[Federal Register Volume 64, Number 110 (Wednesday, June 9, 1999)]
[Rules and Regulations]
[Pages 30898-30902]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-14551]
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FEDERAL TRADE COMMISSION
16 CFR Part 245
Guides for the Watch Industry
AGENCY: Federal Trade Commission.
ACTION: Rescission of the Guides for the Watch Industry.
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SUMMARY: On June 18, 1997, the Federal Trade Commission
(``Commission'') published a Federal Register Notice seeking public
comment on proposed changes to the Guides for the Watch Industry
(``Watch Guides'' or ``Guides'') and on the continuing need for the
Guides. The Commission has now completed its review and has decided to
rescind the Guides. The Commission has concluded that the Guides are no
longer needed to resolve uncertainty among businesses over what claims
are likely to be considered deceptive, and that in most instances,
international standards provide sufficient guidance to industry
regarding watch markings and claims.
EFFECTIVE DATE: June 9, 1999.
ADDRESSES: Requests for copies of this Federal Register document should
be sent to the Consumer Response Center, Room 130, Federal Trade
Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580. This
document also is available on the Internet at the Commission's website,
<http://www.ftc.gov>.
FOR FURTHER INFORMATION CONTACT: Laura J. DeMartino, Attorney, Federal
Trade Commission, 600 Pennsylvania Ave., NW., Washington, DC 20580,
(202) 326-3030, e-mail [email protected]>.
SUPPLEMENTARY INFORMATION:
I. Introduction
The Commission announces that it is rescinding the Guides for the
Watch Industry, 16 CFR part 245. The Watch Guides address claims for
the advertising, marking, and sale of watches, watchcases, watch
accessories, and watch bands that are permanently attached to
watchcases. The Guides specifically address representations and
markings regarding a watch's metallic composition, protective and other
special features, movement, and country of origin.
In 1992, the Commission solicited public comment on the Watch
Guides and the then-Guides for the Jewelry Industry and Guides for the
Metallic Watch Band Industry.1 After review, the Commission
tentatively decided to make numerous changes to the Watch Guides that
were not discussed in the original Federal Register Notice. The
Commission, therefore, solicited further comment regarding these
proposed changes, as well as its proposal to delete 9 of the 16
sections in their entirety.2 The Commission also solicited
comment on whether there was a continuing need for the Watch Guides. In
particular, the Commission requested comment on whether international
standards provide sufficient guidance to industry and whether industry
self-regulation and ``market mechanisms,'' such as manufacturer
reputation or warranties, are sufficient to protect consumers from
misrepresentations about watches.3 The Commission requested
this information to determine whether the Watch Guides should be
revised and retained or whether they should be rescinded.
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\1\ 57 FR 24996 (June 12, 1992). The Commission revised the
Guides for the Jewelry Industry (renamed Guides for the Jewelry,
Precious Metals and Pewter Industries) and rescinded the Guides for
the Metallic Watch Band Industry. 61 FR 27178 and 27228 (May 30,
1996).
\2\ 62 FR 33316 (June 18, 1997). Comments submitted in response
to the earlier Notice stated that certain provisions of the Guides,
such as those dealing with gold-plated, water-resistant and shock-
resistant watches, were outdated or inconsistent with international
standards. Some comments also noted that the Guides failed to
address quartz watches. In addition to proposing changes to the
Guides, the Commission proposed deleting sections that were the
subject of broader, non-industry specific guidance (e.g., guidance
regarding use of the word ``free''), that were covered by other
parts of the Guides (e.g., admonishing against misrepresentations of
watch accessories), or that were no longer necessary (e.g., advising
the disclosure of foreign origin).
\3\ Id.
