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F ed eral R eserve Ba n k O F DALLAS D allas, T e x a s, June 1 4 ,1 9 5 1 In terp reta tion R e la t i n g T o “ S e t s a n d G r o u p s ” A s R e fe r re d T o In S ection 6 ( g ) o f R eg u la tio n W To the Registrant Addressed and Others Concerned in the Eleventh Federal Reserve District: C ertain gen eral p rin cip les a re offered h erein con ce rn in g w hen and u n der w h a t circu m stan ces an in stalm en t sale o f tw o o r m ore ite m s t o on e cu stom er is to be trea ted as a sale o f a single listed a rticle f o r th e p u rp ose o f d eterm in in g w h e th e r o r n o t a dow n p a y m e n t is req u ired. B asically in v olv ed are th e p ro v isio n s o f S ec tio n 6 (g) o f th e R eg u la tion en titled “ S ets and G rou ps o f A r ticles,” and th e p ro v isio n in P a rt 1 o f th e Supplem en t to th e R e g u lation (a s am ended O ctob er 16, 1950) th a t th e dow n p aym en t and loan value req u irem en ts shall n o t apply in th e case o f a listed article h a v in g a cash p rice o f less th a n $50.00, exclu siv e o f any applicable sales ta x. A d d ition a l cop ies o f th is circu la r m a y b e obtain ed fr o m th is bank, o r its b ra n ch es a t E l P aso, H ou ston , and San A n to n io . Y o u rs v e r y tru ly , R . R . G IL B E R T P resid en t This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) R eg u la tion W : S ets and G roups and T h e $50 E x em p tion T h ere is qu oted b elow an a d m in istrative in terp reta tion b y th e B oard o f G overn ors o f th e F ed era l R e se rv e S ystem co v e rin g th e a pp lication o f S ection 6 ( g ) : “ In d eterm in in g w h eth er severa l a rticles con stitu te ‘a sin gle listed a rticle’ under S ection 6 (g) — 1. T h e a rticles m u st b e so related as t o con stitu te a set, g rou p , o r assem bly, or 2. T h e y m u st b e m erch an d ised as a sin gle u n it; and, in eith er case 3. T h ey m u st b e sold o r d elivered at su bstan tia lly th e sam e tim e. “ R equ isites 1 and 2, it w ill b e n oted, are stated in th e altern ative. C on sequ en tly, i f a g iv e n case m eets e ith e r o r b o th o f th ese requ isites, S ection 6 (g ) w ill apply, a ssu m in g th a t the th ird requ isite, w h ich is self-ex p la n a tory , is also satisfied. “ I f th e item s a re fu n ctio n a lly related as in th e case o f a d in in g room o r b edroom suite, th e first req u isite w ould b e m et. H ow ever, even i f th e item s are n o t fu n ctio n a lly related, b u t are m erch an d ised as a set, grou p , o r a ssem b ly , th e second req u isite w ou ld b e m e t and th e absence o f fu n ction a l rela tion sh ip w ou ld b e im m aterial. “ W ith resp ect to th e secon d requ isite, im p orta n t con sid eration s are h o w th e item s are offered to cu stom ers, a dvertised , or tick eted , and th e m erch a n d isin g p ra ctices o f a p articu la r seller o r p ra ctices in th e p a rticu la r trade. I f listed articles a re sold p u rsu a n t to an o ffe r in g o f th e a r ticles as a set, g rou p , or assem bly, th e a rticles con stitu te a sin gle listed a rticle reg ard less o f fu n ction a l rela tion sh ip and reg ard less o f w h eth er th e y are offered a t a com bin ation p rice w h ich is low er th a n th e p rice o f each article i f b ou g h t sep a ra tely.” T h ere are set o u t below a n u m ber o f illu strative cases, t o g e th e r w ith a b r ie f statem en t as to h ow each is to b e trea ted u n der th e R egu la tion . It is to b e u n derstood th a t n o a tte m p t has been m ade to co v e r ev ery p ossible fa ctu a l situ ation w h ich m a y arise, and th a t th ese illustrative cases are intended to serve on ly as a guide. C ase 1.