[Federal Register Volume 69, Number 134 (Wednesday, July 14, 2004)]
[Notices]
[Pages 42172-42176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-15923]


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

FEDERAL TRADE COMMISSION


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

AGENCY: Federal Trade Commission (``FTC'' or ``Commission'').

ACTION: Notice.

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

SUMMARY: The information collection requirements described below will 
be submitted to the Office of Management and Budget (``OMB'') for 
review, as required by the Paperwork Reduction Act (``PRA''). The FTC 
is seeking public comments on its proposal to extend through September 
30, 2007 the current PRA clearance for information collection 
requirements contained in (1)

[[Page 42173]]

the Rule Concerning Disclosure of Written Consumer Product Warranty 
Terms and Conditions; (2) the Rule Governing Pre-Sale Availability of 
Written Warranty Terms; and (3) the Informal Dispute Settlement 
Procedures Rule. (OMB Control Numbers 3084-0111, 3084-0112, and 3084-
0113, respectively, ``Warranty Rules,'' collectively). These clearances 
expire on September 30, 2004.

DATES: Comments must be submitted on or before September 13, 2004.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Warranty Rules: Paperwork Comment, P044403'' 
to facilitate the organization of comments. A comment filed in paper 
form should include this reference both in the text and on the 
envelope, and should be mailed or delivered to the following address: 
Federal Trade Commission/Office of the Secretary, Room H-159, 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 form, and the first page of the document must be clearly 
labeled ``Confidential.'' \1\ The FTC is requesting that any comment 
filed in paper form be sent by courier or overnight service, if 
possible, because U.S. postal mail in the Washington area and at the 
Commission is subject to delay due to heightened security precautions.
---------------------------------------------------------------------------

    \1\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must 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).
---------------------------------------------------------------------------

    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments will be 
considered by the Commission, and will be available to the public on 
the FTC Web site, to the extent practicable, at http://www.ftc.gov. As 
a matter of discretion, the FTC makes every effort to remove home 
contact information for individuals from the public comments it 
receives before placing those comments on the FTC Web site. More 
information, including routine uses permitted by the Privacy Act, may 
be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Requests for additional information or 
copies of the proposed information requirements should be addressed to 
Carole Danielson, Investigator, Division of Marketing Practices, Bureau 
of Consumer Protection, Federal Trade Commission, Room H-238, 600 
Pennsylvania Ave., NW., Washington, DC 20580, (202) 326-3115.

SUPPLEMENTARY INFORMATION: Under the PRA (44 U.S.C. 3501-3520), Federal 
agencies must obtain approval from OMB for each collection of 
information they conduct or sponsor. ``Collection of information'' 
means agency requests or requirements that members of the public submit 
reports, keep records, or provide information to a third party. 44 
U.S.C. 3502(3), 5 CFR 1320.3(c). As required by section 3506(c)(2)(A) 
of the PRA, the FTC is providing this opportunity for public comment 
before requesting that OMB extend the existing paperwork clearance for 
the Warranty Rules.
    The FTC invites comments on: (1) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the agency, including whether the information will have practical 
utility; (2) the accuracy of the agency's estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumptions used; (3) ways to enhance the quality, 
utility, and clarity of the information to be collected; and (4) ways 
to minimize the burden of the collection of information on those who 
are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submission of responses.
    The Warranty Rules implement the Magnuson-Moss Warranty Act, 15 
U.S.C. 2301 et seq. (``the Act''), which governs written warranties on 
consumer products. The Act directed the FTC to promulgate rules 
regarding the disclosure of written warranty terms and conditions, 
rules requiring that the terms of any written warranty on a consumer 
product be made available to the prospective purchaser before the sale 
of the product, and rules establishing minimum standards for informal 
dispute settlement mechanisms that are incorporated into a written 
warranty. Pursuant to the Act, the Commission published the instant 
three rules.\2\
---------------------------------------------------------------------------

    \2\ 40 FR 60168 (December 31, 1975).
---------------------------------------------------------------------------