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The Commission received eleven comments in response to this second
Federal Register Notice.4 The comments favored retaining the
Watch Guides, albeit with significant changes.5 After
carefully reviewing the comments and the Guides, however, the
Commission has concluded that there is no continuing need for the Watch
Guides. Section 5 of the Federal Trade Commission Act (``FTC Act''), 15
U.S.C. 45(a)(1), prohibits ``unfair or deceptive acts or practices in
or affecting commerce.'' The purpose of guides is to assist industry
members in complying with the Act. Guides are particularly useful if
they resolve uncertainty among businesses over what claims are likely
to be considered deceptive. The current Watch Guides, however, are in
many instances out of date, inconsistent with international standards,
or unnecessary. Rather than extensively redrafting the Guides, the
Commission has decided that international standards provide guidance to
sellers regarding certain acceptable claims and markings. For those
claims not addressed by international standards, there does not appear
to be any demonstrated uncertainty over what the Commission is likely
to consider deceptive. Thus, the Commission has determined to rescind
the Watch Guides. In the following sections of this Notice, the
Commission summarizes the key points raised by the
[[Page 30899]]
comments and discusses its decision to rescind the Guides.
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\4\ In the remainder of this Notice, the comments are cited to
by an abbreviation of the comment name, the comment number, and the
relevant pages of the comment. The following is a list of the
comment name, abbreviation and comment number used to identify each
commenter. Japan Clock & Watch Association (``JCWA'') #1; European
Union Delegation of the Permanent European Horological Committee
(``EU'') #2; United States Watch Council, Inc. (``USWC'') #3; Leon
M. Newhouse (``Newhouse'') #4; Federation of the Swiss Watch
Industry (``Swiss'') #5; Seiko Corporation of America (``Seiko'')
#6; Bell & Ross (``Bell'') #7; American Watch Association (``AWA'')
#8; U.S. Watch Producers in the US Virgin Islands (``USVI'') #9;
Kenneth E. Mapp, Lieutenant Governor, The United States Virgin
Islands (``Mapp'') #10; Timex Corporation (``Timex'') #11.
\5\ JCWA (1) p.3; EU (2) p.1; USWC (3) p.1; Swiss (5) pp.3-4;
Seiko (6) p.1; AWA (8) p.1; USVI (9) p.1; Timex (11) p.2. Although
Newhouse (4), Bell (7) and Mapp (10) did not expressly state that
they favored retention of the Guides, they recommended changes or
additions to the Guides and, therefore, also are considered to favor
retention. Timex (11) p.2, stated that there is a continuing need
for the Guides ``only if, to the extent the Guides set standards,
those standards will be enforced.''
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II. Summary of the Comments
A. Need for the Watch Guides
The comments favored retention of the Guides, stating that they
benefit both watch manufacturers and consumers. AWA stated that the
Guides ``have served a valuable purpose in assisting industry members
in understanding the standards for appropriate marking and labeling of
watch products and in avoiding practices that could confuse or deceive
consumers.'' 6 This sentiment was echoed in many
comments.7 In addition, the comments indicated that the
Guides are a useful source of information for consumers.8
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\6\ AWA (8) p.1.
\7\ See, e.g., JCWA (1) p.3 (providing guidance as to proper
markings serves the purpose of preventing unfair or deceptive
markings and benefits both manufacturers and consumers); Swiss (5)
pp.3, 5 (the Guides ``assist watch manufacturers in determining what
representations can be made concerning the performance and qualities
of watches'' and also ``supply a common technical benchmark upon
which consumers can rely''); USVI (9) p.1 (the Guides ``serve a
valuable purpose in assisting domestic as well as foreign producers
in understanding the applicable standards for marking and labeling
watches and in avoiding practices that could result in consumer
confusion or deception''); Timex (11) p.4 (``by specifying `safe
harbors' the Guides provide industry members with means to ensure
that they will not be charged with unfair or deceptive trade
practices as a result of making certain claims--a certainty that is
of value to those making such claims'').
