltham Watch Co. v. FTC, 318 F.2d 28 (7th Cir.),

cert. denied, 375 U.S. 944 (1963) (``passing off'' products as those

of a competitor violates Section 5); Parke, Austin & Lipscomb, Inc.

v. FTC, 142 F.2d 437 (2d Cir.), cert. denied, 323 U.S. 753 (1944)

(false claims of association with a better known company violate

Section 5); J. Merrell Redding, 14 F.T.C. 32 (1930) (simulation of a

competitor's advertising violates Section 5); Lighthouse Rug Co. v.

FTC, 35 F.2d 163 (7th Cir. 1929) (imitation of a competitor's

corporate name and trademark violates Section 5).

\9\ See generally, Restatement, supra note 7, Chapter 3.

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Section 248.7

Section 248.7 of the Guides proscribes the defamation of

competitors and the disparagement of their products. This section

prohibits conduct which may be addressed under Section 43(a) of the

Lanham Act and common law theories of commercial tort.\10\ There is no

need for this section of the Guides, because it does not supplement

this general authority with instruction specifically relevant to the

beauty and barber equipment and supply industry.

\10\ See generally, Restatement, supra note 7, Sec. 2, Comment

C. See also, J.D. Lee, Modern Tort Law, Sec. 36.09 (4th ed. 1990)

(hereinafter ``Lee'').

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Section 248.8

Section 248.8 of the Beauty/Barber Guides proscribes the payment by

industry members of so-called ``push money.'' This section prohibits

industry members from providing anything of value to a salesperson

employed by a customer of the industry member as inducement to obtain

greater effort in promoting the resale of the industry member's

products when: (i) the agreement or payment is made ``without the

knowledge and consent of the salesperson's employer''; (ii) the benefit

to the salesperson or customer is dependent on lottery; (iii) ``any

provision of the agreement or understanding requires or contemplates

practices or a course of conduct unduly and intentionally hampering the

sales of products of competitors * * *''; (iv) ``the effect may be to

substantially lessen competition or tend to create a monopoly''; or (v)

``similar payments are not accorded to salespersons of competing

customers on proportionally equal terms in compliance with Sections 2

(d) and (e) of the Clayton Act.''

To the extent that Section 248.8 prohibits industry members from

surreptitiously compensating employees of their customers in exchange

for greater effort on the part of those employees, it addresses

commercial bribery, which may be prohibited under Section 2(c) of the

Clayton Act \11\ and is proscribed by many state criminal statutes.\12\

To the extent that Sec. 248.8 prohibits bonus plans dependent on

lottery, it addresses business conduct which may be proscribed by

Section 5 of the FTC Act and by state statutes relating to lotteries

and similar promotions.\13\ To the extent that it requires payments to

salespersons of competing customers to be on proportionally equal

terms, it restates general principles of competition law which are set

forth in Section 2 of the Clayton Act and the Fred Meyer Guides. See

Guides for Advertising Allowances and Other Merchandising Payments and

Services, 16 CFR Part 240.

\11\ 15 U.S.C. 13(c).

\12\ See e.g., Cal. Penal Code Sec. 641.3 et seq. (Deering

1995); Ill. Rev. Stat., Ch. 38, para. 29A-1 (1995); N.Y. Penal Law

Sec. 180.00 (McKinney 1976).

\13\ See e.g., Tex. Penal Code Sec. 32.42 (West 1995); Cal. Bus.

& Prof. Code Sec. 17539.1 (Deering 1995); Cal. Penal Code Sec. 319

et seq. (Deering 1995).

Section 248.9

Section 248.9 of the Guides prohibits industry members from

``willfully'' enticing away the employees of competitors ``with the

intent and effect of thereby hampering or injuring competitors in their

business or destroying or substantially lessening competition.''\14\

Such conduct may constitute a commercial tort.\15\ The Guides do not

add substantial industry-specific analysis to this general authority.

\14\ As a caveat, section 248.9 provides:

nothing in this section shall be construed as precluding such

persons from seeking more favorable employment, or as precluding

employers from hiring or offering employment to employees of a

competitor in good faith and not for the purpose of inflicting

competitive injury.

\15\ See generally, Lee, supra note 10, Ch. 45; William L.

Prosser, Prosser on Torts Sec. 129 (4th ed. 1971) (hereinafter

``Prosser'').

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Section 248.10

Section 248.10 of the Guides prohibits industry members from

``knowingly inducing or attempting to induce the breach of existing

lawful contracts between competitors and their customers. * * *'' The

conduct described in this section may be a commercial tort.\16\ There

is no need for this section of the Guides, because it does not

supplement this general authority with instruction specifically

relevant to the beauty and barber equipment and supply industry.

\16\ Lee, supra note 10, at 45; Prosser, supra note 15, at

Sec. 129.

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Section 248.11

Section 248.11 proscribes exclusive dealing arrangements where the

effect on such arrangements ``may be substantially to lessen

competition or tend to create a monopoly in any line of commerce.''

This section recapitulates language contained in Section 3 of the

Clayton Act and sets out a general principle of Sherman Act Section 2

jurisprudence--namely, that exclusive dealing may constitute an

antitrust violation where it constitutes an attempt to monopolize or

results in an actual monopolization of a relevant market.

Section 248.12

Section 248.12 prohibits commercial bribery. This conduct may be

prohibited by Section 2(c) of the Clayton Act, and by many state

criminal statutes.\17\ There is no need for this section of the Guides,

because it does not supplement this general authority with instruction

specifically relevant to the beauty and barber equipment and supply

industry.

\17\ See supra note 12.

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Section 248.13-248.15

Sections 248.13, 248.14 and 248.15 of the Beauty/Barber Guides

respectively proscribe discriminatory pricing, the provision of

discriminatory promotional allowances, and inducing price

discrimination. Section 248.13 and 248.15 recite almost verbatim

language contained in Sections 2 (a), (b) and (f) of the Clayton Act.

Section 248.14 is duplicative of the Fred Meyer Guides, which interpret

Sections 2 (d) and (e) of the Clayton Act and Section 5 of the Federal

Trade Commission Act. See Guides for Advertising Allowances and Other

Merchandising Payments and Services, 16 CFR part 240.

IV. Conclusion

The Commission thus believes that the Beauty/Barber Guides do not

provide guidance substantially specific to the beauty and barber

equipment and supply industry. The Guides merely restate principles of

consumer protection and commercial tort law found in statutes, case

law, and other

[[Page 40270]]

regulations. The Guides also describe certain conduct that may, in some

instances, violate Sections 2 (a), (b), (c) and (d) of the Clayton Act.

In addition, to the extent that certain conduct described by the Guides

may substantially lessen competition in a properly defined antitrust

market, it may violate Section 5 of the FTC Act. To the extent such

conduct may tend to create a monopoly, it may also violate Section 2 of

the Sherman Act. The conduct described by the Guides must be examined

on a case-by-case basis to determine whether an applicable provision of

law has been violated. Furthermore, in some instances, the Guides do

not accurately represent current Commission policy and enforcement

standards. Accordingly, the Commission has determined to repeal the

Guides.

Authority: 15 U.S.C. 41-58.

List of Subjects in 16 CFR Part 248

Advertising, Cosmetics, Trade practices.

PART 248--[REMOVED]

The Commission, under authority of Sections 5(a)(1) and 6(g) of the

Federal Trade Commission Act, 15 U.S.C. 45(a)(1) and 46(g), amends

chapter I of title 16 of the Code of Federal Regulations by removing

Part 248.

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 95-19544 Filed 8-7-95; 8:45 am]

BILLING CODE 6750-01-M