[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