[Federal Register Volume 62, Number 117 (Wednesday, June 18, 1997)]
[Proposed Rules]
[Pages 33316-33334]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-15820]



[[Page 33315]]

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Part IV





Federal Trade Commission





_______________________________________________________________________



16 CFR Part 245



Request for Comments Concerning Guides for the Watch Industry; Proposed 
Rule

  Federal Register / Vol. 62, No. 117 / Wednesday, June 18, 1997 / 
Proposed Rules  

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FEDERAL TRADE COMMISSION

16 CFR Part 245


Request for Comments Concerning Guides for the Watch Industry

AGENCY: Federal Trade Commission.

ACTION: Request for public comments.

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SUMMARY: The Federal Trade Commission (the ``Commission'') is 
requesting public comments on proposed revisions to the Guides for the 
Watch Industry (``the Watch Guides'' or ``the Guides''). The Commission 
also is soliciting comment about whether there is a continuing need for 
the Watch Guides. All interested persons are hereby given notice of the 
opportunity to submit written data, views and arguments concerning this 
proposal. This information will assist the Commission in determining 
whether the Guides should be revised and retained, or whether the 
Guides should be rescinded.

DATES: Written comments will be accepted until September 2, 1997.
ADDRESSES: Comments should be directed to: Secretary, Federal Trade 
Commission, Room H-159, Sixth and Pennsylvania Ave., N.W., Washington, 
D.C. 20580. Comments about these proposed changes to the Watch Guides 
should be identified as ``Watch Guides--16 CFR Part 245--Comment.''

FOR FURTHER INFORMATION CONTACT: Constance M. Vecellio or Laura J. 
DeMartino, Attorneys, Federal Trade Commission, Washington, D.C. 20580, 
(202) 326-2966 or (202) 326-3030.

SUPPLEMENTARY INFORMATION:

I. Introduction

    The Guides for the Watch Industry, 16 CFR Part 245, address claims 
made about watches, watchcases, watch accessories and watch bands that 
are permanently attached to watchcases. The Commission published a 
Federal Register Notice (``FRN'') soliciting public comment on 
amendments to the Watch Guides, in response to a petition from the 
Jewelers Vigilance Committee, Inc. (``JVC'').\1\
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    \1\ 57 FR 24996 (June 12, 1992). The FRN also solicited comment 
on the JVC petition's proposed changes to the Guides for the Jewelry 
Industry (``Jewelry Guides''), 16 CFR Part 23, and the Guides for 
the Metallic Watch Band Industry (``Watch Band Guides''), 16 CFR 
Part 19. The Commission described the changes to the Jewelry Guides 
and the Watch Band Guides in a previously published FRN, 61 FR 
27178-27228 (May 30, 1996).
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    While there was extensive comment in response to the FRN (263 
comments were received), most comments focused on the Jewelry Guides 
rather than on the Watch Guides.2 Approximately ten comments 
focused primarily on the Watch Guides.3 The Commission has 
tentatively decided to make numerous changes that were not suggested in 
the JVC petition or mentioned in the FRN. Therefore, the Commission 
solicits further comment on the Watch Guides and the proposed changes.
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    \2\ In the remainder of this notice, the comments are cited to 
by an abbreviation of the commenter's name and the document number 
assigned to the comment on the public record. A list of the 
commenters, including the abbreviations and document numbers used to 
identify each commenter is attached as an Appendix.
    \3\ Benrus (22); Newhouse (76); AWI (116); USWC (118); JCWA 
(216); Citizen (228); Swiss Federation (232); AWA (236); Timex 
(239); and NAW (251). Other comments are also discussed below to the 
extent they address specific aspects of the Watch Guides or related 
issues.
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    The Commission also is soliciting comment about whether there is a 
continuing need for the Watch Guides. In particular, the Commission is 
requesting comment about the overall costs and benefits of the Guides. 
The Commission also is interested in determining whether international 
standards provide sufficient guidance to the watch industry. Further, 
the Commission is requesting comment regarding whether industry self-
regulation and ``market mechanisms,'' such as manufacturer reputation 
or manufacturer warranties, are sufficient to protect consumers from 
misrepresentations about watches. This information will assist the 
Commission in determining whether the Guides should be revised and 
retained, or whether the Guides should be rescinded.

II. Analysis of Comments

A. Revisions to the Legal Language of the Guides

    The legal language in the Guides has been revised to conform to the 
Commission's view on deception and unfairness, as expressed in its 
Policy Statements on Deception and Unfairness.4 
Specifically, instead of stating ``industry members should not 
misrepresent directly or indirectly * * *,'' the Guides have been 
revised to state ``it is unfair or deceptive to * * *.''5
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    \4\ Statement on Deception, appendix to Cliffdale Assoc., Inc., 
103 F.T.C. 110, 1734-84 (1984) and Statement on Unfairness, appendix 
to International Harvester Co., 104 F.T.C. 949, 1072 (1984).
    \5\ The FRN stated that, if the Commission determined to retain 
the Guides, the legal discussion would be updated to reflect the 
Commission's current practice. 57 FR 24999 and n.4.
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B. Proposal to Consolidate the Jewelry, Watch Band, and Watch Guides 
and to Delete Permanently Attached Watchbands From the Provisions of 
the Watch Guides

    At the time of the JVC petition, detachable metallic watch bands 
were the subject of the Watch Band Guides and metallic watch bands that 
were permanently attached to the watch were included in the Watch 
Guides. The JVC proposed combining the Watch and Watch Band Guides with 
the Jewelry Guides and the FRN solicited comment on this proposal. 
Thirty comments addressed this issue, and 22 believed the Guides should 
be consolidated.6 Most of those who gave reasons for 
favoring consolidation mentioned the Watch Band Guides rather than the 
Watch Guides. In a notice published on May 30, 1996, the Commission 
stated that it was rescinding the Watch Band Guides and consolidating 
certain of their provisions with the Guides for the Jewelry Industry 
(renamed Guides for the Jewelry, Precious metals and Pewter 
Industries). 61 FR 27222 (May 30, 1996).
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    \6\ JMC (1); Fasnacht (4); Gold Institute (13); Benrus (22); 
Estate (23); G&B (30); Jabel (47); Skalet (61); Lannyte (65); 
Newhouse (76); Nowlin (109); McGee (112); ArtCarved (155); Bales 
(156); Bedford (210); Bridge (163); IJA (192); Canada (209); Matthey 
(213); Bedford (210); MJSA (226); and Leach (257).
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    The Commission also announced that it had determined not to combine 
the Guides for the Watch Industry with either of the other two guides. 
61 FR 27181 (May 30, 1996). Six of the eight comments opposing 
consolidating all three Guides were from watch manufacturers or trade 
associations.7 (Only Benrus favored consolidation.) The 
reasons given for opposition were primarily related to the 
consolidation of the Watch Guides, not the Watch Band Guides. AWA 
stated that the current Guides reflect the fact that watches and 
jewelry are very different products ``by imposing substantially 
different definitions and standards for watches and jewelry.'' 
8 For example, the minimum thickness in the Watch Guides for 
gold electroplated watches is about 100 times thicker than the

[[Page 33317]]

minimum thickness for gold electroplated jewelry that was contained in 
the Jewelry Guides or for detachable watch bands in the Watch Band 
Guides.9 The differences in the provisions were based on the 
assumption that watches are worn more often than other plated jewelry 
and should, therefore, have thicker minimum plate standards.
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    \7\ USWC (118); JCWA (216); NACSM (219); Best (225); Citizen 
(228); Swiss Federation (232); AWA (236); and Timex (239). Although 
AWI (116) p.1, did not specifically address this issue, it proposed 
certain changes in the Watch Guides and then noted that the 
remainder of the Watch Guides should be retained ``as they now 
exist.''
    \8\ Comment 236, p.1. See also Swiss Federation (232) pp. 1, 38 
(stating that the industries are separate, with separate trade 
associations, and that consolidating the Guides would make dealer 
and consumer use of the Guides difficult); Citizen (228) p.5 
(watches and jewelry are dissimilar and should not be combined); 
JCWA (216) p. 4 (favoring separate Guides because the application of 
materials and quality demands differ for watches and jewelry).
    \9\ Standards for plated watch bands that are permanently 
attached to watches are the same as for watches.
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    Moreover, the Commission notes that watches are essentially 
machines that perform a function; many sections of the Watch Guides 
address the proper functioning of watches or protective features of 
watches. Those sections are irrelevant to jewelry or detachable watch 
bands. The Commission has thus determined to retain the Watch Guides as 
separate Guides.

C. Definitions: Section 245.1

    The Watch Guides set forth definitions in section 245.1. The JVC 
proposed a change in the definition of ``watchcase'' or ``case'' that 
would result in deleting permanently attached watchbands from the items 
covered by the Watch Guides. Section 245.1(b) defines ``watchcase'' or 
``case'' as ``any metal case, covering, or housing * * * for a watch * 
* * including a watch band which has been permanently affixed thereto * 
* *.'' The JVC proposed including all watch bands, whether permanently 
attached or detachable, in the same category of its proposed 
guides.10
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    \10\ See JVC Petition, Sec. 23.25(c) ``Note.''
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    However, the Commission has tentatively determined not to delete 
permanently attached watch bands from the items covered by the Watch 
Guides. The two watch industry commenters that specifically addressed 
this issue supported retaining permanently attached watchbands under 
the Watch Guides.11 The Commission agrees that whatever 
guidelines apply to watches plated with precious metals should also 
apply to permanently attached watchbands.12
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    \11\ Swiss Federation (232) pp.27, 38-39 (stating that a watch, 
case, and permanently attached band are sold as one unit whereas 
detachable bands primarily are sold separately in an aftermarket); 
Timex (239) p.8 (stating that compliance may be more burdensome if a 
permanently attached band is treated as a detachable band and 
therefore must bear separate country of origin and metallic content 
markings, regardless of whether it differed from the markings on the 
case).
    \12\ Detachable bands are in essence bracelets that can be 
replaced if the precious metal plating wears thin.
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    The JVC also proposed adding ``watch chains'' to the examples of 
accessories defined in section 245.1(c).13 No comments 
addressed this proposal. Section 245.1(c) defines ``accessories'' as 
``products, other than watch bands, which are affixed to and sold in 
combination with watchcases or watches, such as, for example, 
bracelets, pins, pendants, brooches, or ornaments.'' Currently, as 
noted, detachable watch bands are excluded from the Watch Guides; 
logically, all detachable accessories should be excluded. Accessories 
are not covered by 245.3, which governs misrepresentation of metallic 
composition; that section covers only ``watchcases,'' which are defined 
as including permanently affixed watch bands. The only provision of the 
Watch Guides that specifically mentions accessories is 245.7, 
``Misrepresentation of Accessories,'' which prohibits misrepresentation 
of various types and refers the reader to the Jewelry Guides for 
details. The Commission proposes to delete the definition of 
``accessories'' from the Guides and expand the definition of 
``watchcase'' or ``case'' to include any permanently attached 
accessory, so that only permanently attached accessories are included 
in the Watch Guides. Therefore, such accessories would be covered by 
section 245.3 (i.e., Misrepresentation of Metallic 
Composition).14
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    \13\ JVC Petition, Sec. 23.25, Section I (b).
    \14\ The Watch Guides also cover accessories as ``industry 
products,'' defined in Sec. 245.1(g), and addressed in other 
sections of the Guides. However, these sections are either 
inapplicable to accessories or are very general in nature.
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    The JVC also proposed adding the explanation ``at all levels of 
consumption'' to the end of the definition of ``industry member'' as 
``a person, firm, corporation, or organization engaged in the 
importation, manufacture, sale or distribution of any industry 
product,'' in section 245.1(h) of the current Guides. The current 
definition states that it applies to entities engaged in the 
``importation, manufacture, sale, or distribution of any industry 
product.'' (Emphasis added). Thus, a distributor who sells watches to a 
retailer is covered by the admonitions of the Guides.
    However, one comment stated that the Guides need to clarify that 
purchasers at all levels of the industry are protected by the Guides, 
since it is commonly assumed by courts that merchants are experts who 
should know better than to rely on suppliers' representations as being 
accurate.15 The Commission agrees that it would be useful to 
clarify that retailers, as well as consumers, are meant to be protected 
from deceptive practices addressed by the Guides. Thus, the Commission 
proposes adding a new section to the Guides, ``245.0 Scope, 
application, and purpose,'' which states that the Guides ``apply to 
persons, partnerships or corporations, at every level of the trade 
(including but not limited to manufacturers, suppliers, and retailers) 
engaged in the business of offering for sale, selling, distributing or 
importing industry products.'' This section also provides that the 
Watch Guides cover representations asserted by any means, including 
computerized images.
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    \15\ ISA (237) p.12.
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    Some of the commenters proposed other changes to section 245.1. The 
Swiss Federation proposed adding certain definitions (for ``movement,'' 
``mechanical movement,'' and ``quartz movement'') because ``today's 
development of more complex watches and watch components require more 
precise identification of these terms.'' 16 The JVC also 
proposed that the Watch Guides prohibit deceptive use of the term 
``quartz watch,'' and included a proposed definition of quartz 
watch.17
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    \16\ Comment 232, p.28.
    \17\ See JVC Petition Sec. 23.29 and discussion of section 
245.6, ``Deception as to Movements,'' infra.
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    Although quartz watches are not addressed by the current Guides, 
they constitute the bulk of watches sold today. The Commission proposes 
adding a definition of quartz watches, and addressing, in section 
245.6, misrepresentations specifically related to quartz watches, as 
the JVC suggested. The Commission also proposes including in section 
245.1 the following simplified version of the technical definitions of 
movement proposed by the Swiss Federation:
    The term ``movement'' means that part of a watch which produces and 
maintains a recurring phenomenon and is capable of counting time. The 
movement is connected to a means of displaying time by either a dial 
and hands (analog) or a digital display, and is mounted in a case.
    (1) ``Mechanical movement'' means a movement which divides time 
into equal parts using a balance wheel or any other mechanical means of 
determining intervals of time that uses power generated by a mainspring 
which may be wound by hand or automatically.
    (2) ``Quartz movement'' means a movement which divides time into 
equal parts using a synthetic quartz crystal that vibrates using power 
generated by electrical energy.
    The Swiss Federation also proposed adding a definition of 
chronometer contained in Standard 3159 (Timekeeping instruments--Wrist-

[[Page 33318]]

 chronometers with spring balance oscillator) established by the 
International Organization for Standardization (ISO). This definition 
states that a watch is not a ``chronometer'' unless ``certified by a 
neutral, official authority, which checks the watch, or if necessary 
the movement, and issues an official certificate of compliance.'' 
18
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    \18\ Comment 232, p.29 and exhibit 10 thereto. ISO is, according 
to the ``foreword'' sections in several ISO standards attached to 
the Swiss Federation's comment (232), ``a worldwide federation of 
national standards bodies. The work of preparing International 
Standards is normally carried out through ISO technical 
committees.''
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    The Swiss Federation contended that the Trade Agreements Act of 
1979 supports adopting ISO standards. The Act states that ``No Federal 
agency may engage in any standards-related activity that creates 
unnecessary obstacles to the foreign commerce of the United States * * 
*.'' and that federal agencies must, in developing standards, ``take 
into consideration international standards and shall, if appropriate, 
base the standards on international standards.'' 19 U.S.C. 2532 (1980). 
The Commission agrees that, in developing standards within the meaning 
of the Trade Agreements Act, it should consider whether international 
standards exist and are appropriate for use in the United 
States.19
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    \19\ Certain provisions of the Watch Guides qualify as standards 
under the Trade Agreements Act, which defines a standard as ``a 
document approved by a recognized body that provides, for common and 
repeated use, rules, guidelines, or characteristics for products or 
related processes and production methods, with which compliance is 
not mandatory.'' 19 U.S.C. 2571(13) (Supp. 1995).
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    Although the Guides do not define chronometer, section 245.4 
cautions industry members not to falsely designate or describe a watch 
as a chronometer. However, the definition in the ISO standard would 
require industry members to test and obtain a certificate before 
describing a watch that keeps time with precision as a chronometer. No 
evidence has been brought to the Commission's attention indicating that 
consumers believe use of the word ``chronometer'' alone, without any 
reference to testing and certification, means that the device has been 
tested and certified.20 In the absence of such evidence, the 
Commission does not intend to adopt the definition of chronometer 
contained in ISO Standard 3159.
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    \20\ The dictionary definition of ``chronometer'' is ``an 
exceptionally precise clock, watch, or other timepiece.''
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    However, the Commission is aware that companies marketing 
chronometers in the United States that have been tested and certified 
in accordance with the ISO standard may want assurance that the level 
of precision required to meet the ISO standard is also sufficient 
within the meaning section 245.4 of the Guides. Therefore, the 
Commission proposes to include a Note to section 245.4 stating that 
conformity to the ISO definition constitutes a ``safe harbor'' for a 
claim that a watch is a chronometer. The Commission seeks comment on 
this modification.
    Timex proposed limiting the definition of ``watch'' to a device 
``with the primary function of timekeeping for measuring or indicating 
time which is worn on or about the person.'' 21 It noted 
that wrist instruments may serve a variety of purposes other than 
timekeeping, such as wrist paging devices that also keep time, and 
concluded that such technical advances make it ``appropriate'' to limit 
the definition of ``watch.'' 22 However, it is not evident 
why the Watch Guides would be less needed with respect to devices that 
perform a watch's function (i.e., timekeeping), but in a secondary 
role. Thus, the Commission has determined not to adopt Timex's 
proposal.
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    \21\ Comment 239, p.8.
    \22\ Id.
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    Finally, the Commission is deleting the definitions of ``plate'' or 
``plated'' and of ``electroplate'' or ``electroplated'' from section 
245.1. These terms are used in section 245.3, which deals with 
misrepresentation of metallic composition, and their meaning is clear 
in the context of that section.

