[Federal Register Volume 62, Number 170 (Wednesday, September 3, 1997)]
[Notices]
[Pages 46498-46499]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23311]


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FEDERAL TRADE COMMISSION


Agency Information Collection Activities; Proposed Collection; 
Comment Request; Extension

agency: Federal Trade Commission.

action: None.

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summary: The Federal Trade Commission (FTC or Commission) is announcing 
an opportunity for public comment on the proposed extension of OMB 
approval under the Paperwork Reduction Act for ``collection of 
information'' requirements contained in the Mail or Telephone Order 
Merchandise Trade Regulation Rule, 16 CFR Part 435.

dates: Submit written comments on the collection of information on or 
before November 3, 1997.

addresses: Send written comments to Elaine W. Crockett, Attorney, 
Office of the General Counsel, Room 598, 6th St. and Pennsylvania Ave., 
N.W. 20580. All comments should be identified as responding to this 
notice.

supplementary information: Under the Paperwork Reduction Act of 1995 
(PRA) (44 U.S.C. 3501-3520), Federal agencies must obtain approval from 
the Office of Management and Budget (OMB) for each collection of 
information that they conduct or sponsor. ``Collection of information'' 
is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency 
requests or requirements that cause members of the public to submit 
reports, keep records, or provide information to a third party. As 
required by section 3506(c)(2)(A) of the PRA, the FTC is providing this 
opportunity for public comment before requesting that OMB extend the 
existing paperwork clearance for the Mail or Telephone Order 
Merchandise Rule.
    The FTC invites comments on: (1) Whether the proposed collection of 
information is necessary for the proper performance of the FTC's 
functions, including whether the information will have practical 
utility; (2) the accuracy of the FTC's estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumptions used; (3) ways to enhance the quality, 
utility, and clarity of the information to be collected; and (4) ways 
to minimize the burden of the collection of information on respondents 
through the use of automated collection techniques, when appropriate, 
and other forms of information technology.

Mail or Telephone Order Merchandise Trade Regulation Rule, 16 CFR Part 
435--(OMB Control Number 3084-0106)--Extension

    The Mail Order Merchandise Rule was promulgated in 1975 in response 
to consumer complaints that many merchants were failing to ship mail 
order merchandise on time, failing to ship at all, or failing to 
provide prompt refunds for unshipped merchandise. The Rule took effect 
on February 2, 1976. A second rulemaking proceeding in 1993 
demonstrated that the delayed shipment and refund problems of the mail 
order industry were being experienced by consumers who ordered 
merchandise over the telephone. The Commission amended the Rule, 
effective on March 1, 1994, to include merchandise ordered by 
telephone, including by FAX or by computer through the use of a modem.
    Generally, the Rule requires a merchant to: (1) Have a reasonable 
basis for any express or implied shipment representation made in 
soliciting the sale; (2) ship within the time period promised, and if 
no time period is promised, within 30 days; (3) notify the consumer and 
obtain the consumer's consent to any delay in shipment; and (4) make 
prompt and full refunds when the consumer exercises a cancellation 
option or the merchant is unable to meet the Rule's other requirements.
    The notice provisions in the Rule require a merchant, who is unable 
to ship within the promised shipment time or 30 days, to notify the 
consumer of a revised date and his or her right to cancel the order and 
obtain a prompt refund. Delays beyond the revised shipment date also 
trigger a notification requirement to consumers. When the Rule requires 
the merchant to make a refund and the consumer paid by credit card, it 
also requires the merchant to notify the consumer either that any 
charge to the consumer's charge account will be reversed or that the 
merchant will take no action that will result in a charge.
    Burden statement: In its 1995 PRA submission to OMB, the FTC 
estimated that 1,897 large businesses and 68,663 small businesses are 
covered by the Rule. As stated in the agency's 1995 submission, the 
conditional nature of some of the Rule's requirements makes it 
difficult to quantify the exact PRA burden involved. Nonetheless, the 
agency estimated that 70,560 businesses spend an average of 229.78 
hours per

[[Page 46499]]

year on compliance with the Rule, for a total estimate of 16,213,300 
burden hours.
    No provisions in the Mail or Telephone Order Merchandise Rule have 
been amended or changed in any manner. All of the requirements relating 
to disclosure and notification remain the same. We have, however, 
reduced the 1995 total burden estimate of 16,213,300 hours for the 
reasons discussed below.
    In the OMB regulation implementing the PRA, burden is defined to 
exclude any effort that would be expended regardless of any regulatory 
requirement. 5 CFR 1320.3(b)(2). In past rulemaking proceedings, 
industry trade associations and individual witnesses have testified 
that compliance with the Rule is now widely regarded by direct 
marketers as being good business practice. The Rule's notification 
requirements would be followed in any event by most merchants to meet 
consumer expectations with respect to timely shipment, notification of 
delay, and prompt and full refunds. Providing consumers with notice 
about the status of their orders fosters consumer loyalty and 
encourages repeat purchases that are important to the success of direct 
marketers. Thus, much of the time and expense associated with Rule 
compliance is not properly treated as burden under the PRA.
    In estimating any remaining burden, the agency has considered ``the 
total time, effort, or financial resources expended by persons to 
generate, maintain, retain, disclose or provide information to or for a 
Federal agency.'' 5 CFR 1320.3(b)(1). This includes ``developing, 
acquiring, installing, and utilizing technology and systems for the 
purpose of disclosing and providing information.'' 5 CFR 
1320.3(b)(1)(iv). Although not expressly stated in the regulation, it 
seems reasonable to infer that the definition of burden would include 
upgrading and maintaining computer systems used to comply with the 
Rule's requirements.
    The mail order industry has been subject to the basic provisions of 
the Rule since 1976 and the telephone order industry since 1994. Thus, 
businesses have had several years (and some have had decades) to 
integrate compliance systems into their business procedures. 
Nonetheless, staff has allocated some hours, estimated at 150 hours 
annually per company, toward the maintenance of computer systems by the 
affected companies, even though maintenance and upkeep arguably would 
also be part of ordinary business practice in the industry.
    Further, in our best judgment (more accurate data from the industry 
is not currently available), approximately 1,000 new companies have 
entered the market since 1995. Thus, the current total affected firms 
would consist of approximately 71,560 companies. Additionally, staff 
estimates that the approximately 1,000 new companies enter the covered 
market each year. Further, we estimate that new companies entering the 
market would need 230 hours per year (1995 figure of 229.78 rounded to 
230) for compliance measures associated with system start-up, although 
again, it could be argued that such efforts would be undertaken even 
absent the Rule. We have therefore estimated that the total burden for 
compliance with the Rule would be approximately 10,964,000 hours. 
(1,000 x 230=230,000)+(71,560 x 150=10,734,000.)
    To emphasize, the FTC has not amended, nor is it in the process of 
amending, the Mail or Telephone Order Merchandise Rule. The burden 
hours associated with the Rule have been recalculated because the 
originally-estimated hours included one-time start up tasks (i.e., 
implementing systems and processes to meet the Rule's requirements) 
that have now been completed by most of the affected companies.

FOR FURTHER INFORMATION CONTACT: Elaine W. Crockett (202) 326-2453; FAX 
(202) 326-2447; E-mail: [email protected].
Jay C. Shaffer,
Acting General Counsel.
[FR Doc. 97-23311 Filed 9-2-97; 8:45 am]
BILLING CODE 6750-01-M