\8\ EU (2) p.1 (stating that the Guides ``define terms and
technical features that are necessary for the consumer
understanding''); USWC (3) p.1 (stating that the Guides ``serve as a
consistent guide for comparison-shopping''); Swiss (5) p.5 (stating
that the Guides ``help consumers obtain the information they need to
make informed purchasing decisions'' and provide definite standards
that consumers can cite to when seeking redress for any
misrepresentations).
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B. Adequacy of Self-Regulation and International Standards
The comments stated that industry self-regulation and market
mechanisms, such as manufacturer reputation or warranties, were
insufficient to protect consumers from misrepresentations about
watches.9 Timex noted that ``it often will not be cost
effective for industry members to take action against others who make
false or misleading claims.'' 10
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\9\ See, e.g., AWA (8) p.1. Swiss also stated that without the
Guides, each manufacturer will ``interpret for itself what any given
attribute for a watch should mean.'' Swiss (5) p.8. Consumers will
not have the ability to distinguish between competing claims or
determine which claims are accurate. Id.
\10\ Timex (11) p.3.
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The comments also stated that international standards were not an
adequate substitute for the Guides. The international standards
applicable to watches are developed by the International Organization
for Standardization (``ISO''), ``a worldwide federation of national
standards bodies from some 130 countries.'' 11 ``The ISO
International Standards relating to clocks and watches are discussed
and determined by eight positive participant countries (i.e., Germany,
China, France, India, Japan, Mexico, Russia and Switzerland) and 20
observer countries including the U.S.A. These International Standards
are regularly reviewed every 5 years to prevent their becoming
obsolete.'' 12 ISO has issued standards relating to, among
other things, gold alloy coverings on watchcases and
accessories,13 antimagnetic watches,14 shock-
resistant watches,15 water-resistant watches,16
divers' watches,17 chronometers,18 and functional
jewels.19
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\11\ For information about ISO, see <http://www.iso.ch/infoe/
intro.htm>. 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.
\12\ JCWA (1) p.2.
\13\ ISO 3160-1:1998; ISO 3160-2:1992; and ISO 3160-3:1993.
\14\ ISO 764:1984.
\15\ ISO 1413:1984.
\16\ ISO 2281:1990.
\17\ ISO 6425:1996.
\18\ ISO 3159:1976.
\19\ ISO 1112:1974.
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The comments do not consider the ISO standards to be sufficient to
protect consumers primarily because the ISO standards are not
enforceable in the United States.20 ISO does not regulate
the international watch industry. Instead, each participating member
country enforces the ISO standards in accordance with their own
laws.21 Because the United States is not an adherent to the
ISO standards, the comments stated that ISO standards are not
enforceable in the United States.22
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\20\ EU (2) p.1 (``International Standards are a good reference
for the manufacturers, but as they are not compulsory, they
sometimes are not sufficient to protect the consumer''); Swiss (5)
pp.8, 9; AWA (8) p.1.
\21\ Swiss (5) p.9.
\22\ Id. at 4-5, 8, 9.
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Some comments also stated that the guidance provided in the Watch
Guides was preferable to the ISO standards. Swiss stated that the Watch
Guides are more comprehensive than the ISO standards because the Guides
provide definitions of products, and address, among other things,
misrepresentations in general, counterfeiting of trademarks, and
marking of watches that contain more than one metal.23 Swiss
also noted that the United States is not a participant in ISO, and
therefore, is not involved in the formulation of ISO watch
standards.24 In addition, Timex stated that the ISO
standards are sometimes inconsistent with existing U.S.
practice.25 For example, an ISO standard states that a watch
may be described as a chronometer if it is ``certified by a neutral,
official authority, which checks the watch, or if necessary the
movement, and issues an official certificate of compliance.''
26 Timex stated that there is no evidence that consumers
believe that chronometers are tested and certified and that current
U.S. practices ``do not mandate that only ``certified'' watches be
described as chronometers.'' 27 Thus, the comments argued
that the Commission should retain the Watch Guides.28
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\23\ Id. at 6-7.