    Consumer Product Warranty Rule (``Warranty Rule''): The Warranty 
Rule, 16 CFR 701, specifies the information that must appear in a 
written warranty on a consumer product. It sets forth what warrantors 
must disclose about the terms and conditions of the written warranties 
they offer on consumer products that cost the consumer more than 
$15.00. The Rule tracks the disclosure requirements suggested in 
Section 102(a) of the Act,\3\ specifying information that must appear 
in the written warranty and, for certain disclosures, mandates the 
exact language that must be used. The Warranty Rule requires that the 
information be conspicuously disclosed in a single document in simple, 
easily understood language. In promulgating this rule, the Commission 
determined that the items required to be disclosed are material facts 
about product warranties, the non-disclosure of which would be 
deceptive or misleading.\4\
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 2302(a).
    \4\ 40 FR 60168, 60169-60170.
---------------------------------------------------------------------------

    The Rule Governing Pre-Sale Availability of Written Warranty Terms 
(``Pre-Sale Availabilty Rule''): In accordance with Section 
102(b)(1)(A) of the Act, the Pre-Sale Availability Rule, 16 CFR 702, 
establishes requirements for sellers and warrantors to make the text of 
any written warranty on a consumer product available to the consumer 
before sale. Following the Rule's original promulgation, the Commission 
amended it to provide sellers with greater flexibility in how to make 
warranty information available.\5\
---------------------------------------------------------------------------

    \5\ 52 FR 7569 (March 12, 1987).
---------------------------------------------------------------------------

    Among other things, the Rule requires sellers to make the text of 
the warranty readily available either by (1) displaying it in close 
proximity to the product or (2) furnishing it on request and posting 
signs in prominent locations advising consumers that the warranty is 
available. The Rule requires warrantors to provide materials to enable 
sellers to comply with the Rule's requirements, and also sets out the 
methods by which warranty information can be made available before the 
sale if the product is sold through catalogs, mail order, or door-to-
door sales.
    Informal Dispute Settlement Rule: The Informal Dispute Settlement 
Rule, 16 CFR 703, specifies the minimum standards which must be met by 
any informal dispute settlement mechanism that is incorporated into a 
written consumer product warranty and which the consumer must use 
before pursuing legal remedies in court. In enacting the Warranty Act, 
Congress recognized the potential benefits of consumer dispute 
mechanisms as an alternative to the judicial process. Section 110(a) of 
the Act sets out the Congressional policy to ``encourage warrantors to 
establish procedures whereby consumer disputes

[[Page 42174]]

are fairly and expeditiously settled through informal dispute 
settlement mechanisms'' (``IDSMs'') and erected a framework for their 
establishment. As an incentive to warrantors to establish IDSMs, 
Congress provided in Section 110(a)(3), 15 U.S.C. 2310(a)(3), that 
warrantors may incorporate into their written consumer product 
warranties a requirement that a consumer must resort to an IDSM before 
pursuing a legal remedy under the Act for breach of warranty. To ensure 
fairness to consumers, however, Congress also directed that, if a 
warrantor were to incorporate such a ``prior resort requirement'' into 
its written warranty, the warrantor must comply with the minimum 
standards set by the Commission for such IDSMs. Section 110(a)(2) 
directed the Commission to establish those minimum standards.
    The Informal Dispute Settlement Rule contains extensive procedural 
standards for IDSMs. These standards include requirements concerning 
the mechanism's structure (e.g., funding, staffing, and neutrality), 
the qualifications of staff or decision makers, the mechanism's 
procedures for resolving disputes (e.g., notification, investigation, 
time limits for decisions, and follow-up), recordkeeping, and annual 
audits. The Rule requires that warrantors establish written operating 
procedures and provide copies of those procedures upon request. The 
Rule's recordkeeping requirements specify that all records may be kept 
confidential or otherwise made available only on terms specified by the 
mechanism. However, the records are available for inspection by the 
Commission and other law enforcement personnel to determine compliance 
with the Rule, and the records relating to a specific dispute are 
available to the parties in that dispute. In addition, the audits and 
certain specified records are available to the general public for 
inspection and copying.
    This rule applies only to those firms that choose to be bound by it 
by placing a prior resort requirement in their written consumer product 
warranties. Neither the Rule nor the Act requires warrantors to set up 
IDSMs. Furthermore, a warrantor is free to set up an IDSM that does not 
comply with this rule as long as the warranty does not contain a prior 
resort requirement.