D. Misrepresentation of Metallic Composition of Watchcases: Section 
245.3

    The Commission believes that section 245.3 is more regulatory in 
tone than appropriate for guides, and thus has redrafted it to describe 
unfair or deceptive acts and to establish ``safe harbors'' (i.e., 
examples of ways of avoiding misrepresentations). In the proposed 
Guides, section 245.3(b) identifies specific practices that may be 
misleading and section 245.3(c) lists markings and descriptions that 
are consistent with the principles described in the section. The latter 
provisions are ``safe harbors.'' As discussed in more detail below, the 
Commission proposes deleting several subsections. Also discussed below 
are some additional issues raised by the JVC's petition and the 
comments.
1. Requirement That Metallic Composition be Marked
    The preamble to section 245.3 advises industry members not to 
misrepresent the metallic composition of a watchcase in advertising, 
labeling, brand or trade name, or otherwise. However, it provides that 
for ``cases having an exposed surface or surfaces which are or have the 
appearance of being metal, the metallic composition of the cases should 
be clearly and conspicuously disclosed in accordance with the methods 
and terminology set forth below.'' The requirement that metallic 
composition be marked is also contained in subsections (c)-(j), each of 
which states that watches of a certain metallic composition ``should be 
marked'' in a certain way.
    The requirement that metallic composition be disclosed is most 
important for watches made of base metals, since the sellers of such 
watches might otherwise choose to say nothing about their metallic 
composition. However, it seems likely that a reasonable consumer would 
assume that a seller would want to tout the precious metal content of a 
watch, and therefore the consumer would assume that an unmarked watch 
was made of base metal. Subsection (j) requires that watchcases or 
parts that do not meet the minimum requirements for marking as precious 
metals be marked as ``Base Metal'' or with the specific base metal(s) 
of which they are composed, such as ``Chromium Plated Steel.'' Timex 
proposed exempting from this requirement watches that sell at retail 
for less than $100 and make no claim of precious metal content. Timex 
pointed out that few, if any, watches selling below $100 contain cases 
or parts that qualify as precious metal under the Guides, and, for such 
watches, the base metal ``markings are of no meaning or value to the 
consumer and only an administrative and financial burden to 
manufacturers of low priced watches.'' 23
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    \23\ Comment 239, p. 5.
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    The Commission believes that it is unlikely to be unfair or 
deceptive to fail to mark a watch as to metallic composition and 
proposes deleting the requirement. However, some comments generally 
supported the marking requirements, pointing out that the disclosure 
lessens the chance that consumers will be misinformed. Apparently, the 
general theory is that the existence of the indelible ``Base Metal'' 
marking can deter misrepresentations of precious metal content by 
making them less likely to succeed; an absence of marking reinforces 
the incentives of unscrupulous watch sellers to make 
misrepresentations. The Commission is aware that the Watch Guides have

[[Page 33319]]

provided for base metal disclosures for decades and the watch industry 
has followed this practice for many years. Therefore, the Commission 
solicits comment on whether or not the requirement should be deleted.
2. Gold and Gold Alloy Coatings: Subsections (b)-(g) 24
    Subsection (b) of section 245.3 restricts the use of ``gold'' to 24 
karat gold, and (c) states that ``gold,'' when applied to alloys of 
gold, should be immediately preceded with a correct designation of the 
karat fineness. There were no comments on these subsections, and the 
Commission only proposes changing the language to a description of 
unfair and deceptive acts, in proposed sections 245.3(b)(1) and (b)(2), 
coupled (in the case of alloys) with a ``safe harbor,'' in proposed 
section 245.3(c)(1).
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    \24\ Subsection (a) exempts certain parts (e.g., springs) from 
any determination of metallic composition. There was no comment on 
this subsection and the Commission proposes no change other than 
redesignating it as subsection (e).
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    Subsection (d) sets a standard for use of ``gold filled,'' (three 
one-thousandths of an inch of mechanically-plated gold of not less than 
10 karat fineness, or approximately 75 microns) and subsection (e) sets 
a standard for use of ``gold plate'' or ``rolled gold plate'' (one and 
one-half thousandths of an inch of mechanically-plated gold of not less 
than 10 karat fineness, or approximately 37.5 microns.) An expansion of 
the meaning of ``gold plate'' was suggested, and is discussed at 
subsection b. infra. No comments objected to the current requirements 
for the use of the terms ``gold filled'' or ``rolled gold plate,'' and 
the Commission proposes maintaining these requirements as ``safe 
harbors'' for the use of these terms. However, ISO Standard 3160-1 
(Watch cases and accessories--Gold alloy coverings--Part 1: General 
requirements) allows the use of ``rolled gold'' for products with 5 
microns of 10 karat gold, although the ISO Standard does not allow the 
karat fineness to be marked.25 Accordingly, the Commission 
solicits comment on whether the ``safe harbor'' for ``rolled gold'' 
should be changed to conform with the ISO standard (i.e., from 37.5 
microns to 5 microns).
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    \25\ ISO Standard 3160-1 is attached as Annex 7 to the comment 
of Japan Watch (216).
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a. Thickness of Gold Electroplate
    Section 245.3(f) advises industry members to mark as ``gold 
electroplate'' or ``gold electroplated'' watchcases which have been 
electroplated with gold or a gold alloy of not less than 10 karat 
fineness to a thickness throughout of not less than \3/4\ 1000ths of an 
inch (approximately 19 microns), and which can successfully withstand 
the adhesion, hardness, and porosity tests set forth in the appendix. 
If the gold electroplate is at least 1 and \1/2\ 1000ths of an inch 
thick, it may be described as ``Heavy Gold Electroplate.'' 
26 Section 245.3(f) permits a designation of the karat 
fineness of the gold coating to be placed immediately before the terms 
``gold electroplate,'' ``gold electroplated,'' or ``heavy gold 
electroplate.'' 27 Sellers also may disclose the actual 
thickness of the electroplate.28
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    \26\ No comments objected to the standard for heavy gold 
electroplate.
    \27\ ISO Standard 3160-1 prohibits, in section 7.4, any mention 
of karat fineness of the gold alloy electrodeposit, although it must 
be at least 14 karats. Japan Watch (216) explained, at p. 4, that 
the karat mark is not put on the product lest it mislead consumers 
into thinking the item is solid gold, rather than merely plated. The 
Commission has received no complaints from consumers indicating that 
they misinterpreted the mark ``14k Gold Electroplate'' to mean solid 
14 karat gold alloy. Nevertheless, the Commission solicits comment 
on whether this portion of subsection (f) should be changed to 
conform to the ISO standard. The ISO standard also requires, in 
section 7.6, a marking of the ``nominal value'' of the thickness in 
microns. The concept of ``nominal value'' appears to treat a thinner 
layer of higher karat gold as equivalent to a thicker layer of lower 
karat gold (e.g., 1 micron of 24 K is equivalent to 2 microns of 12 
K).
    \28\ Current section 245.3(d), (e), and (f) and paragraph 1 of 
the appendix currently allow a twenty percent tolerance in measuring 
the thickness of gold plating. With respect to ``gold plate'' (which 
includes gold electroplate) and ``rolled gold,'' the ISO standard 
allows, in section 6.1, for a 20% tolerance. However, paragraph 1 of 
the appendix, unlike the ISO standard, requires that the total 
quantity of precious metal plating be ``sufficient to equal the 
quantity necessary to provide the specified minimum thickness on all 
points on such watchcase including the thinnest point.'' The 
Commission solicits comment on whether this qualification of the 
tolerance is necessary.
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    The JVC proposed no changes in the current thickness required for 
gold electroplate. Several watch industry commenters, however, urged 
that the current standard be lowered. The Swiss Federation proposed 
lowering the minimum standard to conform to current Swiss law (8 
microns) or the ISO standard (5 microns).29 Similarly, Japan 
Watch commented that the standard should conform to ISO Standard 3160-
1, which requires a thickness of at least 5 microns of 14 karat gold 
for an item marked as gold plate.30 This standard also 
requires disclosure of the nominal thickness of gold coating in 
micrometers (microns).31 Both Japan Watch and the Swiss 
Federation argued that the lack of consistency with international 
standards limits access of U.S. consumers to products sold overseas, 
and adds to the costs of watches designed for the U.S. 
market.32
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    \29\ Comment 232, pp.26-27.
    \30\ Comment 216, p.4 and Annex 7.
    \31\ Note that the electroplate thickness standards differ both 
in terms of the micron thickness and the karat fineness of the gold 
used. The ISO standard of 5 microns of 14 karat gold would be 
equivalent to 7 microns of 10 karat gold. The U.S. Watch Council's 
proposal of 1 micron of 23 karat gold, discussed infra, would be 
equivalent to 1.64 microns of 14 karat gold or 2.3 microns of 10 
karat gold.
    \32\ Comment 216, p.1; Comment 232, p.24.
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    Other comments indicated that the current Guide's thickness 
standard is obsolete, because technology now permits a thinner yet 
durable layer of gold to be deposited electrolytically.33 
Benrus suggested a one micron standard for gold electroplate, based on 
use of that ``standard'' by a large segment of the watch industry and 
the fact that one micron or more of plating ``has substantial 
durability and reliability and gives years of satisfactory service.'' 
34 The U.S. Watch Council also asserted that the industry 
follows a basic standard of 1 micron of thickness (40 millionths of an 
inch of 23 karat gold) for gold electroplating.35 North 
American Watch stated that ``it is routine to apply a gold 
electrodeposit of more than 10 karat fineness with a thickness of, for 
example, 2 microns.'' 36
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    \33\ Benrus (22) p.2.
    \34\ Id. at 1-2. But see Newhouse (76) pp.2-3 (stating that 
electroplate surfaces are less durable than mechanically plated gold 
and recommending a minimum thickness of 20 microns).
    \35\ Comment 118, p.1.
    \36\ Comment 251, p.3. It opposed any minimum standard for the 
thickness of gold electroplate on watches, except when an 
affirmative representation of thickness, such as ``heavy gold 
electroplate,'' is made, but stated that the existing standard of 
1500 millionths of an inch for ``heavy gold electroplate'' is 
acceptable. Id. at 5.
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    The Commission believes that it is useful for the Guides to 
establish a ``safe harbor'' for the use of the term ``gold 
electroplate,'' but that the current 19 micron standard is far above 
what is necessary to prevent unfair and deceptive acts. It may also 
unnecessarily limit competition among gold electroplated watchcases and 
between gold electroplated watchcases and watchcases made of gold-
colored base metal. Lowering the minimum thickness would allow industry 
members who wish to comply with the Guides to describe their products 
accurately, by identifying as ``gold electroplate'' watches that have a 
coating of gold alloy less than 19 microns thick. Currently, the Guides 
provide that such watches may be identified only as base metal. The 
consumer has no way to distinguish them from watches that actually are 
made of base metal. The Watch Council argued that the ``consuming 
public

[[Page 33320]]

should be able to choose watches with better levels of 
electroplating.'' 37
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    \37\ Comment 118, p.1.
---------------------------------------------------------------------------

    Although lowering the minimum thickness required for gold 
electroplate would allow consumers greater choice of products, it also 
has the potential to increase incentives and opportunities for industry 
members to misrepresent the thickness of the gold electroplate of their 
products. The current Guides do not require, but merely allow, a 
disclosure of the actual fineness and thickness of the gold 
electrodeposit. The Commission recognizes that manufacturers and 
sellers of watches with thicker layers of gold electrodeposit are 
likely voluntarily to disclose the amount of gold electrodeposit to 
advertise a higher value or longer life for their products. 
Nonetheless, lowering the minimum thickness requirement from one with 
which the industry and consumers have had decades of experience 
dramatically broadens the range of products to which the term ``gold 
electroplate'' properly may be applied. The amount of gold 
electrodeposit necessary to provide lasting and effective service as a 
gold electroplated watch could vary considerably according to the 
expected life of the watch. Because a much broader range of products 
may be sold as gold electroplate if the Commission lowers the minimum 
thickness requirement, the Commission believes that manufacturers and 
sellers of watches with thinner coatings of gold electrodeposit would 
have an incentive not to disclose the actual thickness and actual karat 
fineness. The lack of such a disclosure is likely to cause substantial 
and unavoidable consumer injury by leading consumers to believe that 
all gold electroplate watches lacking such a disclosure are equally 
valuable and equally durable.
    Furthermore, none of the comments addressed what consumers expect 
to receive when they purchase a watchcase marked ``gold electroplate.'' 
Some consumers may expect they are getting a watchcase with a 
relatively thick, durable layer of gold electrodeposit, because the 
U.S. standard historically has been high. Established consumer 
expectations therefore weigh in favor of disclosing the actual 
thickness of gold electroplate, if the minimum thickness for use of the 
term gold electroplate is drastically lowered. It is likely that a 
significant number of reasonable consumers may assume that watches 
marked ``gold electroplate'' satisfy the same relatively thick standard 
of 19 microns of at least 10 karat gold that has been used for decades, 
unless they know the actual thickness and karat fineness.
    In addition, if the thickness and karat fineness of the gold 
electrodeposit are marked, consumers will be better able to comparison 
shop between watches with differing quantities of gold electrodeposit. 
Consumers who value more highly a thicker or finer layer of gold (or 
simply more total gold) will have the information that allows them to 
select the watch that best serves their particular needs. Consumers who 
are willing to accept a watch with a thinner or lower karat layer of 
gold in exchange for a lower price will be able to determine whether 
they are paying a price commensurate with the actual thickness and 
karat fineness of the gold electrodeposit. The Commission notes that 
the ISO standard for gold plate also requires disclosure of the actual 
minimum ``nominal thickness,'' a comparable concept.38 The 
Commission proposes that the revised Guides include a ``safe harbor'' 
for gold electroplate claims that include a statement of actual 
thickness and actual fineness, and solicits comment on this change, 
including whether ``nominal'' thickness would be preferable.
---------------------------------------------------------------------------

    \38\ As noted, the ISO standard specifies that karat fineness 
cannot be marked but that ``nominal thickness'' must be marked. For 
``gold plate'' (which, in the ISO standard includes electroplate), 
there must be a 14 karat minimum. Thus, the marking indicating 
``nominal thickness'' would be the same for a product that 
contained, e.g., 5 microns of 14 karat gold, as for a product that 
contained 3.5 microns of 20 karat gold.
---------------------------------------------------------------------------