— A rticle s are offered f o r sale and sold as a g r o u p a t a g r o u p p rice, and a re n ot sep a ra tely p rice d o r sold sepa ra tely. E x a m p le : A d in in g room table, six ch a irs, and a b u ffet a re o ffered f o r sale as a g ro u p at a p rice o f $289.50. N on e o f th ese item s is sepa ra tely p riced , and n on e w ill b e sold sepa ra tely. C o m m e n t: In th is case th e v a riou s item s are fu n c tio n a lly r e lated, and a re also m erch an d ised as a unit. W h e re su ch item s a re th e s u b ject o f an in stalm en t sale to a cu stom er, th e seller m u st ob ta in a d ow n p a ym en t o f 15 p ercen t o f th e g ro u p p r ic e o f $289.50. Case 2.— A rticle s a re offered f o r sale and sold a t a g r o u p p rice, b u t a re also sepa ra tely p rice d and w ill be sold sep a ra tely. T h e g ro u p p rice, h ow ever, is less th an th e tota l sum o f th e sepa ra te p rice s o f each o f th e item s. E x a m p le : A b ed, a ch est o f d ra w ers, a van ity, and a v a n ity bench , are offered f o r sale at a g rou p p rice o f $95.50. E a ch o f th e item s is sep a ra tely p riced , and is o ffe re d f o r sale and w ill be sold separately, so th at a cu stom er m ay, at his election , b u y one o r m ore, b u t less th an all at th eir resp ectiv e sepa ra te p r ic e s o f $35 f o r th e bed, $30 f o r the ch est, $30 f o r the v a n ity ta ble, and $4.95 f o r th e v a n ity bench. C om m en t: In th is case th e va riou s item s are fu n ctio n a lly re lated, and also are b e in g m erch an d ised b y th e seller as a sin g le u nit. W h en all such item s a re the s u b je c t o f an in sta lm en t sale to on e cu stom er at the g ro u p p rice o f $95.50, the seller m u st o b ta in a d ow n p aym en t o f 15 p ercen t o f th a t am ount. L ik ew ise, sh ould th e cu stom er elect to p u rch a se a co m b in a tio n o f a n y tw o o f th e item s (e x clu d in g th e v a n ity b e n c h ), th e seller m u st ob ta in a d ow n p a ym en t o f 15 p e rce n t o f th e to ta l sum o f th e sepa ra te p rices o f each such item . Thus, i f th e cu s to m er bu ys th e b ed and th e ch est at the sam e tim e u n der on e in sta lm en t con tra ct, th e seller m u st ob tain a d ow n p a ym en t o f 15 p erce n t o f $65. T h e ru les stated above are app lica ble even th ou gh each o f th e item s has a sepa ra te cash p rice o f less than $50. T h ey w o u ld also a p p ly i f a n y one or m ore o f th e item s had a sepa ra te ca sh p rice o f $50 o r m o r e ; f o r exam ple, i f th e bed w e r e p rice d at $69.50 instead o f $35. O f cou rse, i f th e cu stom er elected to b u y o n ly the v a n ity and th e v a n ity ben ch at the com bin ed p rice o f $34.95, no d o w n p a ym en t w ou ld be req u ired f o r said sum is less th an $50. Case 3.