\24\ Id. at 7; see also USWC (3) p.1 (stating that international
standards are ``written by the Swiss in their best interest,'' and
thus, do not provide adequate guidance).
\25\ Timex (11) p.3.
\26\ ISO 3159.
\27\ Timex (11) p.3. Timex notes, however, that chronometers are
defined as ``an instrument for measuring time . . . esp. one
intended to keep time with great accuracy.'' Timex (11) p.3, citing
Webster's Seventh New Collegiate Dictionary. Consumers, therefore,
may expect watches described as chronometers to have certain
features, such as accuracy. See Swiss (5) p.23. As is required for
all objective claims about products, sellers must have
substantiation for a claim that a watch is a ``chronometer.''
Although certification by a neutral, official authority, as required
by the ISO standard, may provide such substantiation, it is not
necessarily the only means of substantiating such a claim.
\28\ Swiss (5) p.4; AWA (8) p.1; Timex (11) p.3.
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C. Harmonization of the Watch Guides With International Standards
Although not necessarily viewed as a substitute for the Guides,
harmonizing the Watch Guides with the ISO standards was supported by
many comments.29 The comments contended that harmonization
with ISO standards was appropriate because the ISO standards were
adopted ``after extensive consideration by technical experts'' from the
major watch producing countries of the world.30 In addition,
JCWA added that the standards ``reflect the actual states and the
current technical level of watches . . . (and) fully take into
consideration the viewpoint of consumer protection.'' 31
Further, the comments noted that ISO standards are reviewed every five
years, ensuring that the standards do not become obsolete.32
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\29\ JCWA (1) pp.2, 4; EU (2) p.2; Swiss (5) pp.10-11; Seiko (6)
p.1; AWA (8) Letter, p.1. But see Timex (11) pp.3, 8 (stating that
the ISO standard for ``rolled gold'' claims allows watches to have a
significantly lesser thickness of gold than currently advised by the
Guides and noting the possible need to advise sellers to state the
thickness of the gold).
\30\ Swiss (5) p.11.
\31\ JCWA (1) p.3.
\32\ JCWA (1) p.2; Swiss (5) p.11.
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[[Page 30900]]
The comments further argued that differences between the Watch
Guides and the ISO standards would result in undue burdens and costs
for watch manufacturers. The cost of complying with two sets of
guidelines and producing watches separately for the United States would
be passed onto the U.S. consumer, resulting in higher watch
prices.33
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\33\ JCWA (1) pp.3-4; Swiss (5) pp.11, 15.
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In addition to favoring harmonization generally, some comments
recommended that the Guides actually incorporate ISO standards
verbatim.34 The comments noted the difficulty with this
suggestion because the ISO standards are reviewed every five years and
the Watch Guides would need to be revised if there were any ISO
standard changes. Some comments therefore recommended that the Guides
include a provision that stated that ``it shall not be considered
unfair or deceptive if a watch meets the requirements in International
Standard xxxx.'' 35
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\34\ Swiss (5) p.13, n.5.
\35\ JCWA (1) p.4; Swiss (5) p.13.
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In addition to these general matters, the comments also discussed
various Guide provisions and proposed changes to the provisions.
III. Reasons for Rescission
After careful consideration, the Commission has determined to
rescind the Watch Guides. Sellers must continue to comply with section
5 of the FTC Act, which prohibits unfair or deceptive acts or
practices. The Guides, however, are no longer necessary to resolve
demonstrated uncertainty regarding what claims are likely to be
deceptive. In many instances, ISO standards provide guidance to
industry members regarding watch claims. For topics beyond those
addressed by the ISO standards, the Guides do not provide substantial
guidance regarding deceptive claims, and in certain instances, are
outdated. Thus, the Watch Guides are no longer needed.
