[Federal Register Volume 63, Number 92 (Wednesday, May 13, 1998)]
[Notices]
[Pages 26607-26610]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12661]


=======================================================================
-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION


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

AGENCY: Federal Trade Commission.

ACTION: Notice.

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

SUMMARY: The FTC is soliciting public comments on proposed extensions 
of Paperwork Reduction Act clearances for information collection 
requirements for a regulation that the Commission issues and enforces 
and for a study to assess the effectiveness of Commission divestiture 
orders in merger cases. These Office of Management and Budget (OMB) 
clearances expire on July 31, 1998. The FTC proposes that OMB extend 
its approval for the regulation an additional three years from 
clearance expiration and that approval for the divestiture order study 
be extended through December 31, 1999. The proposed information 
collection requirements described below will be submitted to OMB for 
review, as required by the Paperwork Reduction Act.

DATES: Comments must be submitted on or before July 13, 1998.

ADDRESSES: Send written comments to Gary M. Greenfield, Office of the 
General Counsel, Federal Trade Commission, Washington, D.C. 20580, 
(202) 326-2753. All comments should be identified as responding to this 
notice.

FOR FURTHER INFORMATION CONTACT:
Requests for additional information or copies of the proposed 
information requirements should be addressed to Gary M. Greenfield, 
Attorney, Office of the General Counsel, 202-326-2753.

SUPPLEMENTARY INFORMATION: The purpose of this Notice is to solicit 
comments from members of the public

[[Page 26608]]

and affected agencies concerning the proposed collections of 
information to: (1) Evaluate whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the agency, including whether the information will have practical 
utility; (2) Evaluate the accuracy of the agency's estimate of the 
burden of the proposed collection of information, including the 
validity of the methodology and assumptions used; (3) Enhance the 
quality, utility, and clarity of the information to be collected; and 
(4) Minimize the burden of the collection of information on those who 
are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submission of responses. The FTC will submit the proposed information 
collection requirements to OMB for review, as required by the Paperwork 
Reduction Act of 1995 (44 U.S.C. Chapter 35, as amended).
    The relevant information collection requirements are as follows:

1. The Telemarketing Sales Rule, 16 CFR Part 310 (OMB Control 
Number 3084-0097)

    Description of the collection of information and proposed use: The 
Telemarketing Sales Rule implements the Telemarketing and Consumer 
Fraud and Abuse Prevention Act, 15 U.S.C. 6101-6108 (``Telemarketing 
Act'' or ``the Act''). The Act seeks to prevent deceptive or abusive 
telemarketing practices. The Act mandates certain disclosures by 
telemarketers, and directs the Commission to consider recordkeeping 
requirements in its promulgation of a telemarketing rule to address 
such practices. As required by the Act, the Telemarketing Rule mandates 
certain disclosures regarding telephone sales and requires 
telemarketers to retain certain records regarding advertising, sales, 
and employees. The disclosures provide consumers with information 
necessary to make informed purchasing decisions. The records are 
available for inspection by the Commission and other law enforcement 
personnel to determine compliance with the Rule.
    Estimate of information collection annual hourly burden: 9,053,000 
hours. The estimated recordkeeping burden hours are 50,000. The 
estimated combined burden hours related to the required disclosures 
under the Rule are 9,003,000, for an estimated total of 9,053,000 
burden hours.
    Recordkeeping: At the time the Commission issued the Rule, it 
estimated that during the initial and subsequent years after the Rule 
took effect, only 100 entities a year would find it necessary to revise 
their practices to conform with the Rule and that it would take each 
such entity approximately 100 hours to assemble information or develop 
a compliant recordkeeping system, for a total of 10,000 burden hours a 
year. The Commission received no comments of any kind in connection 
with this estimate when it was issued and this estimate continues to be 
appropriate. There is no reason to believe that the number of new 
entrants into the telemarketing field who find it necessary to create a 
different recordkeeping system as a result of the Rule's recordkeeping 
requirements has increased. Of the estimated 39,900 industry members 
who have already assembled or maintained the required records and 
recordkeeping system, staff estimates that each member requires only 
one hour a year to comply with the Rule's recordkeeping requirements 
(39,900 hours). Therefore, the total yearly burden hours associated 
with the Rule's recordkeeping requirements is 49,900. The Commission 
requests this figure be rounded to 50,000 hours.
    Disclosure: In connection with issuing the Rule and obtaining MOB 
clearance, staff previously estimated that the 39,900 (rounded to 
40,000) industry members make approximately 9 billion calls per year, 
or 225,000 calls per year per company. The Telemarketing Sale Rule 
provides that if an industry member chooses to solicit inbound calls 
from consumers by advertising media other than direct mail or by using 
direct mail solicitations that make certain required disclosures, that 
member is exempted from complying with other disclosures required by 
the Rule. Because the burden of complying with written disclosures is 
less than the burden of complying with the Rule's oral disclosure 
requirements, staff estimated that at least 9,000 firms will choose to 
adopt marketing methods that exempt them from the oral disclosure 
requirements.
    In connection with issuing the Rule, staff estimated that it takes 
7 seconds for telemarketers to disclose the required outbound call 
information described above. Staff also estimated that at least 60% of 
calls result in ``hang-ups'' before the seller or telemarketer can make 
all the required disclosures. Staff estimated that ``hang-up'' calls 
last for only 2 seconds. Accordingly, staff estimates that the total 
disclosure burden associated with these initial disclosure requirements 
is approximately 250 hours per firm (90,000 non-hang up calls (40% of 
225,000)  x  7 seconds per call + 135,000 hang-up calls (60% of 
225,000)  x  2 seconds per call). Thus, the total burden for the 31,000 
firms choosing marketing methods that require these oral disclosures is 
7.75 million hours. When the Commission initially published this 
estimate, it received no comments and staff believes such estimates 
remain appropriate.
    The Rule also requires additional disclosures before the customer 
pays for goods or services. Specifically, the sellers or telemarketers 
must disclose the total costs to purchase, receive, or use the offered 
goods or services; all material restrictions; and all material terms 
and conditions of the seller's refund, cancellation, exchange, or 
repurchase policies if a representation about the policy is a part of 
the sales offer. If a prize promotion is involved, the telemarketer 
must also disclose information about the non-purchase entry method for 
the prize promotion. Staff estimates that approximately 10 seconds is 
necessary to make these required disclosures. However, these 
disclosures need only be made where a call results in an actual sale or 
before the consumer pays. Staff estimates that sales occur in 
approximately 6 percent of telemarketing calls. Accordingly, the 
estimated burden for the disclosures is 37.5 hours per firm (13,500 
calls--6% of 225,000--resulting in a sale  x  10 seconds) or 1.163 
million hours for the 31,000 firms choosing marketing methods that 
require oral disclosures. When the Commission initially published this 
estimate, it received no comments and staff believes such estimates 
remain appropriate.
    Alternatively, the disclosures required before the customer pays 
for goods or services may be in writing. Usually, this would occur 
during a solicitation or mass mailing. Staff estimates that 
approximately 9,000 firms will choose to comply with this optional 
written disclosure requirement. Those firms are likely to be the same 
firms that would choose to advertise through written materials, and the 
burden of adding the disclosures required by the Rule is probably 
minimal. However, staff has no reliable data from which to conclude 
that there is no separately identifiable burden associated with this 
provision. Therefore, staff estimates that a typical firm will spend 
approximately 10 hours per year engaged in activities ensuring 
compliance with this provision of the Rule, for an estimated burden of 
90,000 hours. When the Commission initially published this estimate, it 
received no

