[Federal Register Volume 63, Number 146 (Thursday, July 30, 1998)]
[Notices]
[Pages 40713-40716]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20298]
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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 FTC has submitted to OMB for review and clearance under
the Paperwork Reduction Act information collection requirements
stemming from (1) a regulation that the Commission enforces and (2) a
study to assess the effectiveness of Commission divestiture orders in
merger cases. On May 13, 1998, the FTC solicited comments concerning
these information collection requirements. No comments were received.
The current 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.
DATES: Comments must be submitted on or before August 31, 1998.
EFFECTIVE DATE: Send written comments to the Office of Management and
Budget, Office of Information and Regulatory Affairs, New Executive
Office Building, Room 10202, Washington, D.C. 20503, ATTN: Edward
Clarke, Desk Officer for the Federal Trade Commission, and 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 collection requirements should be addressed to Gary M.
Greenfield at the address listed above.
SUPPLEMENTARY INFORMATION: The FTC has submitted requests for OMB
review of the two items described below. Further information concerning
the entities subject to, and the burden estimates for, these
requirements can be found at 63 FR 26607 (May 13, 1998). 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 information collection 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. As specified 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 to be made available for inspection by the Commission and
other law enforcement personnel to determine compliance with the Rule.
Estimate of information collection annual hours burden: 2,301,000
hours.
The estimated recordkeeping burden is 50,000 hours for all industry
members affected by the Rule. The estimated burden related to the
disclosures that the Rule requires is 2,251,000 hours (rounded to
nearest thousand) for all affected industry members, for a total of
2,301,000 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, 100 new telemarketing entities per 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 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 revise
their recordkeeping system as a result of the Rule's recordkeeping
requirements has increased. Of the estimated 39,900 industry members
who have already assembled and retained the required records in their
recordkeeping systems, staff estimates that each member requires only
one hour per year to file and store records required by the Rule. This
estimate was rounded up to 40,000 hours. Therefore, the total yearly
burden hours associated with the Rule's recordkeeping requirements is
50,000.
Disclosure: Staff previously calculated the burden associated with
the Rule's disclosure requirements based primarily on the total number
of telemarketing calls and the amount of time needed to make the
required basic disclosures, as well as the number of calls resulting in
sales and the amount of time needed to make the additional disclosures
required before a customer pays for goods or services. While this
methodology remains appropriate in large part, staff has determined
that the resulting burden estimate substantially overstates the impact
of the Rule unless the analysis is refined to take into account the
number of firms that would make the required disclosures even in the
absence of the Rule.
As noted above, the purpose of the Rule's disclosure provisions is
to help prevent consumer injury from deceptive or abusive telemaketing
practices by ensuring that telemarketers provide consumers with
information they need to avoid being misled. In fact, however, the vast
majority of telemarketing firms are legitime businesses. Although
telemarketing fraud causes significant harm to consumers--Congress has
estimated that misrepresentations or material omissions in
telemarketing sales presentations result in $3 billion to $40 billion
annually in consumer injury--the harm caused by
[[Page 40714]]
telemarketing fraud remains a small fraction of the $400 billion in
total annual sales through telemarketing.
Staff believes that a substantial majority of telemarketers now
make the disclosures required by the Rule in the ordinary course of
business because doing so constitutes good business practice. To the
extent this is so, the time and financial resources needed to comply
with disclosure requirements do not constitute ``burden.'' 16 CFR
1320.3(b)(2). Moreover, many state laws require the same or similar
disclosures mandated by the Rule. Thus, the disclosure hours burden
attributable solely to the Rule is far less than the total number of
hours associated with the disclosure. Staff estimated that the
disclosures required by the Rule would occur in at least 75 percent of
telemarketing presentations even in the absence of the Rule.
Accordingly, staff has determined that the hours burden estimate for
the Rule's disclosure requirements is 25 percent of the total amount of
hours associated with disclosures of the type required by the Rule.
Staff previously estimated this total to be 9,003,000 hours. No
comments were received refuting this estimate. The portion attributable
to the Rule is accordingly 2,250,750 hours (.25 x 9,003,000). For
present purposes, this amount was rounded up to 2,251,000 hours.