A. ISO Standards Provide Guidance Regarding Watch Claims
The ISO standards may provide useful guidance to industry members
in making watch claims. They provide specifications for many watch
attributes, including gold alloy coverings and protective features. For
example, the ISO standards specify minimum thicknesses for gold-plated
watches and test methods for determining that a watch is ``water-
resistant,'' ``shock-resistant,'' and ``anti-magnetic.'' Although the
ISO standards are not enforceable in the United States, watch sellers
must comply with section 5 of the FTC Act. Thus, objective claims about
watches must be truthful and accurate, and substantiated by competent
and reliable evidence.
Some of the detailed standards referenced in the existing Guides
(such as minimum thicknesses for gold-plated watches and tests to
determine water-resistance) may be better established by the ISO or
other private standards-setting organizations with expertise in
technical issues and industry practices. These organizations also are
in a better position to change the standards as technology
evolves.36 As noted by the comments, the ISO standards are
developed by technical experts from the major watch producing companies
of the world and are reviewed every five years. Thus, it is likely that
the ISO standards reflect current technology and industry practice,
and, in considering whether marketers have adequately substantiated
their claims, the Commission will look to the ISO standards.
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\36\ Certain provisions of the Watch Guides have been
technologically outdated for some time. For example, section
245.3(f) advises that gold electroplated products contain a minimum
thickness of gold alloy of \3/4\ 1000ths of an inch (approximately
19 microns). Comments indicated that technology permits a thinner,
yet durable layer of gold to be deposited electrolytically and that
the specified minimum thickness was obsolete. (In its second Federal
Register Notice, the Commission proposed changing this provision.)
Due to the changes in technology, industry members by necessity have
referred to sources other than the Watch Guides for guidance on
making gold electroplate claims.
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As stated in the comments, the Commission recognizes the benefits
of harmonizing its guides with international standards and the burdens
that would result if the Watch Guides presented differing guidance. The
Commission, however, does not believe that it is useful to retain
guides that merely reference international standards. Depending on the
revision schedule of the ISO standards, the Watch Guides could become
quickly outdated and have an unintended effect of burdening technology
and watch manufacturers.
B. The Guides Are Not Needed to Address Topics Not Covered by ISO
Standards
For those topics not addressed by ISO standards, the Watch Guides
(1) provide only limited guidance, (2) do not resolve any demonstrated
uncertainty regarding what claims are likely to be deceptive, and (3)
provide, in certain instances, outdated, unnecessary guidance.
1. The Guides Provide Limited Guidance to Industry Members
Although Swiss stated that the Watch Guides discuss topics not
covered by ISO standards, the Guides provide only limited guidance. For
example, the definition of terms in section 245.1 is necessary for the
remainder of the Watch Guides, but does not provide essential
information to the industry that is not otherwise
available.37 Other sections of the Guides, such as 245.2 and
245.4, merely admonish industry members not to misrepresent various
watch features.38
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\37\ Industry members, for example, do not need to rely on the
Watch Guides for definitions of a watch (``a timepiece or time-
keeping device for measuring or indicating time which is designed to
be worn on or about the person'') or watchcase (``any metal case,
covering, or housing of any quality or description for a watch . .
.''). 16 CFR 245.1(a), 245.1(b).
\38\ Section 245.4, for example, advises industry members not to
misrepresent a watch's suitability for particular uses, and more
specifically, advises that terms such as ``skin divers,''
``navigators,'' or ``railroad'' should not be used to describe a
watch that does not possess the characteristics required of watches
used by persons engaged in such activities.
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The Commission does not believe that it is necessary to retain
guides that merely admonish sellers not to misrepresent various items,
especially when, as here, there appears to be no lack of understanding
that the law forbids such misrepresentations. Instead, guides should
assist industry where there is some difficulty in determining
compliance.