[[Page 26609]]

comments and staff believes such estimates remain appropriate.
    Estimate of information collection and cost burden: $34,411,000.
    (a) Total capital and start up costs: Staff estimates that the 
capital and start up costs associated with the Telemarketing Sales 
Rule's information collection requirements are de minimis. The Rule's 
recordkeeping requirements do not mandate that records be kept in any 
particular form. While the recordkeeping requirements necessitate that 
the affected entity have some storage device, virtually every entity is 
likely to already possess the means to store the required records. Most 
entities keep the type of records required by the Rule in the ordinary 
course of business. Even assuming that an entity found it necessary to 
purchase a storage device, which could be as inexpensive as a cardboard 
box, when the cost of the device is annualized over its useful life, 
the annual expenditure is likely to be very small.
    The Rule's disclosure requirements require no capital expenditures.
    (b) Total operation/maintenance/purchase of services costs: The 
Rule's recordkeeping requirements necessitate that companies maintain 
records. Accordingly, affected entities have to expend some capital on 
office supplies such as file folders, computer diskettes, or paper in 
order to comply with the Rule's recordkeeping requirements. Although 
staff believes that most affected entities would maintain the required 
records in the ordinary course of business, staff estimates that the 
approximately 40,000 industry members affected by the Rule spend an 
annual amount of $50 each on office supplies as a result of the Rule's 
recordkeeping requirements, for a total recordkeeping cost burden of 
$2,000,000.
    In connection with the Rule's disclosure requirements, 
telemarketing firms may incur additional costs for telephone service, 
assuming that the firms spend more time on the telephone with customers 
as a result of the required disclosures. As indicated above, staff 
believes that the hour burdens relating to the required disclosures 
amount to 9,003,000 hours. Assuming all calls to customers are long 
distance and a commercial calling rate of 6 cents per minute ($3.60 an 
hour), affected entities as a whole may incur up to $32,410,800 in 
telecommunications costs as a result of the Rule's disclosure 
requirements.
    As indicated previously, staff estimates that approximately 9,000 
entities will choose to comply with the Rule through written 
disclosures. However, staff estimated that those companies incur no 
additional capital expenses as a result of the Rule's requirements 
because they are likely to provide written information to prospective 
customers in the ordinary course of business and adding the required 
disclosures to that written information does not require any 
supplemental expenditures. Thus, the total estimated cost burdens 
associated with the Rule's information collection is $34,411,000 
(rounded to nearest thousand).