Warranty Rule Burden Statement

    Total annual hours burden: 34,000 hours. In 2001, the FTC estimated 
that the information collection burden of including the disclosures 
required by the Warranty Rule in consumer product warranties was 
approximately 34,000 hours per year. Because the Rule's paperwork 
requirements have not changed since then, and staff believes that the 
number of manufacturers affected is largely unchanged, staff concludes 
that its prior estimate remains reasonable. Moreover, because most 
warrantors would now disclose this information even if there were no 
statute or rule requiring them to do so, this estimate and those below 
pertaining to the Warranty Rule likely overstate the paperwork burden 
attributable to it. The Rule has been in effect since 1976, and most 
warrantors have already modified their warranties to include the 
information the Rule requires.
    The above estimate is derived as follows. Based on conversations 
with various warrantors' representatives over the years, staff has 
concluded that eight hours per year is a reasonable estimate of 
warrantors' paperwork burden attributable to the Warranty Rule. This 
estimate includes the task of ensuring that new warranties and changes 
to existing warranties comply with the Rule. Staff continues to 
estimate that there are 4,241 manufacturing entities, which results in 
a burden figure of 33,928 hours (4,241 x 8 hours annually/
manufacturer), rounded to 34,000.
    Total annual labor costs: Labor costs are derived by applying 
appropriate hourly cost figures to the burden hours described above. 
The work required to comply with the Warranty Rule is predominantly 
clerical. Based on an average hourly rate of $10.75 for clerical 
employees and 34,000 total burden hours, the annual labor cost is 
approximately $365,500.
    Total annual capital or other non-labor costs: The Rule imposes no 
appreciable current capital or start-up costs. The vast majority of 
warrantors have already modified their warranties to include the 
information the Rule requires. Rule compliance does not require the use 
of any capital goods, other than ordinary office equipment, which 
providers would already have available for general business use.

Pre-Sale Availability Rule Burden Statement

    Total annual hours burden: Staff estimates that the burden of 
including the disclosures required by the Pre-Sale Availability Rule in 
consumer product warranties is 2,760,000 hours, rounded to the nearest 
thousand.
    In 2001, FTC staff estimated that the information collection burden 
of including the disclosures required by the Pre-Sale Availability Rule 
in consumer product warranties was approximately 2,760,000 hours per 
year. There has been no change in the Rule's paperwork requirements 
since the previous clearance request in 2001, and the staff has 
determined, based on its knowledge of the industry, that the number of 
manufacturers subject to the Rule remains largely unchanged. Staff 
continues to estimate that there are 6,552 large retailers, 422,100 
small retailers, 146 large manufacturers, and 4,095 small 
manufacturers. Staff estimates that large retailers spend an average of 
26 hours per year and small retailers an average of 6 hours per year to 
comply with the Rule. This yields a total burden of 2,702,952 hours for 
retailers. Large manufacturers spend an average of 52 hours per year 
and small manufacturers spend an average of 12 hours per year, for a 
total burden estimate of 56,732 hours. Thus, the combined total burden 
is 2,760,000 hours, rounded to the nearest thousand.
    Since 2001, some online retailers have begun to post warranty 
information on their web sites, which should reduce their cost of 
providing the required information. However, this method of compliance 
is still evolving and involves a relatively small number of firms. 
Furthermore, those online retailers that also operate ``brick-and-
mortar'' operations would still have to provide paper copies of the 
warranty for review by those customers who do not do business online. 
Thus, online methods of complying with the Rule do not yet appear to be 
sufficiently widespread so as to significantly alter the measure of 
burden associated with the Rule, although it is likely to decrease that 
burden in the future.
    Total annual labor cost: The work required to comply with the Pre-
Sale Availability Rule is predominantly clerical, e.g., providing 
copies of manufacturer warranties to retailers and retailer maintenance 
of them. Assuming a clerical labor cost rate of $10.75/hour, the total 
annual labor cost burden is approximately $29,670,000.
    Total annual capital or other non-labor costs: De minimis. The vast 
majority of retailers and warrantors already have developed systems to 
provide the information the Rule requires. Compliance by retailers 
typically entails simply filing warranties in binders and posting an 
inexpensive sign indicating warranty availability.\6\ Manufacturer 
compliance entails providing retailers with a copy of the warranties 
included with their products.
---------------------------------------------------------------------------

    \6\ Although some retailers may choose to display a more 
elaborate or expensive sign, that is not required by the Rule.