    With regard to the inclusion of a minimum thickness in the ``safe 
harbor,'' the Commission finds persuasive the comments of NAW, Benrus, 
and the Watch Council indicating that electroplating of as little as 1 
or 2 microns of fine gold comports with industry practice and, due to 
technological advances in electroplating, is sufficient to render 
lasting and effective service for inexpensive watches intended to last 
only a couple of years. The ISO standard advocated by the Swiss 
Federation and Japan Watch appears overly restrictive in light of such 
advances. Nevertheless, the Commission solicits comment on whether the 
minimum thickness requirement in the ISO standard (5 microns of 14 
karat gold) is preferable to 1 micron of 23 karat gold.
    As Japan Watch pointed out, for a product marked ``gold plated,'' 
the ISO standard requires that the alloy be of at least 14 karat 
fineness.39 Section 245.3(f), however, requires a minimum of 
10 karat fineness. The Swiss Federation suggested lowering the minimum 
fineness requirement to 9 karats to conform with Swiss law and 
unspecified ``developments'' in the European Community.40 
Neither the JVC nor any other commenter advocated changing the existing 
minimum fineness requirement. Because there is insufficient information 
on the record to warrant departing from the existing minimum fineness 
standard, the Commission does not propose changing the 10 karat minimum 
fineness for gold electroplate.41
---------------------------------------------------------------------------

    \39\ JCWA (216) p.4.
    \40\ Comment 232, p.26.
    \41\ The 10 karat minimum standard has been used at least since 
1933 when it first appeared in Commercial Standard CS 67-38, 
promulgated by the then Bureau of Standards of the U.S. Department 
of Commerce. It was incorporated into the Trade Practice Rules for 
the Jewelry Industry, 16 CFR Part 23, in 1957. In 1977, the 
Commission proposed permitting sellers to market gold of less than 
10 karat and silver of less than 92.5% if the quality was accurately 
disclosed. This proposal was published for public comment. Over 1200 
comments were received, many from consumers, and over 98% of the 
comments opposed lowering the standard. The Commission found, based 
on articles and test reports, that articles of less than 10 karat 
fineness tend to tarnish and corrode. The Commission ultimately 
retained the 10 karat minimum fineness for gold and the 92.5% 
standard for silver. 42 FR 29,916, 29,917 (1977).
---------------------------------------------------------------------------

    Finally, the Commission proposes deleting the current requirements 
that the electroplated product pass the adhesion, hardness, and 
porosity tests described in the Appendix to the Watch Guides. None of 
the commenters suggested retaining these tests, and the Commission has 
concluded that these tests reflected industry practice in the 1960's, 
before current methods of gold electroplating existed and do not 
reflect current industry practice. In addition, the ISO standard for 
gold plate does not rely on any tests other than tests to confirm the 
minimum thickness and fineness.
b. Gold Plate
    The Watch Guides recognize only electrolytic and mechanical means 
of applying gold plate. Further, section 245.3(e) limits use of the 
term ``gold plate'' to watchcases to which a layer of gold has been 
mechanically applied to a thickness of at least one and one half one 
thousandths of an inch (37.5 microns). Such watchcases alternatively 
may be identified as ``rolled gold plate'' under the current section 
245.3(e).
    Citizen urged that use of the general term ``gold plate'' not be 
restricted to any particular method of applying gold covering, but 
rather be used to inform consumers that the article so designated has a 
surface covering of gold. 42 The

[[Page 33321]]

Commission agrees that the term gold plate should apply to both 
mechanically and electrolytically plated watches. As the ISO standard 
recognizes in its definition of gold plate, a gold plated covering may 
be achieved by electrolytic, chemical, or other means. The current 
Watch Guides may limit competition and consumer choice by preventing an 
industry member from describing its product as ``gold plate'' if it has 
a durable layer of gold coating applied by any means other than 
mechanical. Accordingly, the Commission proposes removing the term 
``gold plate'' from current section 245.3(e) and defining gold plate to 
cover any industry product to which a surface coating of gold has been 
applied by any method. The Commission seeks comment on this change.
---------------------------------------------------------------------------

    \42\ Comment 228, p.3. Citizen described a new method of 
applying gold covering, ``ion plating,'' and suggested that the 
Guides contain a provision regarding this new technique and the use 
of the term ``Gold Ion Plate.'' However, it offered no reason why 
there is a need to identify the specific method of plating, and no 
evidence that indicates that consumers care about the method by 
which gold coating is applied. According to the Commission's 
proposed revisions, discussed above, gold ion plated watchcases 
could be identified as ``gold plate'' or ``gold plated.''
---------------------------------------------------------------------------

    However, consumers are likely to expect a minimum level of 
durability from an item labeled ``gold plate.'' Accordingly, the 
Commission believes that the Guides should inform the industry of the 
conditions under which use of the term ``gold plate'' would not be 
deemed unfair or deceptive. The ISO Standard 3160 for gold plated 
watches requires a minimum thickness of 5 microns of 14 karat gold for 
gold plate regardless of the method by which it is applied. The 
Commission believes that the 5 micron ISO standard for gold plated 
watchcases provides a supportable safe harbor for application of a 
broader, inclusive gold plate designation for watchcases. However, for 
gold electroplated watchcases, the record evidence (as discussed above) 
supports an even lower, 1 micron of 23 karat gold, or its equivalent, 
safe harbor. 43 The Commission would not exclude from the 
broad ``gold plate'' category those gold electroplated watches that 
fall below the stricter ISO minimum thickness of 5 microns, but satisfy 
revised section 245.3's gold electroplate requirements. Accordingly, 
the Commission proposes a minimum safe harbor for application of the 
term ``gold plate'' if one of two conditions are met: (1) the plating 
meets the thickness requirements in revised section 245.3, for gold 
electroplate (i.e., a thickness equivalent to 1 micron of 23 karat gold 
for gold electroplate), 44 or (2) the watchcase has a gold 
coating at least 5 microns thick of 14 karat gold or the equivalent 
(i.e., it satisfies the ISO standard).
---------------------------------------------------------------------------

    \43\ As noted, no comments suggest changing the Watch Guides' 
current minimum thickness safe harbors for gold filled watchcases 
(three one-thousands of an inch or 75 microns) or rolled gold 
watchcases (one and one-half one thousands of an inch or 37.5 
microns).
    \44\ Thus, a product meeting the gold electroplate thickness 
requirement could be marked either ``gold electroplate'' or ``gold 
plate.''
---------------------------------------------------------------------------

    As proposed, the term ``gold plate'' would cover a broad range of 
watchcases with gold coatings that may vary considerably in thickness 
and durability. Accordingly, to ensure consumers are not deceived by 
the term ``gold plate,'' the Commission also proposes that the actual 
minimum thickness and fineness of the gold plating be disclosed in 
microns on the watchcase in close proximity to the mark identifying the 
watchcase as gold plate. (Because the ISO standard requires the marking 
of the ``nominal thickness,'' the Commission seeks comment on whether 
the ``nominal thickness'' or the actual karat fineness and thickness 
should be so disclosed.)
    Finally, the Commission proposes deleting current section 245.3(l), 
which states that if the plating is not of a sufficient thickness as to 
render lasting and effective service, there must be a disclosure of 
this fact on a tag, label, or other printed material which accompanies 
the watch. The Commission believes that the revised ``safe harbor'' 
provisions, discussed above, describe non-deceptive use of certain 
terms, such as ``gold plate'' and make this provision unnecessary.
c. Use of Terms ``Gold Flashed'' and ``Gold Washed''
    The JVC proposed adding a sentence to the definition of ``gold 
electroplate'' in section 245.3(f) to provide that ``[w]hen the gold 
electrodeposit is less than 75 millionths of an inch, and meets the 
minimum [10 karat] fineness, the case may be marked or described as 
`gold flashed' or `gold washed.' '' 45 The Watch Guides 
currently do not permit use of the term ``gold flashed'' or ``gold 
washed,'' although these terms are used for jewelry. 46
---------------------------------------------------------------------------

    \45\ JVC Petition, Sec. 23.25, Section III, (f).
    \46\ See current Guides for the Jewelry, Precious Metals, and 
Pewter Industries, 16 CFR 23.4(c)(4).
---------------------------------------------------------------------------

    Several commenters opposed the use of these terms for watches, for 
various reasons. 47 None of the comments indicated that 
members of the watch industry currently use the terms gold washed or 
gold flashed. Further, the Commission is not aware of any international 
standard for gold flashed or gold washed watches.
---------------------------------------------------------------------------

    \47\ Citizen (228) p.5; AWA (236) p.2 (stating that the terms 
gold flashed and gold washed suggest ``something impermanent and 
shoddy'' and that ``[d]ifferent technologies permit varying 
thicknesses of gold to produce the same effect--a durable covering 
of cold electroplate'').
---------------------------------------------------------------------------

    However, under the current Guides, manufacturers of watches that 
use gold electrodeposit in amounts too small to be able to identify the 
watches as ``gold electroplate'' are unable to inform consumers that 
the watch contains gold at all. The Commission's proposed revisions to 
the gold electroplate and gold plate provisions acknowledge the 
technological advances and allow manufacturers of watches with a 
thinner, yet durable coating of gold to indicate to consumers that the 
item is plated with gold. Under the proposal, industry members could 
apply the terms ``gold electroplate'' or ``gold plate'' to watchcases 
covered with gold alloy of at least 23 karat fineness to a thickness of 
at least 1 micron (40 millionths of an inch) or the equivalent (e.g., 2 
microns of 11.5 karat fineness). There is no evidence that surface 
deposits of gold alloy of less than 40 millionths of an inch are 
sufficient to render lasting and effective service during the life of 
the watch. Thus, the Commission has not included a provision regarding 
the use of the terms ``gold flashed'' or ``gold washed.''
3. Vermeil
    The JVC proposed a standard definition for a ``vermeil'' watchcase 
of a silver base coated with gold.48 The JVC's proposal 
states that a watchcase cannot be described as ``vermeil'' unless it 
has a sterling silver base, with a gold coating of at least \3/4\ of 
1,000th of an inch (approximately 19 microns) of 10K gold or better, 
applied either by mechanical bonding or electroplating. The FRN 
solicited comment on this proposal.
---------------------------------------------------------------------------

    \48\ JVC Petition, Sec. 23.25, Section III, (i).
---------------------------------------------------------------------------

    Most comments specifically addressing vermeil watchcases agreed 
with the JVC's proposed standard without stating any specific 
reasons.49 Other comments advocated adopting a vermeil 
standard, but did not indicate whether the JVC's proposal was the 
appropriate standard nor did they offer an alternative.50 
Other comments indicated that the JVC's vermeil standards for watches 
differed from the JVC's proposal for vermeil jewelry.51
---------------------------------------------------------------------------

    \49\ JMC (1) p.1; Fasnacht (4) p.1; Estate (23) p.1; Handy (62) 
p.1; Newhouse (76) p.3; MJSA (226) p.10; and AWA (236) p.2 
(endorsing the JVC's vermeil proposal because such watches ``are a 
distinct product and should be subject to specific standards'').
    \50\ Phillips (204); Leach (257) p.6.
    \51\ Canada (209) p.5 (advocating the same vermeil standard for 
both jewelry and watchcases, because the term would be better 
understood by consumers if used consistently); Citizen (228) p.3 
(stating that it did not object to a vermeil watchcases standards, 
but questioning why it should be significantly greater than the 
JVC's proposed vermeil jewelry standard); and Sheaffer (249) p.5 
(stating that the minimum vermeil standard should be the same for 
all entities).

---------------------------------------------------------------------------

[[Page 33322]]

    The inclusion of a definition of vermeil could help prevent 
deceptive uses of the term, to the extent that consumers expect or may 
come to expect that items sold as vermeil conform to industry usage of 
that term. The basic premise that it is deceptive to sell a product 
identified as having a specific metallic composition when it does not 
conform to consumer's expectations of characteristics associated with 
that term (e.g., quality and durability)--apply with equal force to 
vermeil.
    None of the comments, however, establish a need for a vermeil 
standard for watches. Only Japan Watch indicates that there is current 
production of vermeil watchcases, but it does not indicate that such 
watches are being sold in the United States. Accordingly, the 
Commission does not propose to include a vermeil standard, because 
there appears to be no need to do so to prevent consumer deception.
    4. Silver and Silver-Plated Watchcases
    Section 245.3(g) states that use of the terms ``silver,'' 
``sterling,'' or ``sterling silver'' is deceptive unless the watchcase 
contains at least 925 parts per thousand silver, and that use of the 
term ``coin silver'' is deceptive unless it contains 900 parts per 
thousand silver. Section 245.3(h) states that watchcases ``which have 
been plated or electroplated with silver should be marked as `silver 
plate' or `silver plated,' if after the completion of all finishing 
operations, such plating is of sufficient thickness to withstand normal 
use and last throughout the estimated life of the watch.''
    The JVC proposed adding the following sentence to this section: 
``The term `Sterling' shall not be applied in any manner to a silver-
plated watchcase.'' 52 This change merely states in the 
negative what is stated affirmatively in sections 245.3(g) and (h) of 
the current Watch Guides. These provisions are derived from the 
National Stamping Act, which states that silverplated articles shall 
not ``be stamped, branded, engraved or imprinted with the word 
`sterling' or the word `coin,' either alone or in conjunction with 
other words or marks.'' 15 U.S.C. 297(a). The Commission believes that 
the best way to convey this information is by a Note referencing this 
section of the National Stamping Act.
---------------------------------------------------------------------------

    \52\ JVC Petition, Sec. 23.25, Section III, (g)
---------------------------------------------------------------------------

5. Metallic Composition of Parts of Watchcases
    Section 245.3(k) specifies that watchcases composed of parts having 
different metallic compositions shall be marked as prescribed for 
watchcases, with an accompanying explanation of the part or parts to 
which such markings or descriptions apply, such as ``14 K Gold Filled 
Bezel.'' 53 Japan Watch advocated that only the metallic 
composition of ``major parts'' (that is, center, bezel and back) be 
disclosed.54 Although the Commission believes, as noted 
above, that it would probably not be unfair or deceptive to simply fail 
to mark a watch as to metallic composition, it might well be unfair and 
deceptive to mark part of a watch as, e.g., gold, when other parts are 
not gold but are similar to gold in appearance. Hence, in proposed 
Guide section 245.3(d), this section has been redrafted to state that 
if a watchcase is composed of parts having different metallic 
compositions, and has exposed surfaces that are or have the appearance 
of being metal, a mark placed on the product that indicates the 
metallic content of the product should be closely accompanied by an 
identification of the parts to which the mark applies. The Commission 
requests comment on this change.
---------------------------------------------------------------------------

    \53\ Current section 245.3(a) specifies that certain parts, such 
as springs, that are necessarily required to be of some base metal, 
may be excluded in determining the metallic content of a watchcases.
    \54\ Comment 216, p.3.
---------------------------------------------------------------------------

6. Location of Markings and Abbreviations: Section 245.3(m)
    Subsection (m) states that all markings of metallic composition 
should be of a permanent type placed on the exterior, exposed surface 
of the back of the watchcase. The metallic composition of a permanently 
attached watchband, however, may be disclosed either on the band or on 
the back of the watchcase. The JVC proposed no change, but the FRN 
solicited comment on the section.
    Nearly all comments that specifically addressed this issue 
supported retaining the current marking requirements.55 
Other comments indicated that the section prevents misrepresentations 
and lessens the chance that consumers receive 
misinformation.56 However, the National Stamping Act 
explicitly allows marking by means of a label or tag. Moreover, a 
marking could be satisfactory if it is somewhere other than on the 
back.57 The Commission proposes deleting the portion of 
subsection (m) that requires that a watch be permanently marked and 
that it be marked on the back.
---------------------------------------------------------------------------

    \55\ JMC (1) p.1; Fasnacht (4) p.2; Estate (23) p.2; G&B (30) 
p.10; Jabel (47) p.2; Handy (62) p.6; ArtCarved (155) p.6; Bales 
(156) p.11; IJA (192) p.5; Bedford (210) p.3; and Citizen (228) p.4. 
Canada (209) p.5 stated, without explanation, that ``this question 
deserves further review.''
    \56\ Sibbing's (5) p.2; Bridge (163) p.3 (stating that 
``[m]arking the acutal metal composition of each watch case on the 
watch case helps prevent misrepresentation'').
    \57\ See USWC (118) p.1 (favoring deletion of the requirement 
that required disclosures be made on the back of watchcases, stating 
out that casebacks may have ornamental designs, names or award 
engravings on them, or be the back side of a coin or medallion, or 
have transparent glass lenses).
---------------------------------------------------------------------------

    Subsection (m) also contains statements about the conspicuousness 
of markings that may be appropriate. In addition, subsection (m) states 
that certain abbreviations may be used (e.g., ``R.G.F.'' for rolled 
gold plate) but that the word ``electroplate'' may not be abbreviated. 
In the proposed Guides, these issues are addressed in subsections 
245.3(c)(2)-(5). The Commission proposes omitting the prohibition on 
abbreviating electroplate.
7. Misuse of Terms: Section 245.3(n)
    Section 245.3(n) of the current Guides provides that: ``The words 
`gold,' `karat,' `silver,' `sterling,' `coin,' or any abbreviation 
thereof either alone or in conjunction with other words such as 
`solid,' `plate,' `plated,' `filled,' `electroplate,' or 
`electroplated' or any abbreviation thereof should not be used as a 
marking or as descriptive of a watchcase or part thereof in labeling, 
advertising, trade names or otherwise in a manner inconsistent with the 
provisions of this section.'' This subsection could be read to make the 
use of the terms discussed in other subsections mandatory. As discussed 
above, the Commission proposes revising the Guides to set forth safe 
harbors (examples of marking and descriptions that would not be 
considered to be misleading) and recognizes that there may be other 
non-deceptive terms that could be used to describe an item. Because 
subsection (n) is unnecessary and provides no additional information to 
the reader, the Commission proposes deleting it.
8. Disclosures in Advertising: Section 245.3(o)
    Section 245.3(o) urges disclosure in advertising and promotional 
material of the information about metallic composition placed on 
industry products in conformity with section 245.3, when failure to 
make such a

[[Page 33323]]

disclosure would create the false impression that the product is of a 
certain metallic composition. However, current section 245.2 admonishes 
against misrepresentation in general, including misrepresentation as to 
``substance.'' Thus, the Commission proposes deleting it.