2. Study of the Effectiveness of Commission Divestiture Orders in 
Merger Cases (OMB Control Number 3084-0115)

    Description of the collection of information and proposed use: The 
Commission is directed to prevent ``unfair methods of competition'' 
under Section 5 of the Federal Trade Commission Act (``FTC Act''), 15 
U.S.C. 45, and is authorized to enforce the Clayton Act's proscriptions 
against anticompetitive mergers. 15 U.S.C. 18, 21. Under these general 
authorities, the Commission examines transactions to determine whether 
anticompetitive effects are likely and then fashions remedies that it 
believes are necessary to alleviate the likely anticompetivie effects.
    In 1978, the Commission began a divestiture remedy similar to what 
appears in current orders. Generally, respondents are asked to divest a 
package of assets (deemed to be commercially viable based on the 
investigative staff's knowledge of the relevant market) within a 
specified time to a buyer to be approved by the Commission.
    In 1995, the FTC's Bureau of Competition and Bureau of Economics 
undertook a pilot study to determine whether a more comprehensive study 
of Commission divestiture orders would be feasible and productive. The 
staff concluded that further study is necessary to draw more general 
conclusions about the effectiveness of the Commission's divestiture 
process as the circumstances surrounding the orders vary widely. OMB 
subsequently granted clearance for such an expanded study. Pursuant to 
that authority, FTC staff have interviewed numerous buyers of assets or 
businesses and respondents in the study. As with the pilot study, the 
information that staff have obtained continues to offer important 
insights into the effectiveness of the divestiture process.
    Accordingly, the Commission's Bureau of Competition and Bureau of 
Economics staff will continue to conduct interviews with buyers and 
respondents in order to complete its review of the 36 sample orders 
comprising its study. Thereafter, staff will interview third-parties 
and solicit sales data from buyers and respondents. The objectives of 
the study continue to be to determine: (1) The effectiveness of 
Commission orders that seek to preserve or reestablish competition 
where the Commission has permitted a merger but required divestiture of 
certain assets; (2) The influence of certain provisions in Commission 
orders (e.g., length of time permitted for divestiture of ``crown 
jewel'' provisions) on the timeliness of divestitures and on the 
success of the business or assets divested; (3) The influence of 
divestiture procedures used by respondent to find a buyer on the 
timeliness of the divestitures and on the success of the business or 
assets divested; (4) The influence of the divestiture contract on the 
success of the divested business or assets; (5) The influence of the 
type of assets divested on the success of the divested business; (6) 
The influence of the type of buyer on the success of the divested 
business; and (7) Whether respondents have fully complied with the 
requirements under the order.
    Securing information about the success of divested businesses (or 
businesses that have acquired divested assets) would provide a better 
understanding of the kind of order provisions most likely to lead to 
successful divestitures. The survey is designed to expand the 
Commission's knowledge by eliciting, across a broad spectrum of 
industries, information to evaluate the success of divestitures. Such 
information is likely to enhance the Commission's law enforcement 
mission.
    Estimate of information collection annual hourly burden: 1,000 
hours (rounded). The information to be collected will be obtained by 
telephone interviews, document requests, and a questionnaire. Staff 
will conduct telephone interviews with respondents, buyers of divested 
assets or businesses, and third parties (such as competitors, 
customers, and suppliers). The divestiture study includes a total of 51 
divestitures arising out of 36 orders. Staff have already interviewed 
32 buyers and 6 respondents; thus it will contact another 19 buyers and 
30 respondents. It will also contact 153 third-parties (on average, 
three per divestiture) for a total of 202 remaining telephone 
interviews. All of the remaining interviews, like those already 
conducted, should take about 1.5 hours to complete, for a total burden 
estimate of approximately 303 hours.

[[Page 26610]]

    After interviewing buyers and respondents, staff will ask them to 
submit financial documents for a five-year period beginning the year 
before the divestiture occurred. To the extent that no such financial 
documents exist, staff will not request that such documents be 
prepared. Because only documents already in existence will be 
requested, the anticipated burden of producing these documents will be 
minimal, approximately two hours per participant, for a total of 174 
hours (51 buyers + 36 respondents=87, 87 x 2=174).
    Staff is also asking respondents and buyers to complete a two-
question chart that requests sales in dollars and units of the product 
that was the subject of the Commission's concern in the case over a 
five-year period beginning the year before the divestiture. Staff 
estimates that the burden on each participant to provide this 
information will be 4 hours, for a total of 348 hours (51 buyers + 36 
respondents =87, 87 x 4=348). The total cumulative burden of the 
document production will be 522 hours (174+348). The estimated total 
burden for the entire study is therefore calculated to be 825 hours 
(303+522), which has been rounded to 1,000 hours to allow for small 
additions such as subsequent buyers of divested assets.
    Estimate of Information Collection Annual Cost Burden: none.
    Capital equipment/start-up/operation and maintenance/other non-
labor costs: Not applicable. The date for the study are being collected 
in two principal ways. Staff is conducting telephone interviews and 
asking respondents to respond to a brief questionnaire. Neither the 
telephone interviews nor respondents' responses to questionnaires 
require any capital expenditure by respondents. Interviews solely 
involve respondents making available one or more company officials for 
approximately 1\1/2\ hours. The questionnaires ask respondents to 
provide only information that they maintain within the ordinary and 
usual course of their business. No additional cost burden is imposed on 
respondents.
Debra A. Valentine,
General Counsel.
[FR Doc. 98-12661 Filed 5-12-98; 8:45 am]
BILLING CODE 6750-01-M