[Federal Register Volume 62, Number 231 (Tuesday, December 2, 1997)]
[Notices]
[Pages 63717-63718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-31728]


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FEDERAL TRADE COMMISSION


Submission for OMB Review; Comment Request

AGENCY: Federal Trade Commission.

ACTION: Notice.

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SUMMARY: The Federal Trade Commission (FTC or Commission) has submitted 
information collection requirements associated with the Mail or 
Telephone Order Merchandise Trade Regulation Rule, 16 CFR Part 435, to 
the Office of Management and Budget (OMB) for review and clearance 
under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520). 
The FTC previously solicited comments from the public concerning these 
information collection requirements, and provided the information 
specified in 5 CFR 1320.5(a)(1)(iv). 62 FR 46498 (September 3, 1997). 
No comments were received. The current OMB clearance for these 
requirements expires on December 31, 1997. The FTC has requested that 
OMB extend the PRA clearance through December 31, 2000.

DATES: Comments must be filed by January 2, 1998.

ADDRESSES: Send comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, New Executive Office 
Building, Room 3228, Washington, D.C. 20530, ATTN: Edward Clarke, Desk 
Officer for the Federal Trade Commission. Comments may also be sent to 
Elaine W. Crockett, Attorney, Office of the General Counsel, Room 598, 
6th St. and Pennsylvania Ave., N.W. 20580, telephone: (202) 326-2453; 
fax: (202) 326-2477; e-mail [email protected]

SUPPLEMENTARY INFORMATION:

Title: 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 also being experienced by consumers who ordered 
merchandise over the telephone. The Commission therefore 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.
    Under the notice provisions in the Rule, a merchant who is unable 
to ship within the promised shipment time or 30 days must notify the 
consumer of a revised date and of 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 resulting 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 were 
covered by the Rule, for a total of 70,560 businesses. 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, at that time, 70,560 
businesses spent an average of 229.78 hours per year on compliance with 
the Rule, for a total estimate of 16,213,300 burden hours. In the 
September 3, 1997,

[[Page 63718]]

Federal Register notice, we calculated that established businesses 
would need 150 hours annually toward maintenance of associated computer 
programs. We have now reduced that figure further after determining 
that most maintenance and upkeep of computer systems would be part of 
ordinary business practice in the industry. The OMB regulation that 
implements the PRA defines ``burden'' to exclude any effort that would 
be expended regardless of any regulatory requirement. 5 CFR 
1320.3(b)(2).
    No provisions in the Mail or Telephone Order Merchandise Rule have 
been amended or changed in any manner. All of the Rule's requirements 
relating to disclosure and notification remain the same. We have, 
however, reduced the 1995 total burden estimate for the following 
reasons.
    Most of the 1995 estimated burden hours were associated with one-
time start up tasks associated with establishing implementing standard 
systems and processes. This is because the Rule had recently been 
amended (in 1994) to include the telephone order industry. The mail 
order industry, in contrast, had been subject to the basic provisions 
of the Rule since 1976. Thus, most of the 230 burden hours that we 
estimated per firm related to the development and installation of 
computer systems to handle telephone ordering, and not to the 
maintenance of such systems.
    As noted above, the OMB regulation that implements the PRA defines 
``burden'' 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 encourages 
repeat purchase behavior that is essential to the survival of direct 
mail or telephone order businesses.
    Also, the industry is highly automated; notices are produced 
mechanically and little labor is involved. Nonetheless, even for 
established businesses, there may be some burden attributable strictly 
to the existence of the rule. For example, some merchants rely on 
contractors to handle orders and must therefore monitor how the 
contractor complies with the Rule. This entails reviewing consumer 
complaints to determine whether appropriate delay notification is being 
provided. The Rule allows merchants to use as much or as little time as 
necessary to assure that notification and disclosure requirements are 
being met. Companies employ a broad range of energy, time, and 
resources for performing these tasks. Also, while established companies 
spend some time maintaining existing compliance systems, their 
expenditures are only a fraction of those by new businesses required to 
establish entirely new systems. An exact figure is difficult to 
quantify; however, based on staff's familiarity with the industry, we 
have determined that the average among the industry is unlikely to be 
more than 50 hours per year.
    Staff responsible for the Rule have also estimated that 
approximately 1,000 additional companies have entered the market since 
1995 (for a total of 71,560 incumbent firms) and that, due to 
escalating sales, approximately 1,000 new companies will enter the 
market during the coming year. We estimate that these 1,000 new 
companies will each expend 230 hours per year (the 1995 figure of 
229.78 rounded to 230) to establish compliance measures associated with 
system start-up, although it could be argued once again that most of 
these efforts would be undertaken even absent the Rule. Nonetheless, we 
have estimated the total burden imposed by the disclosure and 
notification requirements at approximately 3,808,000 hours 
(1,000 x 230=230,000)+(71,560 x 50+3,578,000).
Debra A. Valentine,
General Counsel.
[FR Doc. 97-31728 Filed 12-1-97; 8:45 am]
BILLING CODE 6750-01-P