[Federal Register Volume 68, Number 247 (Wednesday, December 24, 2003)]
[Notices]
[Pages 74580-74582]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31714]


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FEDERAL TRADE COMMISSION


Agency Information Collection Activities; Submission for OMB 
Review; Comment Request

AGENCY: Federal Trade Commission.

ACTION: Notice.

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SUMMARY: The Federal Trade Commission (FTC) has submitted to the Office 
of Management and Budget (OMB) for review under the Paperwork Reduction 
Act (PRA) information collection requirements contained in its Mail or 
Telephone Order Merchandise Trade Regulation Rule (MTOR or ``Rule''). 
The FTC is soliciting public comments on the proposal to extend through 
January 31, 2007 the current PRA clearance for information collection 
requirements contained in the Rule. That clearance expires on January 
31, 2004.

DATES: Comments must be filed by January 23, 2004.

ADDRESSES: Send written comments to Secretary, Federal Trade 
Commission, Room H-159, 600 Pennsylvania Avenue, NW., Washington, DC 
20580, or by e-mail to [email protected], as prescribed 
below, and to: Records Management Center, ATTN: Desk Officer for the 
FTC, OMB, Room 10102 NEOB, fax: 202/395-6566. The submissions 
should include the submitter's name, address, telephone number and, if 
available, FAX number and e-mail address. All comments should be 
captioned ``Mail or Telephone Order Merchandise Trade Regulation Rule: 
Paperwork comment.''

FOR FURTHER INFORMATION CONTACT: Requests for additional information 
should be addressed to Joel N. Brewer, Attorney, Division of 
Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 
Room 2207, 601 New Jersey Ave., NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION: On October 10, 2003, the FTC sought comment 
on the information collection requirements associated with MTOR, 16 CFR 
Part 435 (Control Number: 3084-0106). See 68 FR 58683. No comments were 
received. Pursuant to the OMB regulations that implement the PRA (5 CFR 
Part 1320), the FTC is providing this second opportunity for public 
comment while seeking OMB approval to extend the existing paperwork 
clearance for the Rule.
    Comments from members of the public are invited, and may be filed 
with the Commission in either paper or electronic form. A public 
comment filed in paper form should be mailed or delivered to the 
following address: Federal Trade Commission/Office of the Secretary, 
Room 159-H, 600 Pennsylvania Avenue, NW., Washington, DC 20580. If the 
comment contains any material for which confidential treatment is 
requested, it must be filed in paper (rather than electronic) form, and 
the first page of the document must be clearly labeled 
``Confidential.'' \1\ A public comment that does not contain any 
material for which confidential treatment is requested may instead be 
filed in electronic form (in ASCII format, WordPerfect, or Microsoft 
Word), as part of or as an attachment to an e-mail message sent to the 
following e-mail box: [email protected]. Regardless of the 
form in which they are filed, all timely comments will be considered by 
the Commission, and will be available (with confidential material 
redacted) for public inspection and copying at the Commission's 
principal office and on the Commission Web site at www.ftc.gov. As a 
matter of discretion, the Commission makes every effort to remove home 
contact information for individuals from the public comments it

[[Page 74581]]

