Haw. Code R. § 16-303-5 - Use of the word "free"

(a) It shall be an unfair or deceptive act or practice for any seller to advertise "free" merchandise in connection with the sale of other merchandise except in conformity with this section. When the consumer is told that merchandise is "free" if other merchandise is purchased, the word "free" indicates that the consumer is paying nothing for the "free" merchandise and no more than the regular price for the other merchandise. A consumer has a right to believe that the seller will not directly and immediately recover, in whole or in part, the cost of the "free" merchandise by marking up the price of the merchandise that must be purchased, by substituting inferior merchandise, or by other means. It is the express intent of this section to prohibit the practice of advertising or offering merchandise as "free," when in fact, the cost of the "free" merchandise is passed on to the consumer, in whole or in part, by raising the price of the merchandise that must be purchased in connection with the "free" merchandise or by decreasing the quality or quantity of merchandise that must be purchased in connection with the "free" merchandise.

(b) "Free," as used in this section, includes the use of such words or phrases as "bonus," "gift," "free-of-charge," "prize," "absolutely without charge," "buy one, get one free," "two-for-one-sale," "1 cent sale," "50% off with purchase of two," and words of similar import or meaning, which would reasonably lead a person to believe that the person may receive something of value, entirely or in part, without the requirement of additional compensation. "Free," as used in this section, does not include a bona fide quantity discount.

(c) When using the word "free" in advertisements, all the terms, conditions, and obligations upon which receipt and retention of the "free" merchandise are contingent shall be set forth clearly and conspicuously. In the case of oral statements or representations, such terms, conditions, and obligations shall be stated orally at the outset of the offer of "free" merchandise. In the case of written statements or representations, such terms, conditions, and obligations shall appear next to the offer of "free" merchandise. Disclosure of the terms of the offer set forth in a footnote of an advertisement to which reference is made by an asterisk or other symbol placed next to the offer shall not constitute adequate disclosure. A notice of the existence of an offer of "free" merchandise on packaged merchandise shall not be regulated by this section provided that the notice is not otherwise unfair or deceptive.

(d) It shall be an unfair or deceptive act or practice for any seller to offer "free" merchandise when the price of other merchandise required to be purchased exceeds the seller's regular price.

(e) No offer of "free" merchandise shall be made in connection with the introduction of new merchandise offered to be sold at a specified price unless:

(1) The offerer will discontinue the offer within ninety days after the offer is first stated or specifies the duration of the offer and will discontinue the offer at the specified date which date shall in no event be more than six months after the offer is first stated;

(2) The offerer will commence selling the merchandise promoted, separately, at a price no less than the price at which it was promoted with the "free" merchandise; and

(3) The offerer will continue to sell the merchandise for a reasonable period of time after the termination of the offer at a price no less than the price at which it was promoted with the "free" merchandise, unless compliance becomes impossible because of circumstances beyond the seller's control.

(f) Except as provided in subsection (e), continuously advertising the same offer of "free" merchandise is an unfair or deceptive act or practice since the seller's price for merchandise to be purchased by consumers in order to avail themselves of the "free" merchandise will, by lapse of time, become the regular price for the "free" merchandise together with the other merchandise required to be purchased. Under such circumstances, an advertisement of "free" merchandise is illusory and unfair or deceptive.

Notes

Haw. Code R. § 16-303-5

[Eff 6/19/81] (Auth: HRS § 487-5) (Imp: HRS §§ 480-2, 487-5)