Staff's basis for its underlying estimate of 9,003,000 total
disclosure hours was derived as follows. In connection with issuing the
Rule and obtaining OMB 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 Sales 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 orally. Staff also estimated that at least 60 percent 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 estimated that the total
amount of time associated with these initial disclosure requirements is
approximately 250 hours per firm (90,000 non-hang up calls (.40 x
225,000) x 7 seconds per call + 135,000 hang-up calls (.60 x
225,000) x 2 seconds per call). Thus, the total time expenditure 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 the
estimate remains appropriate. Based on the assumption that no more than
25 percent of this time constitutes ``burden'' imposed solely by the
Rules (as opposed to the normal business practices of most affected
entities apart from the Rule's requirements), the burden subtotal
attributable to the basis disclosure is 1,937,500 hours.
The Rule also requires additional disclosures before the customers
pays for goods or services. Specifically, telemarketers must disclose
the total cost of 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 such a policy is a part of the sales offer). If a
prize promotion is involved in connection with the sales of goods or
services, the telemarketer must also disclosure information about the
non-purchase entry method for the prize promotion. Staff estimated that
these disclosures take approximately 10 seconds. However, these
disclosures are required only where a call results in a sale. Staff
estimated that sales occur in the approximately 6 percent of
telemarketing calls. Accordingly, the estimated amount of time for the
disclosures is 17.5 hours per firm (13,500 calls resulting in a
sale--.06 x 225,000-- x 10 seconds) or 1.163 million hours for the
31,000 firms choosing marketing methods that require oral disclosure.
When the Commission initially published this estimate, it received no
comments and staff believes the estimate remains appropriate. Based on
the assumption that no more than 25 percent of this time constitutes
``burden'' imposed solely by the Rule, the burden subtotal attributable
to these additional disclosures is 290,750 hours.
As noted, staff estimated that approximately 9,000 telemarketing
firms will choose to use the written disclosure option. Firms choosing
this option are likely to be those using written advertising materials.
Thus, the burden of adding the required disclosures should be minimal.
Staff estimated 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 total burden of 90,000 hours for all
9,000 firms using written disclosure. When the Commission initially
published this estimate, it received no comments and staff believes the
estimate remains appropriate. Based on the assumption that no more than
25 percent of this time constitutes ``burden'' imposed solely by the
Rule, the burden subtotal attributable to these written disclosures is
22,500 hours.
Estimate of information collection annual labor cost burden:
$34,361,250.
The estimated labor cost for recordkeeping is $600,000. Assuming a
cumulative burden of 10,000 hours/year to set up compliant
recordkeeping systems, and applying to that a skilled labor rate of
$20/hours, set up costs would approximate $200,000 annually for all new
telemarketing entities. Staff also estimated that existing industry
members require 40,000 hours to maintain compliance with the Rule's
recordkeeping provisions. Using a clerical cost rate of $10/hour,
cumulative recordkeeping maintenance would cost approximately $400,000
annually. The estimated labor cost for disclosure is $33,761,250, based
on an estimate of 2,250,750 disclosure burden hours and a wage rate of
$15/hour.
Estimate of information collection annual capital and operating
cost burden: $10,022,000.
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 mandate that companies maintain records but
not in any particular form. While the recordkeeping requirements
necessitate that the affected entity have some storage device,
virtually every entity is likely already to 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, the annual expenditure is likely to
be very small when the cost of the device is annualized over its useful
life. The Rule's disclosure requirements require no capital
expenditures.
Total operation/maintenance/purchase of services costs: Affected
entities need some storage media such as file folders, computer
diskettes, or paper in order to comply with the Rule's
[[Page 40715]]
recordkeeping requirements. Although staff believes that most affected
entities would maintain the required records in the ordinary course of
business, staff estimated that the approximately 40,000 industry
members affected by the Rules 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 likely 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. Staff believes that
the hour burdens relating to the required oral disclosures amount to
8,913,000 hours (7.75 million initial disclosure hours + 1.163 million
hours regarding sales). Assuming all calls to customers are long
distance, at a commercial calling rate of 6 cents per minute ($3.60 per
hour), affected entities as a whole may incur up to $32,086,800 in
telecommunications costs as a result of the Rule's disclosure
requirements. However, as noted above, only 25 percent of such
disclosures constitute ``burden.'' Accordingly, the adjusted oral
disclosure cost burden is $8,021,700, rounded to $8,022,000.
As indicated previously, staff estimated 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 or operating 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 requires no
supplemental expenditures.
Thus, the total estimated operating cost burdens associated with
the Rule is $10,022,000 (rounded to nearest thousand).