E. Misrepresentation as to Durability or Suitability: Section 245.4

    This section informs industry members that they should not 
misrepresent the characteristics of a product, its ability to resist or 
withstand damage from stated causes, or its suitability for a 
particular use, such as a chronometer or for skin diving. Although 
neither the JVC nor the commenters proposed changes to this section, 
commenters did propose changes to other sections that the Commission 
believes are best addressed in this section.
    As discussed supra, the Swiss Federation proposed the addition of a 
definition for ``chronometer'' based on the ISO standard, which would 
require industry members to test and obtain a certificate before 
describing a watch that keeps time with precision as a chronometer. No 
evidence has been brought to the Commission's attention indicating that 
consumers believe use of the word ``chronometer'' alone, without any 
reference to testing and certification, means that the device has been 
tested and certified. However, because section 245.4 prohibits 
misrepresentation of chronometers, the Commission has tentatively 
determined to take into account the international standard that exists 
for chronometers. Specifically, the Commission proposes including a 
Note to section 245.4 stating that conformity to the ISO definition 
constitutes a ``safe harbor'' for a claim that a watch is a 
chronometer. The Commission seeks comment on this change.
    AWI and Japan Watch asked the Commission to expand the Guides to 
include definitions and tests for divers' watches, and Japan Watch 
suggested the use of the ISO standard.58 The Commission is 
not aware of any consumer complaints that a watch sold as a diver's 
watch did not satisfy consumers' expectations of what a diver's watch 
is. However, because there is an ISO standard concerning divers' 
watches, the Commission seeks comment on adding a Note establishing the 
ISO standards for divers' watches as a ``safe harbor'' and seeks 
comment on this change. If such a note proves unnecessary, the 
Commission proposes consolidating section 245.4 into 245.2 
(Misrepresentation in general).
---------------------------------------------------------------------------

    \58\ AWI (116) p.1; JCWA (216) p.3. The ISO standard for divers' 
watches is ISO 6425--Divers' Watches.
---------------------------------------------------------------------------

F. Misrepresentation of Protective Features: Section 245.5

    Section 245.5(a) is repetitive of section 245.4 in that it cautions 
against misrepresenting the ability of a product to withstand or resist 
damage or other harmful effects from stated causes. However, it 
specifically states that a product should not be described as 
``shockproof,'' ``waterproof,'' ``nonmagnetic,'' or ``all proof.'' No 
comments objected to this provision, and therefore, the Commission has 
retained it in the proposed Guides. The Commission, however, seeks 
comment on whether this provision is necessary and desirable.
    Section 245.5(a) also states that products may be described as 
``shock resistant,'' ``water resistant,'' or ``antimagnetic'' if they 
withstand tests described in the appendix to the Watch Guides. The JVC 
proposed no changes to this section. The FRN solicited comment on 
whether the current definitions and tests for protective features of 
watchcases (e.g., water resistance, shock resistance) described in this 
section should be retained.
    Most commenters who addressed this issue favored retaining the 
current definitions and tests. 59 Two jewelry industry 
members suggested updating the tests, but did not explain how or why. 
60 Four watch industry commenters suggested revising one or 
more of the tests or definitions. 61 All of these commenters 
appeared to view the use of definitions and tests in the Guides as 
useful. The Swiss Federation noted that consumers cannot easily confirm 
that watches are water resistant, shock resistant, or anti-magnetic. 
62 The Swiss Federation and Japan Watch, however, 
recommended substituting ISO standards in some instances for those 
currently being used. The Commission agrees that industry is likely to 
need guidance with respect to what constitutes an adequate basis for 
claiming that a watch is water resistant, shock resistant, or anti-
magnetic, and that the creation of ``safe harbors'' for the non-
deceptive use of these terms is beneficial to industry and consumers.
---------------------------------------------------------------------------

    \59\ Benrus (22) p. 2; Citizen (228) p. 4 (stating that there is 
no evidence that watches meeting the current standards do not 
provide ``adequate performance'' and stating that the industry has 
responded to the market by selling and marking water resistant 
watches for specialized uses); AWA (236) p. 2 (stating that there is 
no evidence of consumer dissatisfaction with the standards, that the 
standards safeguard against problems arising under normal 
conditions, and that consumers requiring watches for special 
circumstances, such as diving, can purchase products marked for such 
purposes). Eleven members of the jewelry industry supported the 
existing definitions and tests, but did not explain why. JMC (1); 
Fasnacht (4); Sibbing's (5) (stating that the existing definitions 
and tests have worked well and there is no reason to change them); 
Estate (23); Jabel (47); Handy (62); McGee (112); ArtCarved (155) p. 
6 (supporting established, published standards in general); Bales 
(156); LaPrad (181); IJA (192); Leach (257).
    \60\ Bridge (163) p. 3; Bedford (210) p. 3.
    \61\ See discussion, below, regarding the comments of Swiss 
Federation, Timex, JCWA and AWI
    \62\ Comment 232, p. 5.
---------------------------------------------------------------------------

1. Water Resistance of Watches
    Section 245.5(a)(2) provides that the term ``water resistant'' may 
be applied to an industry product that is sufficiently impervious to 
water and moisture so as to insure that it will successfully withstand 
the test described in paragraph 4 of the appendix to the Watch Guides. 
That test requires that the watch being tested be immersed in water for 
specified periods at specified pressures and not admit any water or 
moisture.
    The Swiss Federation and Japan Watch recommended adopting the tests 
used in ISO Standard 2281-1990(E). 63 ISO Standard 2281 
provides two alternative sets of tests. One uses a water pressure test 
and involves immersion in water for specified periods at specified 
temperatures. The other uses an air pressure test.
---------------------------------------------------------------------------

    \63\ Swiss Federation (232) pp. 5, 21-22; JCWA (216) p. 3.
---------------------------------------------------------------------------

    Timex contended that the current water resistance test is outmoded 
and unduly burdensome. It advocated a test for water resistance that 
would expose watches to helium pressure equivalent to water pressure at 
15 pounds, but recommended considering the ISO standard as an 
alternative.64 AWI did not specifically reference the ISO 
test, but commented that the test for water resistance should allow for 
testing with new, waterless testers.65
---------------------------------------------------------------------------

    \64\ Comment 239, pp.6-7.
    \65\ Comment 116, p.1.
---------------------------------------------------------------------------

    Based on its comparison of the ISO standard and the existing test, 
the Commission is satisfied that both methods test whether pressure, to 
a level consistent with ordinary use of a water resistant watch, 
results in condensation or moisture inside the watch. Based on the 
widespread use of the ISO test, and its apparent compatibility with the 
purposes and measure of success of section 245.5's test for water 
resistance, the Commission proposes revising section 245.5 to identify 
safe harbors for use of the term ``water resistant'' for watches that 
satisfy either the current test or the requirements of ISO 2281.

[[Page 33324]]

    On the basis of the limited descriptions of the alternative tests 
proffered by Timex and AWI, the Commission is unable to evaluate 
whether such alternatives would satisfactorily measure water 
resistance.
2. Shock Resistant Watches
    Section 245.5(a)(1) and paragraph 3 of the appendix currently 
require that to be identified as ``shock resistant'' or ``shock 
absorbing,'' an industry product must be sufficiently resistant to 
shock to withstand certain shocks equivalent to being dropped from a 
height of three feet onto a horizontal hardwood surface without losing 
more than 60 seconds per day in timekeeping accuracy or damaging the 
physical condition of the product. Timex noted that the current test 
for shock resistance applies only to mechanical watches, and should be 
expanded to cover quartz watches.66 The Swiss Federation and 
Japan Watch advocated adopting the test for shock resistance used in 
ISO Standard 1413-1984(E).67 The ISO uses a test to simulate 
the shock received by a watch in falling one meter onto a horizontal 
hardwood surface. It requires that the residual effect on accuracy of 
quartz watches not exceed 2 seconds per day and that the residual 
effect on accuracy of all other watches not exceed 60 seconds per 
day.68 The Swiss Federation noted that the ISO's test for 
mechanical watches does not differ materially from the current Guides. 
The test for quartz watches, however, imposes a stricter timekeeping 
requirement than for mechanical watches.69
---------------------------------------------------------------------------

    \66\ Comment 239, pp.6-7.
    \67\ Swiss Federation (232) pp. 20-21; JCWA (216) p.3.
    \68\ Horology--Shock-resistant Watches, ISO Standard 1413-1984 
(E), para. 4.
    \69\ Comment 232, p.21.
---------------------------------------------------------------------------

    The Commission notes that quartz watches apparently are inherently 
more accurate than mechanical watches and therefore are held by the 
industry to a higher standard of minimum accuracy. Accordingly, 
consumers expect greater accuracy from inexpensive quartz watches than 
they do from inexpensive mechanical watches. Thus, the Commission 
proposes updating section 245.5's test to incorporate the ISO residual 
effect standards that are stricter for quartz watches than for watches 
with mechanical movements.
    The Commission also notes that the language used in the current 
Guide's test requires observations of a watch's daily timekeeping rate 
in language that is applicable only to watches with mechanical 
movements (i.e., the necessary observations are to be made ``one hour 
after the watch has been fully wound''). Because the test should be 
applied to all watches claimed to be ``shock resistant'' or ``shock 
absorbing,'' the Commission proposes revising the current test to 
provide that the necessary observations are made either one hour after 
a watch with a mechanical movement has been fully wound or at least two 
hours after a quartz watch has been functioning. This approach adopts 
the ISO standard's pre-test observations of accuracy for quartz 
watches.
    Because many watch industry members are familiar with and support 
retaining the current test, the Commission proposes identifying two 
alternative safe harbors for shock resistance: the current test, as 
updated to apply to quartz watches, and ISO Standard 1413-1984(E). 
Satisfying either of these tests would be a reasonable basis for claims 
of shock resistance.
3. Antimagnetic Watches
    Section 245.5(a)(3) and paragraph 5 of the appendix allow an 
industry product to be described as ``antimagnetic'' if it is designed 
and constructed to provide a substantial degree of protection against 
magnetism and will successfully withstand a test that places it in a 
particular electrical field under specified conditions without altering 
the daily rate of the watch by more than 15 seconds. The Swiss 
Federation and Japan Watch urged adoption of ISO Standard 764-1984(E) 
for antimagnetic watches.70
---------------------------------------------------------------------------

    \70\ Swiss Federation (232) pp.5, 23; JCWA (216) p.3. AWI (116) 
at p.1, supported the current definition and test.
---------------------------------------------------------------------------

    The ISO standard requires placing the watch in a magnetic field of 
a specified intensity generated by a particular apparatus for several 
minute long exposures.71 For mechanical watches, the 
residual effect must not exceed 30 to 45 seconds per day depending upon 
the size of the watch; for quartz watches, the residual effect must not 
exceed 1.5 seconds per day.72
---------------------------------------------------------------------------

    \71\ Horology--Antimagnetic Watches, ISO 764-1984(E), para. 5.
    \72\ Id., para. 4.1, 4.2
---------------------------------------------------------------------------

    As discussed above, quartz watches generally are expected to be 
more accurate than mechanical watches. The ISO standard, however, 
permits mechanical watches today to be less accurate following 
completion of the antimagnetism test than the test contained in the 
current Watch Guides. Mechanical watches manufactured today generally 
may not be as antimagnetic as mechanical watches manufactured thirty 
years ago, because different metals are used today. Thus, the ISO 
standard reflects current industry practice. Accordingly, the 
Commission proposes incorporating the ISO residual effects for quartz 
and mechanical watches into the current test and identifying both the 
revised test and the ISO standard as safe harbors for claims of 
antimagnetism.
4. Pre-Sale Explanations
    Section 245.5(b) states that when a watch described as ``shock 
resistant,'' ``water resistant,'' or ``antimagnetic'' is sold to the 
ultimate consumer, the description should be accompanied by a statement 
explaining the meaning of the term and the care and maintenance 
required. This statement should also be made on ``any point of sale 
material describing or referring to the watch having the designation in 
question and on a label or tag firmly affixed to the watch bearing the 
designation.'' Timex requested that the Commission revise this 
provision, arguing that it is ``clearly impractical'' in mass 
merchandising and that it is sufficient to provide the explanation, 
care, and maintenance statement in instruction booklets and 
catalogs.73
---------------------------------------------------------------------------

    \73\ Comment 239, p.11.
---------------------------------------------------------------------------

    The Commission has tentatively determined that this section is not 
necessary to prevent unfair or deceptive practices and thus, proposes 
deleting the provision. Comment is sought on this change.

G. Proposed ``Deception as to Movements'': Section 245.6

    Section 245.6, ``Deception as to jewels,'' advises industry members 
not to misrepresent the number of jewels contained in a watch, or that 
a watch is ``jeweled'' or contains a jeweled movement. Subpart (a) 
states that industry members should not describe a watch as ``jeweled'' 
unless the movement contains at least seven jewels, each of which 
protects against wear from friction by providing a mechanical contact 
with a moving point. Subpart (b) states that industry members should 
not refer to the number of jewels contained in a watch ``unless each 
and every one of these jewels'' protects against wear from friction by 
providing a mechanical contact with a moving point. Neither the JVC nor 
the commenters proposed changing section 245.6. The Commission proposes 
retaining these provisions.
    The Commission also proposes addressing in this section the JVC 
proposal regarding quartz watches. The JVC proposed that the Guides 
state that ``Industry members shall not misrepresent * * * the 
characterization

[[Page 33325]]

of a watch as a `quartz watch.' * * * [nor] describe a watch as a 
`quartz watch' unless a silicon oxide (`quartz') crystal contained in 
the watch serves the purpose of dividing time and regulating the time 
display by means of vibrations of such crystal caused by its placement 
into an electric field.'' \74\
---------------------------------------------------------------------------

    \74\ JVC Petition, Sec. 23.29.
---------------------------------------------------------------------------

    Both comments that specifically addressed this proposal stated that 
the Guides should cover quartz watches and endorsed the JVC's 
proposal.\75\ Several other comments indicated that the Watch Guides 
should be updated to reflect the existence of quartz watches, but did 
not specifically address the JVC's proposal concerning 
misrepresentation of quartz watches.\76\
---------------------------------------------------------------------------

    \75\ AWA (236) p. 2; Citizen (228) pp. 2, 5.
    \76\ Swiss Federation (232) pp. 21, 28-29; Timex (239) pp. 6, 8.
---------------------------------------------------------------------------

    The Commission believes the language suggested by the JVC would be 
helpful to the industry and to consumers by discouraging claims that 
watches with mechanical movements and containing some amount of quartz 
as a decorative feature are ``quartz watches.'' Both consumer 
expectations and commercial practice in the watch industry support 
limiting the description ``quartz watch'' to those watches that have 
quartz movements. Accordingly, the Commission proposes adding a new 
paragraph regarding quartz watches in section 245.6, and retitling the 
revised section ``Deception as to movements'' to reflect its broader 
applicability.

