C.F.R. » Title 16 » CHAPTER I—FEDERAL TRADE COMMISSION › SUBCHAPTER B—GUIDES AND TRADE PRACTICE RULES › PART 240—GUIDES FOR ADVERTISING ALLOWANCES AND OTHER MERCHANDISING PAYMENTS AND SERVICES

16 C.F.R. § 240.5

Definition of competing customers

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Competing customers are all businesses that compete in the resale of the seller's products of like grade and quality at the same functional level of distribution regardless of whether they purchase directly from the seller or through some intermediary.

Example 1:Manufacturer A, located in Wisconsin and distributing shoes nationally, sells shoes to three competing retailers that sell only in the Roanoke, Virginia area. Manufacturer A has no other customers selling in Roanoke or its vicinity. If Manufacturer A offers its promotion to one Roanoke customer, it should include all three, but it can limit the promotion to them. The trade area should be drawn to include retailers who compete.Example 2:A national seller has direct-buying retailing customers reselling exclusively within the Baltimore area, and other customers within the area purchasing through wholesalers. The seller may lawfully engage in a promotional campaign confined to the Baltimore area, provided that it affords all of its retailing customers within the area the opportunity to participate, including those that purchase through wholesalers.Example 3:B manufactures and sells a brand of laundry detergent for home use. In one metropolitan area, B's detergent is sold by a grocery store and a discount department store. If these stores compete with each other, any allowance, service or facility that B makes available to the grocery store should also be made available on proportionally equal terms to the discount department store.
Notes of Decisions
Cited in 6 cases (2 in the last 5 years), 1980–2023 · leading case: Lewis v. Philip Morris Inc., 355 F.3d 515 (6th Cir. 2004).
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Lewis v. Philip Morris Inc., 355 F.3d 515 (6th Cir. 2004). · cites it 2× “fact as to whether they were in competition with the 16 C.F.R. § 240.5 defines “competing customers” as “all convenience stores.”
U.S. Wholesale Outlet & Distr. v. Innovation Ventures, LLC, 89 F.4th 1126 (9th Cir. 2023). · cites it 2× “16 C.F.R. § 240.5 . For example, a discount department store may be competing with a grocery store for distribution of laundry detergent.”
L & L Oil Co., Inc. v. Murphy Oil Corp., 674 F.2d 1113 (5th Cir. 1982). “See 16 C.F.R. § 240.5 (1981). Courts faced with the question of whether delivery constitutes a § 2(e) service or facility have disagreed on the issue.”
Harper Plastics, Inc. v. Amoco Chemicals Corp., 617 F.2d 468 (7th Cir. 1980). · cites it 3× “12 Amoco also points to the Federal Trade Commission Guides for Advertising Allowances and Other Merchandising Payments and Services, 16 C.F.R. § 240.5 (1979), which contains a list of services or facilities that the Commission deems covered by the Act.”
Howell Indus., Inc. v. Sharon Steel Corp., 532 F. Supp. 400 (E.D. Mich. 1981). “Plaintiff contends here that the regulation, by its explicit caveat, does not foreclose application of the Act to preferential delivery of goods.”
U.S. Wholesale Outlet & Distr. v. Innovation Ventures, LLC (9th Cir. 2023). · cites it 3× “” 16 C.F.R. § 240.5 . 2 Our interpretation of “customers competing,” as used in 15 U.”
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