2. Study of the Effectiveness of Commission Divestiture Orders in
Merger Cases (OMB Control Number 3084-0115)
Description of the information collection 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
authorities, the Commission examines proposed transactions to determine
whether anticompetitive effects are likely. If it has reason to believe
that a transaction is unlawful, the Commission either seeks to enjoin
the transaction or seeks a remedy that it believes will alleviate the
likely anticompetitive effects.
When a proposed merger raises competitive concerns, it is sometimes
the case that the problem arises in only a limited number of markets in
which the parties compete, while the remainder of the proposed
transaction poses no competitive harm. Thus, in 1978, the Commission
began requiring respondents in certain merger cases with likely
anticompetitive effects, as a condition for the Commission's decision
not to oppose a transaction, to divest certain assets of business(es)
in order to cure the competitive problem. The Commission requires that
the divested assets or business(es) be commercially viable, and that
the buyer of the assets or business(es) have the capability of
competing effectively in the applicable market(s).
In 1995, the FTC's Bureau of Competition and Bureau of Economics
undertook a pilot study to determine whether a more comprehensive study
of these 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 of such an expanded study.
Pursuant to that authority, FTC staff has interviewed numerous parties
subject to divestiture orders (``respondents'') and buyers of divested
assets or businesses (``buyers''). As with the pilot study, the
information that staff has obtained continues to offer important
insights into the effectiveness of the divestiture process.
Accordingly, the Commission's Bureau of Competition and Bureau of
Economics intend to continue to conduct interviews with respondents and
buyers in order to complete their review of the 36 sample orders
comprising the study. Thereafter, staff will interview third parties
and solicit sales data from respondents and buyers. 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 required divestiture of certain assets; (2) the
effect of certain provisions in Commission orders (e.g., length of time
permitted for divestiture, ``crown jewels'' provisions, etc.) on the
timeliness of divestitures and on the success of the business or assets
divested; (3) the effect of the procedures that respondents use to find
a buyer on the timeliness of the divestitures and on the success of the
business or assets divested; (4) the effect of the divestiture contract
on the success of the divested business or assets; (5) the effect of
the type of assets divested on the success of the divested business;
(6) the effect of the type of buyer on the success of the divested
business; and (7) the extent to which respondents fully complied with
the requirements under the order.
Securing information about the success of divested businesses (or
businesses that have acquired divested assets) will provide a better
understanding of the kind of order provisions most likely to lead to
successful divestitures in merger transactions. The survey is designed
to expand the Commission's knowledge by eliciting information across a
broad spectrum of industries. Such information will be used to enhance
the effectiveness of Commission divestiture orders.
Estimate of information collection annual hours 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, and third parties (such
as competitors, customers, and suppliers). The divestiture study
includes a total of 51 divestitures arising out of 36 orders. Staff has
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.
After interviewing respondents and buyers, staff will ask them to
submit certain existing financial documents for a five-year period
beginning the year before the divestiture occurred. Staff will not
request that any new documents be created. 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 each product
or asset that was the subject of the Commission's competitive concern
in the case over a five-year
[[Page 40716]]
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 and
chart completion 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 interviews with and follow-up document requests of
subsequent buyers.
Estimate of information collection annual labor cost burden:
$75,000.
It is difficult to calculate reliably the costs associated with
this information collection, as they entail varying compensation levels
of executives, management, and/or support staff among many companies
and various industries. Individuals among some or all of those labor
categories may be involved in the information collection process.
Nonetheless, assuming that responses to interviews, the questionnaire,
and the document request are handled by executive and mid-management
level personnel alone, and applying a blended average hourly
compensation rate of $75/hour for their labor, the total cost should
not exceed $75,000 (based on the upward rounding of estimated total
hourly burden for the study).
Estimate of information collection annual capital and operating
cost burden: None.
The data for the study are being collected in two principal ways.
Staff is conducting telephone interviews and asking respondents and
buyers to respond to a brief questionnaire and produce existing
documents. None of these means of collecting information requires any
capital expenditure. Interviews solely involve respondents and buyers
making available one or more company officials for approximately 1\1/2\
hours. The questionnaires and document requests seek only information
that the respondents and buyers maintain in the ordinary and usual
course of their business. No additional cost burden is imposed.
Debra A. Valentine,
General Counsel.
[FR Doc. 98-20298 Filed 7-29-98; 8:45 am]
BILLING CODE 6750-01-M