H. Misrepresentation of Accessories: Section 245.7

    Neither the JVC nor the commenters proposed changes to section 
245.7, which admonishes industry members not to misrepresent the 
composition, quality, or other material fact respecting watch 
accessories. Such accessories, as defined in section 245.1(c), are 
products, other than watch bands, that are affixed to and sold with 
watchcases or watches (e.g., bracelets, pins, or pendants). As 
discussed supra, the Commission proposes deleting the definition of 
``accessories,'' in section 245.1(c) of the current Guides, and 
expanding the definition of ``watchcase'' or ``case,'' in proposed 
Guides section 245.1(b), to include any permanently attached accessory. 
With this change, section 245.7 is unnecessary; section 245.3, which 
covers misrepresentation of metallic composition of watchcases, will 
cover all such permanently attached accessories. The Commission 
proposes deleting section 245.7, and adding a Note following the 
definition of ``watchcase'' that states, ``Detachable metallic watch 
bands and other accessories of the detachable type are subject to the 
provisions of the Guides for the Jewelry, Precious Metals, and Pewter 
Industries, 16 CFR Part 23.''

I. Deceptive Selling of Used, Rebuilt, or Secondhand Products: Section 
245.8

    Section 245.8 requires disclosure of the fact that an industry 
product or parts are not new, or are used, secondhand, rebuilt, 
repaired, or refurbished. The disclosure must be made in all product 
advertising, on the product or a label firmly affixed to the product, 
and on the immediate container in which the product is sold to the 
ultimate consumer. Although a disclosure of some type may indeed be 
necessary to prevent unfairness or deception, the Commission no longer 
believes that the disclosure is adequate only if it is on the product 
and on its immediate container. The Commission proposes modifying this 
provision to require simply that there be a disclosure, without 
specifying how it must be made. The Commission requests comment on this 
change.
    The JVC proposed adding a second paragraph to this section that 
would require the disclosure to all subsequent buyers of any alteration 
to a watch manufactured under a brand name or trade name. Such 
alterations would include modification, removal, or addition of any 
identifying trademark, name, number, or other information on any part 
of a trade name or brand name watch, as well as the ``unauthorized 
opening'' of a water resistant watch. The person making such an 
alteration would invalidate the existing warranty, become the new 
warrantor of the watch, and be required to identify whether the 
warranty is full or limited. The manufacturer or designer of a brand 
name or trade name watch would have the option of refusing to honor its 
original warranty, if it discovers that a watch presented to it for 
service has been so altered after the watch left the manufacturing 
facility.\77\
---------------------------------------------------------------------------

    \77\ JVC Petition, Sec. 23.31.
---------------------------------------------------------------------------

    The FRN sought comment on the JVC's proposal. Several comments from 
members of the jewelry industry supported the proposal with little or 
no explanation.\78\ One jeweler opposed changing section 245.8, but 
provided no reason.\79\ Other jewelry industry comments expressed 
qualified support for the JVC's proposal, but either opposed any 
provision that would invalidate a warranty by mere battery replacement 
or requested clarification as to the definition of ``unauthorized 
opening'' of a water resistant watch.\80\
---------------------------------------------------------------------------

    \78\ Sibbing's (5) p. 2 (particularly supported section dealing 
with alteration of the watch to avoid harming the reputation of 
brand name watches); Estate (23) p. 2; G&B (30) p. 10; Jabel (47) p. 
2 (``disclosure is a good thing''); Handy (62) p. 10; ArtCarved 
(155) p. 6 (both the consumer and the manufacturer need to be 
protected from a third party); Bridge (163) p. 3; Bedford (210) p. 3 
(noting that disclosure should also be made if a diving watch will 
no longer be useable as such); Leach (257) p. 6.
    \79\ Fasnacht (4) p. 1.
    \80\ Battery replacement: JMC (1) p. 1; Solid Gold (261) p. 3. 
Authorization: McGee (112) p. 5; IJA (192) p. 5.
---------------------------------------------------------------------------

    No watch industry commenter expressed support for the JVC's 
proposal in its entirety. Both Timex and Citizen opposed all of the 
JVC's proposed warranty provisions, arguing that such provisions 
conflict with the Magnuson Moss Warranty Act, 15 U.S.C. 2301 et 
seq.\81\ Timex pointed out that ``[t]he watch warranty may specify this 
limitation without need for establishing an industry standard.'' \82\
---------------------------------------------------------------------------

    \81\ Timex (239) pp. 8-9; Citizen (228) p. 4.
    \82\ Comment 239, p. 9.
---------------------------------------------------------------------------

    Several watch industry commenters strongly opposed the JVC's 
proposal that any person who opens a ``water resistant'' watch without 
authorization invalidates the warranty and becomes the warrantor. Three 
pointed out that any competent watch repairer should be able to replace 
a battery without being authorized by the manufacturer of the 
watch.\83\ AWI questioned whether the U.S. Customs Service's routine 
inspection for interior marks on watches would invalidate the 
manufacturer's warranty under the JVC's proposal.\84\ Similarly, the 
Swiss Federation submitted that the unauthorized opening of a water 
resistant watch is better provided for in the warranty itself, rather 
than by substituting the retailer for the warrantor.\85\
---------------------------------------------------------------------------

    \83\ Benrus (22) p. 1; USWC (118) p. 1; Citizen (228) p. 4.
    \84\ Comment 116, p. 1.
     \85\ Comment 232, p. 38.
---------------------------------------------------------------------------

    Only two watch industry commenters specifically addressed the 
aspects of the JVC's proposal pertaining to alteration of trademarks 
\86\ or brand names. Because section 245.9 of the Guides currently 
advises industry members not to imitate, simulate, obliterate, conceal, 
or remove trade names, tags, or other disclosures on watches under 
circumstances having the capacity and tendency to deceive the ultimate 
consumer as to the manufacturer's identity, the product's origin, or in 
any other material respect, the portion of the JVC proposal dealing 
with alteration of a trademark or tradename is discussed in more detail 
infra in conjunction with

[[Page 33326]]

section 245.9. The remaining parts of the JVC proposal are discussed 
below.
---------------------------------------------------------------------------

    \86\ Benrus (22) p. 1; Newhouse (76) p. 3.
---------------------------------------------------------------------------

Warranty Disclosure
    There is no information indicating that the JVC's proposed warranty 
provisions are needed to prevent unfair or deceptive acts or practices 
under section 5 of the FTC Act, or to lessen the burdens of existing 
regulation. The JVC's proposal essentially would require that consumers 
wishing to maintain the manufacturer's original warranty use only 
authorized dealers to repair brand name or trade name watches. This 
would limit competition for watch repair, including simple replacement 
of batteries. It also would conflict with the Magnuson-Moss Warranty 
Act's prohibition on tie-in sales provisions in warranties, unless the 
manufacturer offering the warranty sought and obtained a waiver.\87\
---------------------------------------------------------------------------

    \87\ See Magnuson-Moss Warranty Act--Federal Trade Commission 
Improvements Act, 15 U.S.C. 2302(c). It is possible, however, that a 
seller of a warranted watch could become a co-warrantor under 
Magnuson-Moss. Certain actions and representations may make sellers 
of warranted products co-warrantors under Magnuson-Moss, If under 
state law such a seller is deemed to have adopted any written 
affirmation of fact, promise, or undertaking with regard to a watch 
covered by a written warranty. 16 CFR 700.4.
---------------------------------------------------------------------------

    More narrowly drawn language could help the industry avoid 
practices that the Commission is likely to view as unfair and 
deceptive. In Zale Corp., 77 F.T.C. 1098 (1970), the Commission 
determined that representing a watch as guaranteed or under warranty is 
deceptive if the seller knows or has reason to know that the guarantee 
or warranty does not apply to the watch.\88\ The Commission believes 
that it would assist the watch industry in complying with section 5 of 
the FTC Act to include a specific warning in section 245.8 (revised 
section 245.7) that a seller should not mislead consumers into 
believing that a watch which has been altered, repaired, rebuilt, or 
refurbished is covered by the manufacturer's guarantee or warranty when 
the seller knows or has reason to know the watch is not guaranteed. The 
Commission solicits comment on this change.
---------------------------------------------------------------------------

    \88\ The Commission alleged, among other things, that the 
failure of a retail watch seller to disclose that the original watch 
movement had been removed from a particular manufacturer's watchbase 
misled purchasers into believing that the watch was the original, 
unaltered product of that manufacturer. The complaint also alleged 
that, as a result, many watch manufacturers did not honor their 
guarantees covering the original watches, and purchasers were misled 
into believing that the manufacturers would honor their guarantees.
---------------------------------------------------------------------------

Used Disclosures
    The Swiss Federation also proposed a revision of section 245.8--
i.e., it requested that the Commission define a ``used'' watch so that 
unscrupulous merchants do not make deceptive consumer sales.\89\ It 
proposed that the Guides provide that a purchaser may return a product 
to the original place of purchase within a specified number of days and 
the merchant may later resell it as new. Even products returned during 
this period, however, may not be resold as ``new'' if they bear obvious 
signs of wear.\90\ A watch would be ``used'' when it is sold under 
conditions that begin the running of the manufacturer's warranty, i.e., 
to unauthorized retailers posing as consumers, or when it is returned 
after the specified number of days. The Swiss Federation warned that 
watches sold or returned under these conditions ``are often modified, 
damaged, or otherwise presented for resale under circumstances that 
facilitate consumer deception.'' \91\
---------------------------------------------------------------------------

    \89\ Comment 232, pp.5, 31.
    \90\ Id. at 30.
    \91\ Id.
---------------------------------------------------------------------------

    AWA proposed an amendment to section 245.8, which is nearly 
identical to that suggested by the Swiss Federation,\92\ and which 
states in part:
---------------------------------------------------------------------------

    \92\ Comment 236, p.4. The only substantive differences between 
the Swiss Federation did not specify the number of days during which 
a watch must be returned to the retail seller to be resold as new, 
and the Swiss Federation would add language stating that ``this 
return exception will not apply, and the watch will be deemed as 
used, if it bears obvious signs of wear.'' Comment 232, p.31. The 
Swiss Federation noted that some states have statutes ``controlling 
this question.'' Id. at 30 n.16.
---------------------------------------------------------------------------

    A watch or any part thereof is used or secondhand:
    (a) At any time after
    (i) Its original sale or transfer to a purchaser by a retail 
seller, or
    (ii) Immediately after any sale or transfer that initiates the 
running of a manufacturer's warranty, unless the purchaser or 
transferee returns the watch to the same retail seller in new and 
unused condition within 15 days from the date of sale or transfer to 
such purchaser or transferee.
    (b) Immediately after any sale or transfer that voids a 
manufacturer's warranty;
    (c) If its case, movement or serial numbers, or other 
distinguishing numbers or identification marks or trade names or trade 
marks have been erased, defaced, removed or altered;
    (d) If any serial numbers, identification marks, trade names or 
trade marks have been concealed under circumstances having the capacity 
or tendency of deceiving the ultimate consumer as to the identity of 
the manufacturer, origin of the product, or in any other material 
respect;
    (e) if it is rebuilt, repaired, refinished or reconditioned, or 
contains parts that are used, secondhand, replaced, rebuilt, repaired, 
refinished, or reconditioned, whether such rebuilding, replacing, 
repairing, refinishing or reconditioning has been done by the retail 
seller or another person.\93\
---------------------------------------------------------------------------

    \93\ Comment 236, p.6.
---------------------------------------------------------------------------

    Citizen opposed AWA's proposed definition of ``used or secondhand'' 
as arbitrarily specifying a 15 day return period. ``Specifying any 
return period would impose an impossible burden on retailers and would 
result in the FTC's obligation to micro manage their return policies.'' 
\94\ Further, to the extent that a sale or transfer voiding a 
manufacturer's warranty, or the alteration or concealment of serial 
numbers, should be considered ``unfair,'' they should be addressed 
separately, not deemed to render a product ``used'' or ``secondhand.'' 
\95\
---------------------------------------------------------------------------

    \94\ Comment 228, p.6.
    \95\ Id.
---------------------------------------------------------------------------

    The Commission believes that the proposed revisions to current 
section 245.8 (now 245.7) (i.e., advising against misleading consumers 
as to the coverage of the manufacturer's warranty) adequately address 
most of the concerns expressed by the Swiss Federation and the AWA, 
without placing unnecessary burdens on the industry. That portion of 
their proposals that deals with removal of trade names or other 
identification marks is discussed below.

J. Deceptive Imitation, Obliteration, or Concealment of Names, 
Trademarks, or Marks: Section 245.9

    Current section 245.9 advises industry members not to imitate or 
simulate competitors' tradenames or trademarks, and not to obliterate, 
conceal, or destroy any disclosures on watch products or their 
containers under circumstances that would tend to deceive ultimate 
consumers as to the manufacturer, the country of origin, or in any 
other material respect.
    The JVC proposed no changes to section 245.9. However, as noted 
above in the discussion of section 245.8, it did propose an addition to 
section 245.8 that would require the disclosure to all subsequent 
buyers of any alteration to a watch manufactured under a brand name or 
trade name, including modification, removal, or addition of any 
identifying trademark, name, number, or other information on any part 
of such a watch. Benrus and Newhouse supported this proposal.\96\

[[Page 33327]]

Citizen commented that the JVC's proposed disclosures would be 
unworkable, pointing out that the premium and award incentive 
industries frequently add their clients' trademarks to industry 
products and importers frequently add stones to watches that are 
imported with empty settings.\97\
---------------------------------------------------------------------------

    \96\ Benrus (22) p.1 (stating that alteration of a trade name 
should not be permitted, nor alteration of a brand name to deceive 
the purchaser); Newhouse (76) p.3 (stating, without explanation, 
that alteration of a brand name should be considered counterfeiting 
under the Guides).
    \97\ Comment 228, p.4 (stating also that even the addition of a 
label or tag for inventory purposes might be an alteration subject 
to disclosure under the JVC's proposal).
---------------------------------------------------------------------------

    Several commenters suggested that the Commission add counterfeiting 
to section 245.9's list of prohibited activities, proscribe both 
advertising and trafficking in counterfeit watches, and incorporate by 
reference the language of the 1984 Trademark Counterfeiting Act, 18 
U.S.C. 2320.\98\ Citizen commented that the existing prohibition 
against the imitation or simulation of trademarks of competitors ``* * 
* under circumstances having the capacity and tendency of deceiving the 
ultimate consumer'' conflicts with the Lanham Act and the 1984 
Trademark Counterfeiting Act.\99\
---------------------------------------------------------------------------

    \98\ AWA (236) pp.5-6; Swiss Federation (232) p.5, p.33; Citizen 
(228) p.6.
    \99\ Comment 228, p.2. Citizen further contended that section 
245.9 implies, in conflict with trademark law, that it would be 
acceptable to imitate or simulate a trademark if disclosure is made. 
Id. This interpretation is not supported by the text of section 
245.9.
---------------------------------------------------------------------------

    The comments correctly note that, unlike the FTC Act, the 1984 
Trademark Counterfeiting Act defines ``traffic'' within the context of 
defining a federal criminal offense that may occur simply by obtaining 
control of goods or services bearing a counterfeit mark with intent to 
transport, transfer, or dispose of such items as consideration for 
anything of value.\100\ Thus, the 1984 Trademark Counterfeiting Act has 
made many of the activities described in section 245.9 of the Guides 
criminal.\101\ Moreover, the Anticounterfeiting Consumer Protection Act 
of 1996, Public Law No 104-153 (1996), recently strengthened the 
provisions of the 1984 Trademark Counterfeiting Act. In addition, 
although not all ``passing off'' might be defined as counterfeiting, 
private remedies for these actions exist under the Lanham Act, 15 
U.S.C. 1051.\102\
---------------------------------------------------------------------------

    \100\ 18 U.S.C. 2320.
    \101\ Id.
    \102\ In particular, section 43(a) of the Lanham Act, 15 U.S.C. 
1125(a)(1), provides a civil remedy when a person uses in commence 
``any word, term, name, symbol, or device, or any combination 
thereof, or any false designation of origin, false or misleading 
description of fact, or false or misleading representation of fact, 
which (A) is likely to cause confusion, or to cause mistake, or to 
deceive as to the affiliation, connection, or association of such 
person with another person, or as to the origin, sponsorship, or 
approval of his or her goods, services, or commercial activities by 
another person.''
---------------------------------------------------------------------------

    Guides, as stated in 16 CFR Part 17, are ``administrative 
interpretations of laws administered by the Commission for the guidance 
of the public in conducting its affairs in conformity with legal 
requirements.'' They are meant to ``provide the basis for voluntary and 
simultaneous abandonment of unlawful practices by members of the 
industry.'' Id. The actions described in section 245.9 are illegal 
under criminal and civil statutes other than section 5 of the Federal 
Trade Commission Act. Moreover, persons engaging in these actions in 
spite of the criminal and civil statutes prohibiting them are not 
likely to voluntarily abandon these practices because the Guides state 
that they are also illegal under section 5 of Federal Trade Commission 
Act. Therefore the Commission believes that it may be unnecessary to 
continue to advise the watch industry that the activities described in 
section 245.9 of the Guides are illegal under section 5 of the Federal 
Trade Commission Act. The Commission proposes deleting section 245.9 
from the Guides, and seeks comment on this change.