— C ircu m stances are th e sam e as th ose outlin ed in C ase 2 above, e x cep t th a t th e g ro u p p rice at w h ich the item s a re offered f o r sale equals th e tota l sum o f th e sepa ra te p r ic e s o f ea ch item . E x a m p le : A sofa , a lou n ge ch a ir and ottom an , an o cca sio n a l ch a ir, tw o end tables, and tw o table lam ps, are offe re d f o r sale as a g rou p at a g ro u p p rice o f $167.75. E a ch o f th ese item s is a lso sep a ra tely p rice d and is offered f o r sale and w ill be sold sepa ra tely, so th a t a cu stom er m ay, at h is election , b u y on e o r m o re o r less th an all at th eir resp ective p rices o f $79.50 f o r th e s o fa , $49.50 f o r th e lou n ge ch a ir and ottom a n , $18.95 f o r th e occa sion a l ch a ir, $6.95 f o r each o f th e end tables, and $2.95 f o r ea ch o f th e table lam ps. Comment: A lth o u g h it is n ot n ecessa rily tru e th a t all th ese item s are fu n ctio n a lly related, n everth eless, because o f th e m eth od o f o ffe rin g , it is clea r th at th ey are b e in g m erch an d ised b y th e seller as a sin gle unit. A c c o r d in g ly , w h e re all such item s a re sold to a cu stom er at su bstan tia lly th e sam e tim e u n der an in sta lm en t p a ym en t a rra n gem en t, such sale is to b e tre a te d as a sale o f a sin gle listed a rticle. H ence, th e seller m u st ob ta in a d o w n p aym en t o f 15 p ercen t o f the g rou p p rice o f $167.75. S h ould th e cu stom er ch oose to p u rch a se tw o o r m o re b u t less th a n all o f th e item s, th e case m a y be d ifferen t. T h e fa c ts stated d o n ot assum e th a t th e seller is o ffe r in g to sell, o r is m erch a n d isin g , less than all o f the item s as a sin gle unit. A cc o rd in g ly , th e qu estion o f w h eth er a sale o f less th an all at one tim e is a sale o f a sin gle listed a rticle w ill depen d u pon w h eth er th ere is a fu n ctio n a l rela tion sh ip b etw een th e p ieces. I f the cu stom er bu ys a s o fa and a m a tch in g lou n ge ch a ir and ottom an , such articles w o u ld be con sid ered as fu n ctio n a lly related, and th e sale m u st be trea ted as a sale o f a sin gle listed a rticle. A s a resu lt, th e seller m u st ob tain a d ow n p a ym en t o f 15 p e rce n t o f $129, the tota l sum o f th e sepa ra te p rice s o f th e a rticles. O f cou rse, th e sam e w ou ld n ecessa rily be tru e i f th e sep a ra te p rice o f the lou n g e ch a ir and ottom a n w e r e $59.50 instead o f $49.50, f o r in su ch case the separate p rices o f each o f th e item s w ou ld b e in excess o f $50. On the oth er hand, the lou n g e ch a ir and ottom a n and an end table and a table lam p are n ot fu n ctio n a lly related, and as th ere is n o o ffe r in g to sell these item s as a unit, an instalm en t sale th e r e o f to one cu stom er at the sam e tim e w o u ld n ot be s u b je ct to S ection 6 ( g ) ; and no d ow n p a ym en t need be ob tain ed b y th e seller even th ou g h the total a m ou n t o f the sale w ou ld be $59.40 f o r n one o f th e item s h as a cash p rice o f $50 o r m ore. Case 4.— A rticle s a re sep a ra tely p rice d and a re o ffe re d f o r sale and w ill b e sold separately. T h e item s are n ot o ffe re d f o r sale as a g rou p , and no g ro u p p rice is a d vertised f o r o r assign ed to them . E xa m p le 4 ( a ) : A m attress and b e d s p rin g a re sepa ra tely p rice d at $49.50 and $39.50, resp ectiv ely , and are o ffe re d f o r sale sepa ra tely so th a t a cu stom er m ay, at his op tion , b u y one o r both . Comment: A lth ou g h the seller is n ot o ffe r in g th ese item s as a g ro u p or m erch a n d isin g them as a unit, th e item s are fu n c - tio n a lly related. H ence, w h en b