2. There is No Demonstrated Uncertainty Regarding Deceptive Claims
There do not currently appear to be any particular areas where
there is difficulty in determining what is likely to be considered to
be deceptive.39 For
[[Page 30901]]
example, there does not appear to be any lack of understanding that a
watch described as having a jeweled movement should contain 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. (16 CFR 245.6). In addition, sellers should know,
without the Watch Guides, that they may need to qualify a mark
indicating a watch's metallic composition, when that mark applies to
only certain parts of a watch (e.g., when a watch is made of different
metals, but is only marked with its precious metal content, and
consumers may be misled that the watch is composed entirely of the
precious metal). (16 CFR 245.3(k)). Thus, the Watch Guides do not
appear to clarify which representations would be considered deceptive
under section 5 of the FTC Act.
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\39\ One comment, however, asked the Commission to establish a
test and definition for ``waterproof'' watches. Bell (7) p.1. The
Watch Guides admonish against the use of the term ``waterproof,''
and the Commission solicited comment on whether that admonition was
justified. The comments generally supported the admonition against
the use of the term. JCWA (1) p.6; EU (2) p.2 (``The use of the
terms . . . ``waterproof'' must be prohibited because they can
disclose [sic] the consumer on the right performance of the
watch''); USWC (3) p.2 (the word ``proof'' is too strong a term);
Swiss (5) p.24 (``The word ``proof'' connotes a measure of absolute
protection that unfortunately does not exist with respect to
watches, especially over prolonged periods of time''); Timex (11)
p.12 (Timex is not aware of a watch where ``immersion in water
should have absolutely no effect on the watch whatsoever, regardless
of the depth or duration of immersion,'' and notes that consumers
are unfamiliar with such terms). The Commission does not possess
adequate information to formulate a definition or test for
``waterproof'' claims. Moreover, it is unclear how consumers would
interpret the term ``waterproof,'' which has not been used to
describe watches. Further, no evidence was submitted indicating
appropriate tests that could substantiate such a claim. However,
there may be technological advances that would comport with consumer
understanding of the term, and the Commission would not consider its
use deceptive so long as the watch in fact met consumer expectations
and the claim was substantiated by competent and reliable scientific
evidence.
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3. In Certain Instances, The Guides Contain Outdated, Unnecessary
Guidance
Two Watch Guide topics, in particular, are not addressed by ISO
standards. These two areas involve the marking of a non-precious metal
watch and the marking of foreign origin. As discussed below, these two
Guide provisions no longer reflect the Commission's interpretation of
the law. Therefore, it is unnecessary for the Commission to retain the
Watch Guides for these issues.
a. Non-Precious Metal Markings. The Watch Guides currently advise
manufacturers to mark all watches of metallic composition. Section
245.3(j) advises that when the watch does not contain precious metals,
it should be marked as ``Base Metal'' or the name of the metal of which
it is composed (e.g., ``stainless steel''). The Commission has
determined that it may not be necessary, to prevent deception, to
advise that all non-precious metal watches be affirmatively marked as
``base metal.'' 40
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\40\ In the previous Federal Register Notice, the Commission
solicited comment on its proposal to delete the guidance that
sellers mark base metal watches. Three comments stated that this
provision should be retained, because the ``base metal'' marking
provides the consumer information about the watch and reduces the
chances that the composition of the watch will be misrepresented. EU
(2) p.2; Seiko (6) p.2; AWA (8) p.3. Timex stated that the
requirement to mark watches should be eliminated for watches costing
less than $100 because it is not likely that consumers will believe
that watches in this price range contain precious metals ``absent
representations to the contrary.'' Timex (11) p.7. JCWA and Swiss
stated that the requirement should be eliminated. JCWA stated that
without any markings, ``consumers ought to guess there is no sales
point in the product.'' JCWA (1) p.5. In addition, Swiss stated that
the U.S. is the only country that requires marking of base metal
watches and that removing this requirement will reduce
manufacturers' burdens. Swiss (5) p.20.