K. Disclosure of Foreign Origin: Section 245.10

    Section 245.10 advises, in subsection (a), that watches with 
movements or movement parts of foreign origin should not be offered for 
sale or sold without a clear and conspicuous disclosure of the country 
(or countries) of origin of the movement. This section further 
specifies that the country of origin of the movement depends upon two 
factors: (1) Where the movement is assembled and (2) the origin of the 
parts used in assembling the movement. Under section 245.10(b)(1), if 
the movement is assembled in the same foreign country in which movement 
parts constituting 50% or more of the cost to the assembler of all the 
parts of the movement have been manufactured, the name of that country 
alone may be used to designate the origin (e.g., ``Swiss Made''). Under 
section 245.10(b)(2), if movement parts constituting 50% or more of the 
cost to the assembler of all the parts of the movement have been 
manufactured in a single country different from the country in which 
the movement is assembled, the names of both countries, and no other 
country, are used to designate the country of origin of the movement 
(e.g., ``Assembled in France from Swiss parts''). Under section 
245.10(b)(3), if the movement is assembled in one country, but movement 
parts constituting 50% or more of the cost to the assembler of all the 
parts of the movement have not been manufactured in a single other 
country, only the name of the country of assembly is to be used, with a 
disclosure that the parts are partially foreign, imported or domestic, 
as the case may be (e.g., ``Movement assembled in the United States 
from domestic and imported parts'').
    The JVC did not propose any changes in this section. However, based 
on the comments, changes in international trade, and consumer awareness 
of changes in the marketplace since the Guides were promulgated, the 
Commission believes that it is no longer necessary to continue to 
retain Section 245.10 or to otherwise address origin issues in the 
Guides. Section 245.2 of the Guides, however, will continue to advise 
that misrepresentation of country of origin is unfair and deceptive.
    In the past, failure to disclose foreign origin has been found to 
violate section 5 of the FTC Act. Commission cases have held that 
consumers generally expect to see country of origin marks on imported 
goods (because section 304 of the Tariff Act of 1930, 19 U.S.C. 1304, 
has required such marks on goods entering the country for many years), 
and that consumers assume a product without such marking was 
manufactured in the United States. Commission cases finding that a 
substantial number of consumers interpret the absence of country of 
origin marking to mean that a product was made in the U.S. are based on 
evidence of consumer perceptions in the 1960s or earlier.
    In Manco Watch Strap Co., 60 F.T.C. 495, 514-515 (1962), the 
Commission created a rebuttable presumption that the absence of a 
country of origin label would lead consumers to believe the item was 
made in the United States. In the Commission's reexamination of its 
Made in USA policy, the Commission sought comment on whether this 
presumption continues to be valid. 61 FR 18600 (Apr. 26, 1996). The 
Commission found that ``manufacturing and the sourcing of components 
have become increasingly global in nature, and that consumers appear to 
be increasingly aware that goods they buy are produced throughout the 
world.'' 62 FR 25020, 25046 (May 7, 1997). The Commission determined 
that it is no longer appropriate to retain this presumption, and stated 
that disclosure of foreign origin on unmarked goods is required ``only 
if there is some evidence that, with respect to the particular type of 
product at issue, a significant

[[Page 33328]]

minority of consumers views country of origin as material and believes 
that the goods in question, when unlabeled, are domestic.'' 62 FR 
25020, 25047.
    With respect to watches, the evidence indicates that the country of 
origin of a watch is still a material claim for many consumers.\103\ 
However, it is not certain that today a significant number of consumers 
acting reasonably would believe that a watch without country of origin 
marking is of U.S. origin. Although some watches are assembled in the 
United States from imported parts, virtually no watches are made in the 
United States with domestic parts.\104\ Consequently, it may not be 
reasonable for consumers to assume that unmarked watches are domestic, 
and it may not be deceptive for a seller to fail to mark a watch with 
its country of origin.\105\
---------------------------------------------------------------------------

    \103\ A recent survey submitted by the Swiss Federation found 
that about 49% of the respondents considered the country of origin 
of a watch either ``very important'' or ``somewhat important.'' 
Comment 232, p. 12, Exhibit 4.
    \104\ Swiss Federation (232) p. 7 n. 4. Several comments 
addressed the issue of whether watches assembled in U.S. possessions 
could be marked ``Made in USA.'' Citizen (228) p. 6; Swiss 
Federation (232) Exhibit 5, pp. 4-5. Section 245.10(a)(4) of the 
Watch Guides defines ``United States'' to include the states, the 
District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, 
and American Samoa. As noted above, the Commission proposes deleting 
Sec. 245.10 entirely. With respect to ``Made in USA'' claims, the 
Commission is examining its standard for such claims, and has 
proposed guides addressing such claims, in a separate proceeding. 
(See 62 FR 25020, May 7, 1997). The Commission's proposed Guides for 
the Use of U.S. Origin Claims apply (with certain, specified 
exceptions) to all products, including watches, and thus, eliminate 
the need for the Watch Guides to contain separate admonitions as to 
the use of ``Made in USA.'' 62 FR 25020, 25047 (May 7, 1997).
    \105\ Commission cases have long recognized that, for some 
products, disclosure of foreign origin is not required. L. Heller & 
Son, Inc., 47 F.T.C. 34 (1950), aff'd, 191 F.2d 954 (7th Cir. 1951) 
(finding that the public interest does not require disclosure of the 
origin of a foreign product of a type not produced in the United 
States, such as cultured pearls, natural pearls, or diamonds).
---------------------------------------------------------------------------

    Nevertheless, because of Customs regulations, all watches imported 
into the United States are required to contain marks indicating country 
of origin. The current Guides require the disclosure of more 
information than is required by Customs--i.e., the origin of the parts 
of the movement.\106\ (Both Customs and the Guides regard the movement 
as the ``guts'' of the watch, but Customs does not require disclosure 
of the origin of the parts of the movement; rather, it requires 
disclosure of the country of assembly of the movement.\107\) However, 
in the interest of harmonization of foreign origin markings generally 
and because country of origin of movement parts may no longer be 
material to consumer purchasing decisions, the Commission has 
tentatively determined that the Watch Guides should not require 
disclosure of the origin of movement parts.\108\
---------------------------------------------------------------------------

    \106\ Customs regulations relating to country of origin emanate 
primarily from section 304 of the Tariff Act of 1930 (``Tariff 
Act''), as amended, 19 U.S.C. 1304. The Tariff Act of 1930, as 
amended, and Customs' implementing regulations provide that every 
article of ``foreign origin,'' or its container, imported into the 
U.S. must be marked in a conspicuous place with the name of the 
country of origin of the article.
    \107\ Three commenters [Citizen (228) p. 2; Swiss Federation 
(232) p. 17; Timex (239) pp. 5-6] stated that the current Guides' 
country of origin provisions conflict with Customs' marking 
requirements and urged that they be harmonized. With the exception 
of the use of the word ``assembled,'' which Customs does not 
generally view as sufficient to indicate the country of origin [see 
HQ 735251 (Oct. 7, 1993), 1993 U.S. CUSTOMS HQ LEXIS 1144], it 
appears that Customs' and FTC country of origin marking requirements 
for watches already are consistent, albeit not identical. Except for 
watches that are assembled abroad of U.S. origin parts, Customs has 
not viewed the term ``assembled in'' as sufficient to indicate the 
country of origin. Id. Generally, watches can be marked ``Made in,'' 
``Product of,'' just with the name of the country of origin, or with 
the word ``Movement'' or the abbreviation ``MVT'' with the name of 
the country of origin. Id.; HQ 734758 (Mar. 1, 1993). However, in 
the Federal Register notice of June 6, 1996, Customs announced that 
it was modifying 19 CFR 134.43 to provide, in section (e) Assembled 
articles, that, where the country of origin of an article is 
determined to be the country where the article was finally 
assembled, the article may be marked as follows: ``(1) Assembled in 
(country of final assembly); (2) Assembled in (country of final 
assembly) from components of (name of country or countries of origin 
of all components); or (3) Made in, or product of, (country of final 
assembly).''
    \108\ Timex (239) stated, at p. 6, that the ``the origin of 
parts no longer has any meaning to consumers since the introduction 
of quartz technology and precision timekeeping. Now a $10 quartz 
watch will keep as good or better time than the most expensive 
watch.''
---------------------------------------------------------------------------

    Finally, the Swiss Federation objected to certain markings 
currently allowed by Customs and by the Guides and submitted survey 
evidence suggesting that these marks may sometimes be misleading 
because they imply incorrectly that a watch was encased and inspected 
in the named country. It recommended that use of the unqualified name 
of a country and use of the name of a country with the word ``Made'' be 
reserved for watches that contain movements manufactured in the 
specified country and that are completed (i.e., encased and inspected) 
in the same country. It argued that the origin of a finished watch, 
rather than the origin of the movement alone, significantly influences 
consumers' purchasing decisions.\109\ The survey evidence it cited 
showed that U.S. consumers would prefer to buy a watch manufactured in 
Switzerland, rather than in France, Hong Kong or Japan.\110\ It also 
showed that 14% of the respondents were ``very confident'' and 39% were 
``somewhat confident'' that if ``Swiss'' appears on a watch's face, the 
complete watch was manufactured in Switzerland.'' \111\
---------------------------------------------------------------------------

    \109\ Comment 232, p.10.
    \110\ Id. at 12, citing Exhibit 4, The Gallup Organization, 
Country of Origin as a Consideration in the Purchase of Watches 
(July 1992), p.5. The survey was commissioned by the Swiss 
Federation. It presented a choice among only the four countries 
named in the text.
    \111\ Id., Exhibit 4, pp.3,7.
---------------------------------------------------------------------------

    The Swiss Federation also contended that, due to advances in 
manufacturing technology, widespread use of lower cost quartz 
movements, and the availability of special features of watches, the 
movement now represents a significantly lower proportion of the 
finished watch's value. ``In addition, technological advances in the 
quality and type of movement require greater testing and final 
inspection after assembly of the movement.'' \112\ Moreover, it alleged 
that special features make encasing and subsequent testing more 
important, noting, e.g., that the accuracy of a chronometer or a water 
resistant watch cannot be assured until a watch is encased.\113\
---------------------------------------------------------------------------

    \112\ Swiss Federation (232) p.8.
    \113\ Id.
---------------------------------------------------------------------------

    However, the Tariff Act only requires that products entering the 
United States be marked with one country of origin. Moreover, because 
there is currently an international attempt to harmonize Customs rules 
of origin, the Commission has tentatively determined not to issue new 
guidelines that vary from requirements already imposed by Customs for 
foreign-origin markings.\114\ As necessary, the Commission can address 
this issue in the case-by-case context of specific products and claims, 
weighed against other factors, rather than giving general guidance in 
the

[[Page 33329]]

Watch Guides.\115\ Further, to the extent that competitors believe that 
the origin of processes other than the ones Customs considers in making 
its determination are truly important, they can use comparative 
advertising to tout how their products may be unique; for example, 
``Entirely Swiss Made,'' whereas other products have only Swiss-made 
movements.
---------------------------------------------------------------------------

    \114\ On April 7, 1995 at 60 FR 19605, the United States 
International Trade Commission announced an investigation and a 
request for public comment entitled ``International Harmonization of 
Customs Rules of Origin.'' The notice stated, ``The investigation is 
intended to provide the basis for Commission participation in work 
pertaining to the Uruguay Round Agreement on Rules of Origin (ARO) * 
* * adopted along with the Agreement Establishing the World Trade 
Organization (WTO). The ARO is aimed at obtaining the harmonization 
and clarification of nonpreferential rules of origin for goods in 
trade on the basis of the substantial transformation test; at 
achieving discipline in the rules' administration; and at providing 
a framework for notification, review, consultation, and dispute 
settlement. These harmonized rules are intended to make country-of-
origin determinations impartial, predictable, transparent, 
consistent, and neutral, and to avoid restrictive or distortive 
effects on international trade.'' Id. The notice noted that there 
will be subsequent notices inviting comments on ``draft U.S. 
proposals on the rules, which generally will be issued on a product 
sector basis * * *.'' Id.
    \115\ Section 245.2 of the Guides will continue to advise that 
misrepresentation of country of origin is unfair and deceptive.
---------------------------------------------------------------------------

    The Commission therefore proposes deleting section 245.10 entirely, 
and seeks comment on this proposal.

