A. It
shall be a deceptive act or practice in connection with a consumer transaction
for a supplier to use the word "free" or other words of similar import or
meaning, except when such representation is, in fact, the case and the cost of
the "free" consumer commodity is not passed on to the consumer by raising the
regular price of the consumer commodity that must be purchased in connection
with the "free" offer.
(1) The meaning of
"free".
(a) An offer of "free" consumer
commodities is based upon a regular price for the merchandise or services which
must be purchased by consumers in order to avail themselves of that which is
represented to be "free." Such consumer commodities are not free if the
supplier will directly and immediately recover, in whole or in part, the costs
of the free consumer commodities by marking up the price of the other consumer
commodities which must be purchased, by the substitution of inferior consumer
commodities, or otherwise.
(b) For
the purpose of this rule, all references to the word "free" shall include
within the term all other words of similar import and meaning. Representative
of the word or words to which this rule is applicable would be the following:
"free"; "buy one, get one free"; "two for one sale"; "50% off the purchase of
two"; "gift"; "given without charge"; "bonus" or other words and terms which
tend to convey to the consuming public the impression that an item of a
consumer commodity is "free".
(2) The meaning of "regular price".
(a) The term "regular price" means the price
in the same quantity, quality, and with the same service, at which the seller
or advertiser of the consumer commodity has openly and actively sold the
consumer commodity 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. 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 aforementioned period of
time.
(b) Negotiated sales. If a
consumer commodity usually is sold at a price arrived at through bargaining,
rather than at a regular price, it is improper to represent that another
consumer commodity is being offered "free" with the sale, unless the supplier
is able to establish a mean, average price immediately prior to the free offer.
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.
(3) Frequency of offers.
(a) In order to establish a regular price
over a reasonably substantial period of time, a single kind of consumer
commodity should not be advertised with a "free" offer in a trade area for more
than six months in any twelve- 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 twelve-month
period.
B.
Disclosure of Conditions. A "free" or similar offer is deceptive unless all the
terms, conditions, and obligations upon which receipt and retention of the
"free" item are contingent are 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.
C. Combination Offer. This rule does not
preclude the use of nondeceptive, "combination" offers in which two or more
items of consumer commodities such as, but not limited to, toothpaste and a
toothbrush, or soap and deodorant, or clothing and alterations are offered for
sale as a single unit at a single state price, and, in which no representation
is made that the price is being paid for one item and the other is "free."
Similarly, suppliers are not precluded from settling a price for an item of
consumer commodities which also includes furnishing the consumer with a second,
distinct item of consumer commodities at one inclusive price if no presentation
is made that the latter is free.
D.
Introductory Offers. No "free" offers should be made in connection with the
introduction of a new consumer commodity offered for sale at a specified price
unless the offerer expects in good faith to discontinue the offer after a
limited time and to commence selling the consumer commodity promoted
separately, at the same price at which it was promoted with a "free"
offer.