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Although a ``base metal'' mark may reduce the chance that a seller
may misrepresent the watch's metallic composition, the absence of such
a mark will not necessarily deceive consumers. A reasonable consumer is
unlikely to assume, in the absence of any representation about the
watch's metallic composition, that the watch was composed of a precious
metal. Instead, it seems likely that consumers would expect that
sellers would want to tout the precious metal content of a item and
would affirmatively place a quality mark on the piece. In fact, other
products made of metals, such as jewelry, are not required to bear a
mark indicating their metallic composition. Consumers, therefore, may
believe that an unmarked item is composed of non-precious metals.
Any benefits derived from advising the marking of base metal
watches do not necessarily outweigh the burdens on manufacturers who
need to mark such watches for sale in the United States. Thus, absent
specific evidence that consumers are misled that an unmarked watch
contains precious metals, the Commission does not believe that it is
necessary to advise sellers to mark non-precious metal watches as
``base metal.'' Of course, the Commission encourages manufacturers to
provide information to consumers about the products they sell and
admonishes sellers against any misrepresentations of a watch's metallic
composition that would violate the FTC Act.
b. Foreign Origin Markings. In addition, the Commission does not
believe that the current guidance regarding the marking of a watch's
country of origin is needed. Section 245.10(a) of the Watch Guides
advises that watches containing movements of foreign origin, or
movement parts of foreign origin, be marked with the country of origin
of the movement. Section 245.10 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. Using these two factors, the Guides provide specific guidance
on how the country of origin is determined. See Sec. 245.10(b)(1)-(3).
The Commission proposed deleting this origin marking provision of
the Guides in its previous Federal Register Notice. The comments
received in response to this proposal generally favored deleting the
provision entirely, or harmonizing it to be identical to the U.S.
Customs Service marking requirements.41 The comments stated
that Customs already has established detailed foreign origin marking
requirements and that the Guides do not advise the disclosure of
material information beyond these requirements. The comments further
advised that in the interests of uniformity, the Watch Guides should
not provide for different or inconsistent standards than the Customs
requirements.42 In addition, the comments noted World Trade
Organization negotiations to harmonize foreign origin markings
internationally.43
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\41\ The Watch Guides advised the disclosure of more information
(i.e., the origin of movement parts) than the Customs regulations
require.
\42\ USWC (3) p.2; Swiss (5) pp.28-29; Seiko (6) p.1; AWA (8)
p.1; USVI (9) p.2; Timex (11) p.15.
\43\ EU (2); Swiss (5) pp.28-29; AWA (8) p.1.
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The Commission recognizes the benefits of harmonizing its guidance
with Customs regulations, to the extent possible, and acknowledges the
international efforts for harmonization of origin markings. In
addition, the Commission has determined that it is no longer necessary
to generally advise the marking of foreign origin for watches. The
Guides advise the disclosure of foreign origin, in part, because of a
presumption that consumers would believe that an unmarked product was
manufactured in the United States.44 However, it is not
certain that today a significant minority of consumers would believe
that a watch without a country of origin marking is of United States
origin. Absent specific evidence regarding consumer perception, the
Commission does not believe it is necessary to continue to advise
sellers to mark foreign country of origin on watches.45
Thus, the Watch Guides are not necessary to address these issues.
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\44\ In its review of Made in the USA claims, the Commission
determined to cease using the rebuttable presumption that goods not
labeled with any country of origin are understood by consumers to be
made in the United States. Instead, the Commission stated that it
would require disclosure of foreign origin on unmarked goods only if
there was some evidence that a significant minority of consumers
views country of origin as material and believes that the goods in
question, when unlabeled, are made in the United States. 62 FR
63756, 63763 and 63766 (Dec. 2, 1997).
\45\ The Commission notes, however, that any misrepresentation
of a watch's origin is a violation of section 5 of the FTC Act. Two
comments requested that the Commission allow watches produced
partially in the United States Virgin Islands to mark their watches
as Made in USA. USVI (9) pp.3-4; Mapp (10) p.1. The Commission's
Enforcement Policy Statement on Made in the USA claims is of general
applicability and should be used as guidance for watch
manufacturers. See 62 FR 63756 (Dec. 2, 1997).