L. Proposed Deletion of Sections 245.11-245.16

    The JVC omitted from its proposal current sections 245.11 through 
245.16. Each of these sections is of general applicability and some of 
them correspond to a broader, non-industry specific guide or rule.\116\ 
For the most part, the comments did not address the deletions proposed 
by the JVC.
---------------------------------------------------------------------------

    \116\ Section 245.11 addresses deceptive pricing. Section 245.12 
covers commercial bribery, which is addressed by the Robinson-Patman 
Act. Section 245.13 covers ``Coercing purchase of one product as a 
prerequisite to the purchase of other products.'' Section 245.14 
addresses ``Misrepresentation of the character and size of business, 
extent of testing, etc.'' Section 245.15 covers ``Guarantees, 
warranties, etc.'' Section 245.16 governs ``Use of the word 
`free'.''
---------------------------------------------------------------------------

    Neither the Watch Council nor AWI specifically addressed any 
proposed deletions, but both recommended rejecting the JVC's petition 
and retaining the current Guides.\117\ Citizen supported the first two 
parts of a proposal made by AWA to revise section 245.15, discussed 
below, but otherwise recommended retaining sections 245.11 through 
245.16 in their present form.\118\ AWA supported deleting sections 
245.11 through 245.13, because they proscribed practices not particular 
to the watch industry and barred by statute.\119\
---------------------------------------------------------------------------

    \117\ USWC (118) p.1; AWI (116) p.1.
    \118\ Comment 228, p.5.
    \119\ Comment 236, p.3.
---------------------------------------------------------------------------

    AWA, however, proposed retaining a revised version of section 
245.15, ``Guarantees, warranties, etc.'' AWA recommended that section 
245.15 not delineate precise elements of warranty disclosures or 
warrantors' duties. Instead, it proposed substituting three paragraphs 
for current section 245.15 that would: (1) prohibit representations 
that an industry product is covered by a guarantee or warranty unless 
it is in fact covered by one that fully complies with all applicable 
state and federal laws; (2) prohibit representations that an industry 
product is covered by a ``full'' or ``limited'' written warranty unless 
it is covered by the specified type of warranty that fully complies 
with the Magnuson-Moss Warranty Act or any successor legislation, as 
well as with any other applicable state or federal laws; and (3) 
require an industry member that performs unauthorized alteration or 
repair services on an industry product to fully and nondeceptively 
disclose that any damage arising from such unauthorized alteration or 
repair services may not be covered by any applicable warranty.\120\ AWA 
argued that the failure of persons repairing or altering a watch from 
its original condition to notify consumers that damage caused in the 
process of unauthorized alterations or repairs might not be covered by 
any applicable warranty ``has the potential to mislead consumers.'' 
\121\ It proposed extending the definition of ``industry member'' to 
any person that performs alterations or repair services on industry 
products, whether or not such alterations or repair services involve 
the sale of an industry product.\122\
---------------------------------------------------------------------------

    \120\ Id. at 3-4.
    \121\ Id. at 3.
    \122\ Id.
---------------------------------------------------------------------------

    The Commission believes that AWA's concerns about watch repair and 
alteration are adequately addressed by revised section 245.8 (now 
section 245.7), which advises watch sellers against misleading 
consumers with regard to the coverage of a manufacturer's guarantee or 
warranty.\123\ The Commission also has concluded that it is unnecessary 
to include in the Guides the remaining aspects of AWA's proposal 
because they address practices not particular to watch industry 
products. Accordingly, the Commission proposes deleting sections 245.11 
through 245.16.
---------------------------------------------------------------------------

    \123\ See discussion above.
---------------------------------------------------------------------------

III. Request for Comment

    The Commission seeks public comment on the Watch Guides as a whole, 
and all of the proposed changes discussed above. The Commission also 
requests comment on the following specific questions:
    1. Is there a continuing need for Guides for the Watch Industry?
    (a) What benefits would the proposed revised Guides for the Watch 
Industry provide to purchasers?
    (b) Would the proposed revised Guides impose costs on purchasers?
    (c) Do international standards provide sufficient guidance to the 
watch industry?
    (d) Are industry self-regulation and ``market mechanisms,'' such as 
manufacturer reputation or manufacturer warranties, sufficient to 
protect consumers from misrepresentations regarding watches?
    2. What changes, if any, should be made to the proposed revised 
Guides to increase the benefits of the Guides to purchasers?
    (a) How would these changes affect the costs the proposed revised 
Guides may impose on firms subject to their admonitions?
    3. What significant burdens or costs, including costs of 
compliance, would the proposed revised Guides impose on firms subject 
to their admonitions?
    (a) Would the proposed revised Guides provide benefits to such 
firms?
    4. What changes, if any, should be made to the proposed revised 
Guides to reduce the burdens or costs imposed on firms subject to their 
admonitions?
    (a) How would these changes affect the benefits provided by the 
Guides?
    5. Do the proposed revised Guides overlap or conflict with other 
federal, state, or local laws or regulations?
    6. Since comment was sought on the existing Watch Guides in 1992, 
what effects, if any, have changes in relevant technology or economic 
conditions had on the provisions of the Guides?
    7. Should detachable accessories to watchcases be covered by the 
Watch Guides? If so, why?
    8. Should the Guides advise that watchcases be marked to indicate 
their metallic content? If so, why?
    9. Should the provisions specifying a minimum thickness for 
``rolled gold'' be changed to conform with ISO standard 3160-1?
    10. Is the tolerance for plating thickness, in paragraph 1 of the 
Appendix, necessary? If so, why?
    11. Should the Guides admonish against the disclosure of karat 
fineness for gold electroplated products in accordance with ISO 
standard 3160-1?
    12. Should the Guides advise the disclosure of the actual thickness 
and karat fineness of gold electroplate? Is a disclosure of the 
``nominal thickness'' of the electroplate, as required by ISO standard 
3160-1, preferable?
    13. Is the proposed safe harbor for gold electroplate 
representations (1 micron of 23K gold) preferable to ISO standard 3160-
1 (5 microns of 14K gold)? If so, does 1 micron of 23 karat gold 
provide a durable coating, sufficient to render lasting and effective 
service?
    14. Should the term ``gold plate'' be used to describe a watchcase 
with a gold coating, regardless of the method of application of the 
coating? For gold plated items, should the Guides advise the disclosure 
of the actual thickness and karat fineness of the plating? Is a

[[Page 33330]]

disclosure of the ``nominal thickness'' of the plating, as required by 
ISO standard 3160-1, preferable?
    15. Is proposed section 245.3(d) adequate to prevent the deceptive 
marking of a watchcase composed of more than one metal?
    16. Should the Commission add a Note to the Guides which states 
that ``Representations that a watch is a chronometer are not considered 
unfair or deceptive if the watch meets the definition of chronometer in 
ISO standard 3159?''
    17. Should the Commission add a Note to the Guides which states 
that ``Representations that a watch is a diver's watch are not 
considered unfair or deceptive if the watch meets the definition of a 
diver's watch in ISO standard 6425?''
    18. Is section 245.5(a)'s admonition against the use of the terms 
``shockproof,'' ``waterproof,'' ``nonmagnetic,'' or ``all proof'' 
justified? Explain.
    19. Should the Guides advise the disclosure of the care 
requirements for protective features of a watch? If so, how should that 
disclosure be made?
    20. Should the Guides advise the manner in which the disclosure 
that a product or its parts are not new, or are used, secondhand, 
rebuilt, repaired or refurbished, be made? If so, how should the 
disclosure be made?
    21. Should the Guides admonish against misleading consumers into 
believing that a watch which has been altered, repaired, rebuilt or 
refurbished, is covered by the manufacturer's guarantee or warranty, 
when the seller knows or has reason to know that the watch is not 
guaranteed?
    22. Should the Guides continue to advise industry members that it 
is unfair or deceptive to imitate, simulate or counterfeit the trade 
names or trademarks of competitors, or to obliterate, conceal, or 
remove tags, labels, marks, or other disclosures placed on an industry 
product under circumstances likely to mislead the ultimate consumer?
    23. With respect to imported watches, should the Guides continue to 
advise industry members to disclose the origin of the parts of the 
watch movement (in addition to the U.S. Customs Service requirement 
that the origin of the assembly of the movement be disclosed)? Is such 
a disclosure of material importance to consumers?

List of Subjects in 16 CFR Part 245

    Advertising; Trade Practices; Watch Bands; and Watches.

    The Commission proposes to amend Chapter I of Title 16 of the Code 
of Federal Regulations by revising: Part 245 to read as follows:

PART 245--GUIDES FOR THE WATCH INDUSTRY

    Sec.
245.0  Scope and application.
245.1  Definitions.
245.2  Misrepresentation in general.
245.3  Misrepresentation of metallic composition of watchcases.
245.4  Misrepresentation as to durability or suitability.
245.5  Misrepresentation of protective features.
245.6  Deception as to movements.
245.7  Deceptive selling of used, rebuilt, or secondhand products.

Appendix A to Part 245--Thickness Tolerance and Tests

    Authority: 15 U.S.C. 45, 46.


Sec. 245.0  Scope, application, and purpose.

    (a) Statement of purpose. The guides in this part represent 
administrative interpretations of laws administered by the Federal 
Trade Commission for the guidance of the public in conducting its 
affairs in conformity with legal requirements. The guides in this part 
specifically address the application of section 5 of the FTC Act (15 
U.S.C. 45) to the advertising and marketing of watches. They provide 
the basis for voluntary compliance with such laws by members of 
industry. Conduct inconsistent with the positions articulated in the 
guides in this part may result in corrective action by the Commission 
under section 5 if, after investigation, the Commission has reason to 
believe that the behavior falls within the scope of conduct declared 
unlawful by the statute.
    (b) The guides in this part apply to persons, partnerships or 
corporation, at every level of the trade (including but not limited to 
manufacturers, suppliers, and retailers) engaged in the business of 
offering for sale, selling, distributing or importing industry 
products.
    (c) The guides in this part apply to claims and representations 
about industry products included in labeling, advertising, promotional 
materials and all other forms of marketing, whether asserted directly 
or by implication, through words, symbols, emblems, logos, 
illustrations, depictions, product brand or trade names, visual 
representations, pictures, televised or computer images, diagrams, or 
other depictions, or through any other means.


Sec. 245.1  Definitions.

    For the purpose of this part the following definitions apply:
    (a) The term watch means a timepiece or time-keeping device for 
measuring or indicating time which is designed to be worn on or about 
the person.
    (b) The term watchcase or case means any metal case, covering, or 
housing of any quality or description for a watch as defined above and 
includes the back, center, lugs, bezel, pendant, crown, bow, cap, and 
other parts thereof, including a watch band or other accessory which 
has been permanently affixed thereto; and unless otherwise stated, 
either term as used in these guides applies to the case whether 
marketed separately or together with the movement or works.

    Note: The Guides for the Jewelry, Precious Metals, and Pewter 
Industries, 16 CFR Part 23, address detachable metallic watch bands 
and other detachable accessories.

    (c) The term movement means that part of a watch which produces and 
maintains a recurring phenomenon and is capable of counting time. The 
movement is connected to a means of displaying time by either a dial 
and hands (analog) or a digital display, and is mounted in a case.
    (1) Mechanical movement means a movement which divides time into 
equal parts using a balance wheel or any other mechanical means of 
determining intervals of time that uses power generated by a mainspring 
which may be wound by hand or automatically.
    (2) Quartz movement means a movement which divides time into equal 
parts using a synthetic quartz crystal that vibrates using power 
generated by electrical energy.
    (d) The term mark means any letter, figure, numeral, symbol, sign, 
word, or term, or any combination thereof, which has been stamped, 
embossed, inscribed, or otherwise placed, on any industry product for 
the purpose of disclosing its metallic composition or any other 
material information.
    (e) The term industry product means a watch or watchcase, or a part 
thereof, as defined in paragraphs (a), (b) and (c) of this section.


Sec. 245.2  Misrepresentation in general.

    It is unfair or deceptive to misrepresent the grade, quality, 
estimated life, appearance, substance, size, construction, novelty, 
composition, accuracy, dependability, imperviousness, repairability, 
conformance to standards, methods of manufacture, country of origin, or 
any other material aspect of an industry product or part.

[[Page 33331]]

Sec. 245.3  Misrepresentation of metallic composition of watchcases.

    (a) It is unfair or deceptive to misrepresent the metallic 
composition of a watchcase.
    (b) The following are examples of markings or descriptions that may 
be misleading:
    (1) Use of the word ``Gold,'' or any abbreviation, without 
qualification, to describe all or part of an industry product, which is 
not composed throughout of fine (24 karat) gold.
    (2) Use of the word ``Gold,'' or any abbreviation, to describe all 
or part of an industry product which is composed throughout of an alloy 
of gold, unless a correct designation of the karat fineness of the 
alloy immediately precedes the word ``Gold,'' or its abbreviation, and 
such fineness designation is of at least equal conspicuousness.
    (3) Use of the word ``Gold,'' or any abbreviation, to describe all 
or part of an industry product, which is not composed throughout of 
gold or a gold alloy, but is surface-plated or coated with gold alloy, 
unless the word ``Gold,'' or its abbreviation, is adequately qualified 
to indicate that the product or part is only surface-plated.
    (4) Use of the term ``Gold Plate,'' ``Gold Plated,'' or any 
abbreviation, to describe all or part of an industry product, unless 
such product or part contains a surface-plating of gold alloy, applied 
by any process, which is of such thickness and extent of surface 
coverage that reasonable durability is assured.
    (5) Use of the terms ``Gold Filled,'' ``Rolled Gold Plate,'' 
``Rolled Gold Plated,'' or ``Gold Overlay,'' or any abbreviation, to 
describe all or part of an industry product, unless such product or 
part contains a surface-plating of gold alloy applied by a mechanical 
process which is of such thickness and extent of surface coverage that 
reasonable durability is assured, and unless the term is immediately 
preceded by a correct designation of the karat fineness of the alloy 
that is of at least equal conspicuousness as the term used.
    (6) Use of the term ``Gold Electroplate,'' or ``Gold 
Electroplated,'' or any abbreviation, to describe all or part of an 
industry product, unless such product or part is electroplated with 
gold or a gold alloy and such electroplating is of such thickness and 
extent of surface coverage that reasonable durability is assured.
    (7) Use of the word ``Gold,'' or any abbreviation, or of a quality 
mark implying gold content (e.g., 9 karat), to describe all or part of 
an industry product, which is composed throughout of an alloy of gold 
of less than 10 karat fineness.
    (8) Use of the words ``silver,'' ``sterling,'' or ``sterling 
silver,'' or any abbreviation, to describe all or part of an industry 
product, which is not composed throughout of at least 925/1000ths pure 
silver. Use of the word ``coin silver'' to describe all or part of an 
industry product, which is not composed throughout of at least 900/
1000ths pure silver.
    (9) Use of the words ``silver,'' ``sterling,'' ``sterling silver,'' 
or ``coin silver'' or any abbreviation, to describe all or part of an 
industry product, which is not composed throughout of silver, but is 
surface-plated or coated with silver, unless the word ``silver,'' or 
its abbreviation, is adequately qualified to indicate that the product 
or part is only surface-plated.
    (c) The following are examples of markings and descriptions that 
are not considered unfair or deceptive.
    (1) An industry product or part thereof, composed throughout of an 
alloy of gold of not less than 10 karat fineness, may be marked and 
described as ``Gold'' when such word ``Gold,'' wherever appearing, is 
immediately preceded by a correct designation of the karat fineness of 
the alloy, and such karat designation is of equal conspicuousness as 
the word ``Gold'' (for example, ``14 Karat Gold,'' and ``14 K. Gold,'' 
and ``14 Kt. Gold''). Such product may also be marked and described by 
a designation of the karat fineness of the gold alloy unaccompanied by 
the word ``Gold'' (for example, ``14 Karat,'' ``14 Kt.,'' and ``14 
K.'').
    (2) An industry product or part thereof, on which there has been 
affixed on all significant surfaces, by any process, a coating, 
electroplating, or deposition by any means, of gold or gold alloy of 
not less than 10 karat fineness, may be marked or described as ``Gold 
Plate'' or ``Gold Plated,'' or adequate abbreviation thereof, (as, for 
example, G.P.), if such products either could be marked as ``gold 
electroplate'' under paragraph (c)(5) of this section, or are plated to 
a thickness throughout which is equivalent to at least five microns 
(approximately 200 millionths of an inch) of 14 karat gold after 
completion of all finishing operations, provided that a mark indicating 
the karat fineness and the actual thickness of the gold plate in 
microns, is disclosed in close proximity to and equally conspicuously 
as the mark identifying the watchcase as ``gold plate'' or ``gold 
plated'' (for example, ``5 microns 14 K. gold plate,'' or ``5 
14 K. G.P.'' for an item plated with 5 microns of 14 karat gold.)
    (3) An industry product or part thereof, on which there has been 
affixed on all significant surfaces by mechanical means, a plating of 
gold or gold alloy of not less than 10 karat fineness, may be marked or 
described as ``Gold Filled,'' or adequate abbreviation, when the 
plating is of a thickness throughout of not less than 75 microns 
(approximately three one-thousands of an inch) after completion of all 
finishing operations, and when the term or abbreviation is immediately 
preceded by a designation of the karat fineness of the gold alloy of 
which the plating is composed, which is of equal conspicuousness as the 
term used (for example, ``12 Karat Gold Filled,'' ``12 K.G.F.'').
    (4) An industry product or part thereof, on which there has been 
affixed on all significant surfaces by mechanical means, a plating of 
gold or of a gold alloy of not less than 10 karat fineness, may be 
marked or described as ``rolled gold plate,'' or an abbreviation, when 
the plating has a thickness throughout of not less than 37.5 microns 
(approximately one and one-half one thousands of an inch) after 
completion of all finishing operations, and when the term or 
abbreviation is immediately preceded by a designation of the karat 
fineness of the gold alloy of which the plating is composed, which is 
of equal conspicuousness as the term used (for example, ``10 Karat 
Rolled Gold Plate,'' ``10 K. R.G.P.'').
    (5) An industry product or part thereof, on which there has been 
affixed on all significant surfaces by an electrolytic process, an 
electroplating of gold, or of a gold alloy of not less than 10 karat 
fineness, which has a minimum thickness throughout which is equivalent 
to at least 1 micron (approximately 40 millionths of an inch) of 23 
karat gold after completion of all finishing operations, may be marked 
``gold electroplate,'' provided that the karat fineness and the actual 
minimum thickness of the gold electroplate is disclosed in microns in 
close proximity to and equally conspicuously as the mark identifying 
the watchcase as ``gold electroplate.'' If the thickness of such gold 
electroplate is 37.5 microns (approximately one and one-half one 
thousandths of an inch) or greater, it may be described as ``heavy gold 
electroplate.'' The terms ``gold electroplate'' and ``heavy gold 
electroplate'' may be immediately preceded by a correct designation of 
the karat fineness of the gold alloy of which such coating is composed.