receives, before placing those comments on the FTC Web site.
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    \1\ FTC Rule 4.2(d), 16 CFR 4.2(d). The comment must also be 
accompanied by an explicit request for confidential treatment, 
including the factual and legal basis for the request, and must 
identify the specific portions of the comment to be withheld from 
the public record. The request will be granted or denied by the 
Commission's General Counsel, consistent with applicable law and the 
public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).
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    The Rule was promulgated in 1975 in response to consumer complaints 
that many merchants were failing to ship merchandise ordered by mail on 
time, failing to ship at all, or failing to provide prompt refunds for 
unshipped merchandise. The Rule took effect on February 2, 1976. A 
second rulemaking proceeding in 1993 demonstrated that the delayed 
shipment and refund problems of the mail order industry were also being 
experienced by consumers who ordered merchandise over the telephone. 
The Commission amended the Rule, effective on March 1, 1994, to include 
merchandise ordered by telephone, including by telefax or by computer 
through the use of a modem (e.g., Internet sales), and the Rule was 
then renamed the ``Mail or Telephone Order Merchandise Rule.''
    Generally, the MTOR requires a merchant to: (1) Have a reasonable 
basis for any express or implied shipment representation made in 
soliciting the sale; (2) ship within the time period promised and, if 
no time period is promised, within 30 days; (3) notify the consumer and 
obtain the consumer's consent to any delay in shipment; and (4) make 
prompt and full refunds when the consumer exercises a cancellation 
option or the merchant is unable to meet the Rule's other requirements.
    The notice provisions in the Rule require a merchant who is unable 
to ship within the promised shipment time or 30 days to notify the 
consumer of a revised date and his or her right to cancel the order and 
obtain a prompt refund. Delays beyond the revised shipment date also 
trigger a notification requirement to consumers. When the Rule requires 
the merchant to make a refund and the consumer has paid by credit card, 
the Rule also requires the merchant to notify the consumer either that 
any charge to the consumer's charge account will be reversed or that 
the merchant will take no action that will result in a charge.
    Burden statement:
    Estimated total annual hours burden: 3,094,000 hours (rounded up to 
the nearest thousand).
    In its 2000 PRA notice and submission to OMB regarding the Rule, 
FTC staff estimated that 45,919 established companies each spend an 
average of 50 hours per year on compliance with the Rule, and that 
approximately 1,985 new industry entrants spend an average of 230 hours 
(an industry estimate) for compliance measures associated with start-
up.\2\ 65 FR 77031 (December 8, 2000). Thus, the total estimated hours 
burden was 2,753,000 hours, rounded up to the nearest thousand [(45,919 
x 50 hours) + (1,985 x 230 hours)].
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    \2\ Most of the estimated start-up time relates to the 
development and installation of computer systems geared to more 
efficiently handle customer orders.
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    No provisions in the Rule have been amended or changed since 
staff's prior submission to OMB. Thus, the Rule's disclosure and 
notification requirements remain the same. Since then, however, the 
number of businesses engaged in the sale of merchandise by mail or by 
telephone has increased. Based on the U.S. Department of Commerce 2002 
Statistical Abstract,\3\ approximately 53,600 establishments are now 
subject to the Rule. The staff attributes much of this growth to brick-
and-mortar retailers expanding into electronic shopping, and the 
continued entry of ``dot.com'' merchants into the retail industry.
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    \3\ Statistical Abstract of the United States, 122nd edition, 
2002, U.S. Department of Commerce, Economics and Statistics 
Administration, Table 1000, ``Retail Trade--Establishments, 
Employees and Payroll: 1999 and 2000.'' This is the most recent 
edition currently available.
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    Conversely, based on the 2002 Statistical Abstract data, staff is 
reducing its estimate of new businesses per year from 1,985 to 1,800. 
Thus, the current total of affected entities is approximately 55,400 
(established and new businesses).
    Accordingly, staff estimates total industry hours to comply with 
the MTOR is 3,094,000 hours [(53,600 x 50 hours) + (1,800 x 230 
hours)].
    This is a conservative estimate. Arguably much of the estimated 
time burden for disclosure-related compliance would be incurred even 
absent the Rule. Industry trade associations and individual witnesses 
have consistently taken the position that compliance with the MTOR is 
widely regarded by direct marketers as being good business practice. 
The Rule's notification requirements would be followed in any event by 
most merchants to meet consumer expectations regarding timely shipment, 
notification of delay, and prompt and full refunds. Providing consumers 
with notice about the status of their orders fosters consumer loyalty 
and encourages repeat purchases, which are important to direct 
marketers' success. Thus, it appears that much of the time and expense 
associated with Rule compliance may not constitute ``burden'' under the 
PRA \4\ although the above estimates account for it as such.
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    \4\ Under the OMB regulation implementing the PRA, burden is 
defined to exclude any effort that would be expended regardless of 
any regulatory requirement. 5 CFR 1320.3(b)(2).
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    The mail-order industry has been subject to the basic provisions of 
the Rule since 1976 and the telephone-order industry since 1994. Thus, 
businesses have had several years (and some have had decades) to 
integrate compliance systems into their business procedures. Since 
staff's preceding PRA submission to OMB for the Rule, many businesses 
have upgraded the information management systems they need, in part, to 
comply with the Rule, and to track orders more effectively. These 
upgrades, however, were needed to deal with growing consumer demand for 
merchandise resulting, in part, from increased public acceptance of 
making purchases over the telephone and, more recently, the Internet.
    Accordingly, most companies now maintain records and provide 
updated order information of the kind required by the Rule in their 
ordinary course of business. Nevertheless, staff continues to 
conservatively assume that the time devoted to compliance with the Rule 
by existing and new companies remains unchanged from its preceding 
estimate.
    Estimated labor costs: $51,825,000, rounded to the nearest 
thousand.
    Labor costs are derived by applying appropriate hourly cost figures 
to the burden hours described above. According to the 2002 Statistical 
Abstract, average payroll for ``electronic shipping and mail order 
houses,'' ``direct selling establishments,'' and ``other direct selling 
establishments'' rose from $14.41 per hour in 1999 to $15.19 per hour 
in 2000, an increase of $0.78 per hour. Assuming average payroll 
continued to increase $0.78 per hour per year, average payroll in 2002 
would have reached $16.75 per hour. Because the bulk of the burden of 
complying with the MTOR is borne by clerical personnel, staff believes 
that the average hourly payroll figure for electronic shipping and mail 
order houses and direct selling establishments is an appropriate 
measure of a direct marketer's average labor cost to comply with the 
Rule. Thus, the total annual labor cost to new and established 
businesses in 2002 for MTOR compliance is approximately $51,825,000 
(3,094,000 hours x $16.75/hr.). Relative to direct industry sales, this 
total is negligible.\5\
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    \5\ Projecting sales for ``electronic shopping and mail-order 
houses,'' ``direct selling establishments,'' and ``other direct 
selling establishments'' (according to the 2002 Statistical 
Abstract) to all merchants subject to the MTOR, staff estimates that 
total direct sales to consumers in 2002 to have been $124.88 
billion. Thus, the labor cost for compliance by existing and new 
businesses in 2002 would have amounted to .042% of sales.

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[[Page 74582]]

    Estimated annual non-labor cost burden: $0 or minimal.
    The applicable requirements impose minimal start-up costs, as 
businesses subject to the Rule generally have or obtain necessary 
equipment for other business purposes, i.e., inventory and order 
management, and customer relations. For the same reason, staff 
anticipates printing and copying costs to be minimal, especially given 
that telephone order merchants have increasingly turned to electronic 
communications to notify consumers of delay and to provide cancellation 
options. Staff believes that the above requirements necessitate 
ongoing, regular training so that covered entities stay current and 
have a clear understanding of federal mandates, but that this would be 
a small portion of and subsumed within the ordinary training that 
employees receive apart from that associated with the information 
collected under the Rule.

William E. Kovacic,
General Counsel.
[FR Doc. 03-31714 Filed 12-23-03; 8:45 am]
BILLING CODE 6750-01-P