View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

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 .


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102