oth item s a re the s u b je c t o f a n in sta lm en t sale to on e cu stom er a t su bstan tia lly th e sam e tim e, th e seller m u st ob ta in a d ow n p a y m en t o f 15 p e rce n t o f th e tota l sum o f th e ir sepa ra te p rices, n am ely, 15 p e rce n t o f $89. In som e instan ces a m a ttress and b e d s p r in g m a y be o ffe r e d f o r sale a t a g ro u p p rice, w h ich m a y b e eith er less th a n o r equal to th e tota l su m o f th e sepa ra te p rice s o f each. T h is f a c t w ou ld not, h ow ev er, relieve th e seller fr o m th e n ecessity o f o b ta in in g a d ow n p aym en t o f 15 p erce n t o f su ch g ro u p p r ic e in cases w h ere b oth a rticles are sold to one cu stom er u n der an in stalm en t c o n tr a c t a t su ch p rice. E x a m p le 4 ( b ) : A fo u r -p ie c e b ed roo m suite, co n s istin g o f a bed, a chest, a va n ity , and a v a n ity bench, is o ffe re d f o r sale a t a g ro u p p rice o f $120. T h e item s co m p o s in g th is set a re n o t sep a ra tely p rice d and w ill n o t be sold sepa ra tely. A t th e sam e tim e th e cu stom er b u y s th is set, he also b u y s an in n e r sp rin g m a ttress and a b o x sp rin g, w h ich item s a re sepa ra tely p rice d a n d a re o ffered f o r sale a n d w ill be sold sep a ra tely f o r $49.50 each . T h e to ta l am ou nt o f th e sale is thus $219. C om m en t: T h e m attress and th e b o x s p r in g a re fu n c tio n a lly rela ted to each oth er (see E x a m p le 4 ( a ) a b o v e ), and to g e th e r a re fu n ctio n a lly rela ted to th e b ed room suite. A c c o r d in g ly , th e seller m u st ob ta in a d ow n p a y m en t o f 15 p e rce n t o f th e to ta l p rice o f $219. T h is is tru e even th ou g h th e separate cash p rice s o f th e m a ttress and b o x s p r in g a re less th a n $50. E xa m p le 4 ( c ) : A c h iffo r o b e and a w in g ch a ir a re p r ic e d sep a ra tely at $49.50 and $37.50, resp ectiv ely , and are o ffe r e d f o r sale sep a ra tely so th a t a cu stom er m ay, at his election , b u y on e o r both . C om m en t: T h ese item s a re n o t fu n c tio n a lly related, n o r a re th e y offered f o r sale o r m erch a n d ised as a sin gle u nit. H ence, an in sta lm en t sale o f both item s to a cu stom er at th e sam e tim e w o u ld n ot con stitu te a sale o f a sin gle listed a rticle w ith in th e p u rview o f S ection 6 ( g ) . A cc o rd in g ly , as n eith er item has a cash p rice o f $50 o r m ore, n o d ow n p a y m e n t is req u ired even th ou g h th e tota l am ou nt o f th e sale is $87. T h e sam e w ou ld be tru e i f th e cu sto m e r also b o u g h t u n d e r th e sam e in sta lm en t con tra ct a r u g h a v in g a sepa ra te ca sh p r ic e o f $47.50, a lam p h a v in g a sepa ra te ca sh p rice o f $19.95, and a n occa sion a l ta ble h a v in g a separate ca sh p rice o f $23.50, o r a n y one o r tw o o f su ch item s. O f cou rse, i f a n y one o f th e item s has a cash p rice o f $50 o r m ore, th e seller m ust ob ta in a d ow n p aym en t o f 15 p e rc e n t o f th e cash p rice o f su ch item . Such w ou ld be th e ca se i f th e ch iffo r o b e w e re p rice d at $69.50 in stea d o f $49.50, o r i f th e ru g w e re p rice d at $99.95 instead o f $47.95. E x a m p le 4 ( d ) : T h e v a riou s item s listed b e lo w a re o ffe re d f o r sale and w ill b e sold sep a ra tely at th e separate p rice s sh ow n . W o o d a rm co u c h ____________________________ 2 m a tch in g w o o d a rm lou n g e ch a irs, each O cca sion al ch a ir ___________________________ 2 end tables, e a ch _______________ ____________ 2 ta ble lam ps, e a ch __________ _______________ C offee ta b le __ _____________________________ S ta n d in g lam p ______________________________ S m o k in g s t a n d _________________________ ___ 2 s o fa p illow s, ea ch ________________________ M ir r o r --------------------------------------------------------- $49.95 . 