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

[[Page 42175]]

Informal Dispute Settlement Rule Burden Statement

    Total annual hours burden: 32,800 hours. The primary burden from 
the Informal Dispute Settlement Rule comes from its recordkeeping 
requirements that apply to IDSMs incorporated into a consumer product 
warranty. Disclosure requirements are much more limited. Staff 
estimates that recordkeeping and reporting burdens are 23,878 hours per 
year and the disclosure burdens are 8,955 hours per year. The total 
estimated burden imposed by the Rule is thus approximately 32,800 
hours, rounded to the nearest thousand. This marks a decrease from 
staff's estimates in 2001. At that time, staff estimated that the 
recordkeeping and reporting burden was 24,625 hours per year and 9,235 
hours per year for disclosure requirements or, cumulatively, 
approximately 34,000 hours.
    Although the Rule's paperwork requirements have not changed since 
the FTC's immediately preceding PRA clearance request, the audits filed 
by the IDSMs indicate that fewer disputes were handled in 2002, which 
reduces the annual hours burden. The calculations underlying these new 
estimates follow.
    Recordkeeping: The Rule requires that IDSMs maintain individual 
case files, update indexes, complete semi-annual statistical summaries, 
and submit an annual audit report to the FTC. The greatest amount of 
time to meet recordkeeping requirements is devoted to compiling 
individual case records. Because maintaining individual case records is 
a necessary function for any IDSM, much of the burden would be incurred 
in any event; however, staff estimates that the Rule's recordkeeping 
requirements impose an additional burden of 30 minutes per case. Staff 
also has allocated 10 minutes per case for compiling indexes, 
statistical summaries, and the annual audit required by the Rule, 
resulting in a total recordkeeping requirement of 40 minutes per case.
    The amount of work required will depend on the total number of 
dispute resolution proceedings undertaken in each IDSM. The 2002 audit 
report for the BBB AUTO LINE states that, during calendar year 2002, it 
handled 22,996 warranty disputes on behalf of 14 manufacturers 
(including General Motors, Saturn, Honda, Volkswagen, Isuzu, and 
Nissan, as well as smaller companies such as Rolls Royce and Land 
Rover).\7\ Industry representatives have informed staff that all 
domestic manufacturers and most importers now include a ``prior 
resort'' requirement in their warranties, and thus are covered by the 
Informal Dispute Settlement Rule. Therefore, staff assumes that 
virtually all of the 22,996 disputes handled by the BBB fall within the 
Rule's parameters. Apart from the BBB audit report, 2002 reports were 
also submitted by the two mechanisms that handle dispute resolution for 
Toyota, Chrysler, Ford, and Mitsubishi, all of which are covered by the 
Rule. The Ford IDSM states that it handled 7,482 total disputes. The 
audit of the Toyota IDSM handled 3,069 cases in 2002. The Mitsubishi 
audit shows 197 disputes handled. The audit of the Daimler-Chrysler 
IDSM shows 2,073 disputes. All of these disputes are covered by the 
Informal Dispute Settlement Rule. Based on the above data, staff 
estimates that the total number of disputes handled by the Rule's 
mechanisms total is 35,817. Thus, staff estimates the recordkeeping 
burden to be approximately 23,878 hours (35,817 disputes x 40 minutes / 
60 min./hr.).
---------------------------------------------------------------------------

    \7\ So far as staff is aware, all or virtually all of the IDSMs 
subject to the Rule are within the auto industry.
---------------------------------------------------------------------------

    Disclosure: The Rule requires that information about the mechanism 
be disclosed in the written warranty. Any incremental costs to the 
warrantor of including this additional information in the warranty are 
negligible. The majority of such costs would be borne by the IDSM, 
which is required to provide to interested consumers upon request 
copies of the various types of information the IDSM possesses, 
including annual audits. Consumers who have dealt with the IDSM also 
have a right to copies of records relating to their disputes. (IDSMs 
are permitted to charge for providing both types of information.) Given 
the small number of entities that have operated programs over the 
years, staff estimates that the burden imposed by the disclosure 
requirements is approximately 8,955 hours per year for the existing 
IDSMs to provide copies of this information. This estimate draws from 
the estimated number of consumers who file claims each year with the 
IDSMs (35,817) and the assumption that each consumer individually 
requests copies of the records relating to their dispute. Staff 
estimates that the copying would require approximately 15 minutes per 
consumer, including copies of the annual audit.\8\ Thus, the IDSMs 
currently operating under the Rule have an estimated total disclosure 
burden of 8,955 hours (35,817 claims x 15 min. / 60 min./hr.).
---------------------------------------------------------------------------