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[[Page 30902]]
C. Other Guidance and Law Enforcement Tools
The rescission of the Watch Guides does not remove the consumer
protection laws relating to watch claims. The main reason that the
comments argued that the ISO standards were not an appropriate
substitute for the Watch Guides was that the ISO standards are not
enforceable in the United States. However, section 5 of the FTC Act,
prohibiting ``unfair or deceptive acts or practices,'' covers the
advertising, marking, and sale of watches.46 Thus, under the
FTC Act, the Commission may seek administrative or federal district
court orders against companies or individuals who engage in unfair or
deceptive practices, prohibiting future violations and, as appropriate,
providing other relief such as consumer redress or disgorgement of ill-
gotten gains. The rescission of the Guides does not signal an FTC
withdrawal from preventing deception in the advertising and marking of
watches. If, in the future, deceptive practices prove to be a problem
in this industry, FTC investigations and law enforcement actions may be
appropriate and necessary.
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\46\ In addition, industry members should note that the National
Gold and Stamping Act, 15 U.S.C. 291, et seq., regulates the marking
of gold or silver content on all products, including watches.
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The rescission of the Guides also does not leave the industry
without guidance as to how to comply with the law. The Commission
directs the industry's attention to the principles of law articulated
in the FTC's Policy Statement on Deception and pertinent Commission and
court decisions on deception, both of which are generally applicable to
all industries. As articulated in the Policy Statement on Deception,
the Commission ``will find deception if there is a representation,
omission, or practice that is likely to mislead the consumer acting
reasonably in the circumstances, to the consumer's detriment.''
47 In addition, sellers are required to possess
substantiation for objective claims made about products. That is,
advertisers must have a reasonable basis for claims before they are
disseminated.48
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\47\ FTC Policy Statement on Deception, appended to Cliffdale
Associates, Inc., 103 F.T.C. 110, 174 (1984).
\48\ See FTC Policy Statement Regarding Advertising
Substantiation, 48 FR 10471 (Mar. 11, 1983), appended to Thompson
Medical Co., 104 F.T.C. 648, 839 (1984).
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Therefore, sellers must have competent and reliable evidence to
substantiate objective claims about watches, such as claims that a
watch is water-resistant. In this respect, ISO standards may provide
sellers with useful guidance. Other tests, research, or information
(besides international standards) also might be used by sellers to
substantiate claims.49 Sellers bear the responsibility of
ensuring that such information constitutes competent and reliable
evidence in support of their claims. 50 The Commission will
evaluate the adequacy of substantiation on a case-by-case basis.
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\49\ Timex, for example, indicated that there may be other
equally valid tests, acceptable in the industry, besides those in
the ISO standards. Timex (11) p.11.
\50\ Sellers also need to ensure that the substantiation
supports consumers' interpretations of the claims they make about
their products. For example, consumers may have certain expectations
regarding a watch claimed to be ``gold-plated.'' If consumers
understand such a claim to mean that the gold coating on the watch
will last for a certain period of time, sellers would need to ensure
that the gold plate is of such thickness and surface coverage to
assure that it will be reasonably durable. Although international
standards may provide guidance regarding, among other things, the
minimum thicknesses of gold to be used, sellers should be sure to
take into account United States consumer expectations and
understandings of claims.
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For all of the foregoing reasons, the Commission has decided to
rescind the Watch Guides.
List of Subjects in 16 CFR Part 245
Advertising, Labeling, Trade practices, Watches, Watch bands, Watch
cases
PART 245--[REMOVED]
The Commission, under the authority of section 18 of the Federal
Trade Commission Act, 15 U.S.C. 57a, amends chapter I of title 16 in
the Code of Federal Regulations by removing part 245.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 99-14551 Filed 6-8-99; 8:45 am]
BILLING CODE 6750-01-P