29.50 . 6.95 . 7.95 . 1.95 . 7.95 . 7.95 . 2.95 . 1.25 . 2.00 C o m m en t: T h e cou ch and th e tw o m a tch in g loun ge ch a irs are fu n c tio n a lly related and an in stalm en t sale th e r e o f to a cu st o m e r a t th e sam e tim e w ou ld be a sale o f a sin gle listed a rticle f o r th e p u rp oses o f th e R egu la tion . It does n ot appear, h ow ever, th a t th e oth er item s are fu n c tio n a lly rela ted t o each o th e r o r to th e co u ch and th e lou n g e ch a irs. A c c o r d in g ly , w h e re all o f th e item s a re sold to a cu stom er u n der an instalm en t a rra n g em en t a t th e sam e tim e f o r a tota l p rice o f $159.05, th e seller w ou ld be re q u ired to ob ta in a d ow n p aym en t o f 15 p e rce n t o f th e to ta l su m o f the sepa ra te p rice s o f th e cou ch and lou n g e ch a irs, n am ely, 15 p erce n t o f $108.95. E x a m p le 4 ( e ) : T h e v a riou s a rticles listed b e lo w a re offe re d f o r sale and w ill be sold sep a ra tely at th e sepa ra te p rice s sh ow n . T h e cu stom er m a y at his op tion b u y a n y on e o r m ore o f them , o r a n y com b in a tion o f them , a t th e ir re sp ectiv e sepa ra te p rice s. C o ok in g stove, coa l o r w o o d ________________ $39.95 C o tton m a ttress --------------------------------------------------------- 12.95 C oil s p r in g ------------------------------------------------------------------ 10.95 M etal b ed -------------------------------------------------------17.50 5 p iece b re a k fa s t set_________________________________ 29.50 R u g -----------------------------------------------------------------------------9.95 K itch en c a b i n e t ______________________________________ 49.95 S et o f d ish es__________________________________________ 6.95 C om m en t: W h en all o f th e a bove a rticles a re th e s u b je c t o f an in stalm en t sale to a cu stom er a t the sam e tim e, it is n ot n e ce ssa ry th a t th e seller ob tain a n y d ow n paym ent, even th ou gh th e to ta l sum o f the sepa ra te p rice s o f such a rticles is $177.70. A lth o u g h th e m a ttress, th e co il sp rin g , and th e m etal bed are fu n c tio n a lly related, and the sale th e r e o f w ou ld o th erw ise co n stitu te a sale o f a sin gle listed article, th e total sum o f the sepa ra te p rice s o f these th ree a rticles is less than $50, a n d h en ce n o d ow n p a ym en t is req u ired. F u rth e r, n on e o f th e oth er a rticles h as a ca sh p rice o f $50 or m ore. O f cou rse, i f th e b re a k fa s t set w e r e g r o u p p rice d a t $59.50 in stea d o f $29.50, th e seller w ou ld h ave to ob tain a d o w n p a y m en t o f 15 p ercen t o f such g rou p p rice . A lso , i f th e to ta l sum o f th e separate p rices o f th e m a ttress, co il sp rin g , and m etal b ed w e r e $50 o r m ore, th e seller w ou ld h ave to ob ta in a d o w n p a ym en t o f 15 p e rce n t o f su ch sum .