    \8\ This estimate incorporates any additional time needed to 
reproduce copies of audit reports for consumers upon their request. 
Inasmuch as consumers request such copies in only a minority of 
cases, this estimate is likely an overstatement.
---------------------------------------------------------------------------

    Total annual labor cost: $478,314.
    Staff assumes that IDSMs use skilled clerical or technical support 
staff to compile and maintain the records required by the Rule at an 
hourly rate of $16; thus, the labor cost associated with the 23,878 
recordkeeping burden hours is $382,048. Staff further assumes that 
IDSMs use clerical support at an hourly rate of $10.75 to reproduce 
records, and therefore that the labor costs of the 8,955 disclosure 
burden hours is approximately $96,266. Accordingly, the combined total 
labor cost for recordkeeping and disclosures is $478,314.
    Total annual capital or other non-labor costs: $300,000.
    Total capital and start-up costs: The Rule imposes no appreciable 
current capital or start-up costs. The vast majority of warrantors have 
already developed systems to retain the records and provide the 
disclosures required by the Rule. Rule compliance does not require the 
use of any capital goods, other than ordinary office equipment, to 
which providers would already have access.
    The only additional cost imposed on IDSMs operating under the Rule 
that would not be incurred for other IDSMs is the annual audit 
requirement. One of the IDSMs currently operating under the Rule 
estimates the total annual costs of this requirement to be under 
$100,000. Because there are three IDSMs operating under the Rule 
(Toyota, Mitsubishi, and Chrysler share the same IDSM, though each 
company is reported separately), staff estimates the total non-labor 
costs associated with the Rule to be three times that amount, or 
$300,000.\9\ This extrapolated total, however, also reflects an 
estimated $120,000 for copying costs, which is accounted for separately 
under the category below. Thus, estimated costs attributable solely to 
capital or start-up expenditures is $180,000.
---------------------------------------------------------------------------

    \9\ The industry source did not break down this estimate by cost 
item. Staff conservatively included the entire $100,000 in its 
estimate of capital and other non-labor costs, even though some of 
this burden is likely already accounted for as labor costs.
---------------------------------------------------------------------------

    Other non-labor costs: $116,400 in copying costs. This total is 
based on estimated copying costs of 5 cents per page and several 
conservative assumptions or estimates. Staff estimates that the 
``average'' dispute-related file is about 25 pages long and that a 
typical annual audit file is about 200 pages in length. For purposes of 
estimating copying costs, staff assumes that every consumer complainant 
(or approximately 35,817 consumers)

[[Page 42176]]

requests a copy of the file relating to his or her dispute. Staff also 
assumes that, for about 7,163 (20%) of the estimated 35,817 disputes 
each year, consumers request copies of warrantors' annual audit reports 
(although, based on requests for audit reports made directly to the 
FTC, the indications are that considerably fewer requests are actually 
made). Thus, the estimated total annual copying costs for average-sized 
files is approximately $44,771 (25 pages/file x .05 x 35,817 requests) 
and $71,630 for copies of annual audits (200 pages/audit report x .05 x 
7,163 requests), for total copying costs of $116,401, rounded to 
$116,400). Beginning with the 2002 audits, the FTC staff requested that 
the audits also be submitted in electronic format so they can be posted 
on the FTC Web site. This new procedure will likely reduce the number 
of hours and costs of copying the audits, because the IDSMs will be 
able to refer consumers to the FTC web site, where they can download 
and/or print out the information needed. Because this process has only 
recently begun (and because not all consumers have access to a 
computer), it is too soon to estimate the decrease in hours and costs 
---------------------------------------------------------------------------
that may result from the public posting of the audits.

William E. Kovacic,
General Counsel.
[FR Doc. 04-15923 Filed 7-13-04; 8:45 am]
BILLING CODE 6750-01-P