    Note: A watch case which has been electroplated with 5 microns 
of 14 karat gold meets the requirements of this section and may be 
marked gold

[[Page 33332]]

electroplate, provided that the karat fineness and the actual 
thickness of the gold electroplate is disclosed in microns in close 
proximity to and equally conspicuously as the mark identifying the 
watchcase as ``gold electroplate.''

    (6) An industry product or part thereof, which is composed 
throughout of at least 925/1000ths pure silver, may be described as 
``silver,'' ``sterling,'' or ``sterling silver,'' or any abbreviation. 
An industry product or part thereof which is composed throughout of at 
least 900/1000ths pure silver, may be described as ``coin silver.''
    (7) An industry product or part thereof, which has been plated with 
silver may be marked as ``silver plate'' or ``silver plated,'' if, 
after the completion of all finishing operations, all significant 
surfaces of the product or part contain a plating or coating of silver 
which is of substantial thickness,\1\ which will withstand normal use 
and last throughout the estimated life of the product.

    \1\ The term ``substantial thickness'' means that all areas of 
the plating are of such thickness as to assure a durable coverage of 
the base metal to which it has been affixed. Since industry products 
include items having surfaces and parts of surfaces which are 
subject to different degrees of wear, the thickness of plating for 
all items or for different areas of the surface of individual items 
does not necessarily have to be uniform.
---------------------------------------------------------------------------

    Note to paragraph (c)(7): The National Stamping Act provides 
that silverplated articles shall not ``be stamped, branded, engraved 
or imprinted with the word `sterling' or the word `coin,' either 
alone or in conjunction with other words or marks.'' 15 U.S.C. 
297(a).

    (8) An industry product or part thereof, which is composed in whole 
or in part of a precious metal other than gold or silver, or of an 
alloy of such a metal, or which has been plated by any method with such 
a metal or alloy thereof, may be marked so as to disclose the kind of 
precious metal or alloy used and the manner of its use.
    (9) An industry product or part thereof, which does not fall within 
the descriptions provided in paragraphs (c) (1) through (7) of this 
section, may be marked as ``Base Metal'' or so as to identify clearly 
the kind or kinds of metal of which it is composed, e.g., ``Aluminum,'' 
``Stainless Steel,'' ``Chromium Plated Steel.''
    (d) If a watchcase is composed of parts having different metallic 
compositions, and has exposed surfaces that are or have the appearance 
of being metal, a mark placed on the product that indicates the 
metallic content of the product should be closely accompanied by an 
identification of the part or parts to which the mark is applicable 
(e.g., ``Base Metal Back,'' ``14K Gold Filled Bezel'').
    (e) In determining the metallic composition of watchcases, parts 
which are necessarily required to be of steel or some other base metal 
may be excluded, namely, the springs, hinge pins for jointed cases, 
spring pins for straps or bands, separate inside movement holding 
rings, and crown cores.
    (f) The provisions of this section relating to markings and 
descriptions of industry products and parts thereof are subject to the 
applicable tolerances under the National Stamping Act (15 U.S.C. 294, 
et seq.), or any amendment thereof. For plated items, refer to the 
permissible tolerances set forth in paragraph 1 of Appendix A to this 
part.


Sec. 245.4  Misrepresentation as to durability or suitability.

    It is unfair or deceptive to misrepresent the ability of a product 
to resist or withstand damage from stated causes, or of its suitability 
for particular uses. Illustratively, it is unfair or deceptive to 
falsely designate or describe a watch as a chronometer or use such 
terms as ``skin divers,'' ``navigators,'' or ``railroad'' to describe 
industry products which do not possess the characteristics, e.g., 
ruggedness, accuracy, dependability, or other features, required of 
watches used by persons engaged in those activities.

    Note: Representing that a watch is a chronometer would not be 
considered unfair or deceptive, if the watch meets the definition of 
``chronometer'' in ISO standard 3159 (Timekeeping instruments--
Wrist-chronometers with spring balance oscillator).
    Note: Representing that a watch is a diver's watch would not be 
considered unfair or deceptive, if the watch meets the definition of 
a ``diver's watch'' in ISO standard 6425 (Divers' Watches).


Sec. 245.5  Misrepresentation of protective features.

    (a) It is unfair or deceptive to misrepresent the ability of an 
industry product to withstand or resist damage or other harmful effects 
from stated causes. Illustratively, it is unfair and deceptive to 
describe an industry product as ``shockproof,'' ``waterproof,'' 
``nonmagnetic,'' or ``all proof,'' even if such term or terms are 
qualified by words or phrases, e.g., ``waterproof when case, crown, and 
crystal are intact.''
    (b) The following are examples of markings and descriptions that 
are not considered unfair or deceptive:
    (1) Use of the term ``shock resistant'' or ``shock absorbing'' to 
describe an industry product, if the person making that claim has a 
reasonable basis for concluding that the product possesses a level of 
resistance to damage from shock, sufficient to insure that it will 
successfully withstand being dropped from a height of 3 feet onto a 
horizontal hardwood surface. Satisfying ISO Standard 1413-1984(E) \2\ 
or passing the test described in paragraph 2 of the appendix provides 
such a reasonable basis.
---------------------------------------------------------------------------

    \2\ ISO standards are available from: American National 
Standards Institute, Customer Service, 11 W. 42nd Street, 13th 
Floor, New York, NY 10036-8002, Telephone (212) 642-4900; FAX (212) 
302-1286.
---------------------------------------------------------------------------

    (2) Use of the term ``water resistant'' to describe an industry 
product, if the person making that claim has a reasonable basis for 
concluding that it is sufficiently impervious to water or moisture so 
as to insure that at the time of its sale to the ultimate consumer it 
will successfully withstand being immersed in water during such 
activities as bathing, showering, and swimming. Satisfying ISO Standard 
2281-1990(E) or passing the test described in paragraph 3 of Appendix A 
to this part provides such a reasonable basis.
    (3) Use of the term ``antimagnetic'' to describe an industry 
product, if the person making that claim has a reasonable basis for 
concluding that it is so designed and constructed as to provide a 
substantial degree of protection against magnetism after sale to the 
ultimate consumer, and the product will successfully withstand 
accidental exposure to unusually strong magnetic or electrical fields. 
Satisfying ISO Standard 764-1984(E) or passing the test described in 
paragraph 4 of Appendix A to this part provides such a reasonable 
basis.


Sec. 245.6  Deception as to movements.

    (a) It is unfair or deceptive to misrepresent the number of jewels 
contained in a watch, or that a watch is ``jeweled'' or contains a 
jeweled movement.
    (b) The following are examples of markings and descriptions that 
are not considered unfair or deceptive:
    (1) Describing a watch as ``jeweled'' or as containing a jeweled 
movement if the movement contains at least seven jewels each of which 
serves the purpose of protecting against wear from friction by 
providing a mechanical contact with a moving part at a point of wear.
    (2) Describing a watch as containing a certain number of jewels if 
each of these jewels serves the purpose of protecting against wear from 
friction by providing a mechanical contact with a moving part at a 
point of wear.
    (c) It is unfair or deceptive to represent that a watch is a 
``quartz

[[Page 33333]]

watch'' or contains a quartz movement if such is not the case.
    (d) A watch may be described as a ``quartz watch'' or as containing 
a quartz movement if a silicon dioxide (``quartz'') crystal contained 
in the watch serves the purpose of dividing time and regulating the 
time display by means of vibrations of such crystal caused by its 
placement into an electric field.


Sec. 245.7  Deceptive selling of used, rebuilt, or secondhand products.

    (a) It is unfair or deceptive to sell or offer for sale an industry 
product which in whole or in part is, or which contains parts that are, 
used, secondhand, rebuilt, repaired or refinished, unless a disclosure 
is made that such product or parts are not new, or are used, 
secondhand, rebuilt, repaired, or refinished.
    (b) It is unfair or deceptive to represent that a watch which has 
been used, rebuilt, repaired, or refinished is covered by the 
manufacturer's guarantee or warranty, when such is not the case.

Appendix A to Part 245--Thickness Tolerances and Tests

    Set forth in this Appendix are the thickness tolerances and tests 
referred to in this part.
    1. Thickness tolerances: plated and electroplated cases. The 
minimum thickness specified in Sec. 245.3(c) (2), (3), (4), and (5) for 
the coatings of gold or gold alloy on watchcases shall mean that the 
coating of precious metal affixed to the surface of the metal stock 
shall be throughout the surface and at the thinnest point not less than 
the thickness specified after the completion of all finishing 
operations, including polishing, except, however, for such deviations 
therefrom, not exceeding 20 percent (minus) of the stated thickness, as 
may be proved by the manufacturer to have resulted from unavoidable 
variations in manufacturing processes and despite the exercise of due 
care, which deviation so proved should be allowed if and when the 
quantity of precious metal remaining plated on the outside of the case 
is sufficient to equal the quantity necessary to provide the specified 
minimum thickness at all points on such watchcase including the 
thinnest point.
    2. Test for shock resistance. A watch should be tested for shock 
resistance in a room having a temperature between 18 and 25 degrees 
Centigrade which does not vary by more than two degrees during the 
test. A wrist watch which does not have a permanently affixed band 
should be tested without the band or strap. The test should be 
conducted as follows:
    a. One hour after a mechanical watch has been fully wound or two 
hours after a quartz watch has been allowed to function, its daily 
rate in each of the following three positions should be determined 
by observing it for two minutes in each position:
    (1) Position HB (horizontal with dial facing down);
    (2) Position VC (vertical with three o'clock to the watch's 
left);
    (3) Position VB (vertical with three o'clock pointed downwards).
    b. Shocks equal to that which the watch would receive if it were 
dropped from a height of three feet onto a horizontal hardwood 
surface should be applied as follows:
    (1) The first shock should be applied to the middle of the watch 
at a position directly opposite the crown and in a direction which 
is parallel to the plane of the watch;
    (2) The second shock should be applied to the crystal, and in a 
direction which is perpendicular to the plane of the watch.
    c. (1) Five minutes after the last shock, the daily rate of the 
watch in each of the three positions described in paragraph 2. a. of 
this appendix above should be determined by observing it for two 
minutes in each position. The differences in daily rate before and 
after the shock should be determined for each position. The residual 
effect of the shocks will be equal to the greatest of these 
differences.
    (2) A watch will be considered to have passed the foregoing 
test, if after application of the shocks, it does not stop; the 
residual effect does not exceed 2 seconds per day for quartz watches 
and 60 seconds per day for all other types of watches; and an 
examination of the watch does not disclose any physical damage which 
would affect its operation or appearance, e.g., hands bent or out of 
position, cracked crystal, or automatic or calendar devices 
inoperable or out of alignment.
    3. Test for water resistance. A watch should be tested for water 
resistance by immersing it completely for at least five minutes in 
water under atmospheric pressure of 15 pounds per square inch and 
for at least another five minutes in water under an additional 
pressure of at least 35 pounds per square inch (total pressure of 50 
pounds per square inch). If the watch does not admit any water or 
moisture it will be considered to have passed the test.
    4. Test for anti-magnetic qualities. A watch should be tested 
for its resistance to magnetism by placing it in a demagnetized 
condition in an electrical field of not less than 60 Gauss for at 
least five seconds in a vertical position and for at least five 
seconds in a horizontal position. If the daily rate of a quartz 
watch has not been changed by more than 1.5 seconds as a result of 
the foregoing exposure, or the daily rate of all other types of 
watches has not been changed by more than 15 seconds as a result of 
the foregoing exposure, it shall be considered to have passed the 
test.

    By direction of the Commission.
Donald S. Clark,
Secretary.
    Note: This appendix will not appear in the Code of Federal 
Regulations.

                                                     Appendix--List of Commenters and Abbreviations                                                     
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            Abbreviation                         No.                                                    Commenter                                       
--------------------------------------------------------------------------------------------------------------------------------------------------------
ArtCarved..........................  155                         ArtCarved.                                                                             
AWA................................  236                         American Watch Association.                                                            
AWI................................  116                         American Watchmakers Institute.                                                        
Bales..............................  156                         Bales Diamond Center & Mfg. Inc.                                                       
Bedford............................  210                         Bedford Jewelers, Inc.                                                                 
Benrus.............................  22                          Benrus Watch Co. Inc.                                                                  
Best...............................  225                         Best Products Co., Inc.                                                                
Bridge.............................  163                         Ben Bridge.                                                                            
Canada.............................  209                         Consumer & Corporate Affairs Canada.                                                   
Citizen............................  228                         Citizen Watch Co. of America, Inc.                                                     
Estate.............................  23                          Estate Jewelers.                                                                       
Fasnacht...........................  4                           Fasnacht's Jewelers.                                                                   
G&B................................  30                          Gudmundson & Buyck Jewelers.                                                           
Gold Institute.....................  13                          Gold Institute.                                                                        
Handy..............................  62                          Handy & Harman.                                                                        
IJA................................  192                         Indiana Jewelers Association.                                                          
ISA................................  237-237A                    International Society of Appraisers.                                                   
Jabel..............................  47                          Jabel Inc.                                                                             
JCWA or Japan Watch................  216                         Japan Clock & Watch Association.                                                       
JMC................................  1                           Jewelry Merchandising Consultants.                                                     

[[Page 33334]]

                                                                                                                                                        
Lannyte............................  65                          Lannyte Co.                                                                            
LaPrad.............................  181                         Robert E. LaPrad.                                                                      
Leach..............................  257                         Leach & Garner.                                                                        
Matthey............................  213                         Johnson Matthey.                                                                       
McGee..............................  112                         McGee & Co.                                                                            
MJSA...............................  226                         Manufacturing Jewelers & Silversmiths of. America, Inc.                                
NACSM..............................  219                         National Association of Catalog Showroom Merchandisers, Inc.                           
NAW................................  251                         North American Watch Corp.                                                             
Newhouse...........................  76                          Leon M. Newhouse.                                                                      
Nowlin.............................  109                         Nowlin Jewelry, Inc.                                                                   
Phillips...........................  204                         Phillips Jewelers, Inc.                                                                
Sheaffer...........................  249                         Sheaffer Inc.                                                                          
Skalet.............................  61                          Skalet Inc.                                                                            
Sibbing's..........................  5                           Sibbing's Jewelry.                                                                     
Solid Gold.........................  261                         Solid Gold Jewelers.                                                                   
Swiss Federation...................  232                         The Federation of the Swiss Watch Industry.                                            
Timex..............................  239                         Timex Corp.                                                                            
USWC...............................  118                         U.S. Watch Council Inc.                                                                
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[FR Doc. 97-15820 Filed 6-17-97; 8:45 am]
BILLING CODE 6750-01-P