[Federal Register Volume 69, Number 184 (Thursday, September 23, 2004)]
[Rules and Regulations]
[Pages 56932-56934]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-21404]


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FEDERAL TRADE COMMISSION

16 CFR Part 228


Tire Advertising and Labeling Guides

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

ACTION: Final decision.

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SUMMARY: The Commission previously announced its intention to review 
and seek public comment on its Tire Advertising and Labeling Guides 
(``Tire Guides'' or ``Guides''). That review has been completed, and 
this document announces the Commission's decision to rescind the 
Guides.

DATES: Effective Date: September 23, 2004.

ADDRESSES: Requests for copies of this document should be sent to the 
Consumer Response Center, Room 130, Federal Trade Commission, 600 
Pennsylvania Ave., NW., Washington, DC 20580. The document is available 
on the Internet at the Commission's Web site http://www.ftc.gov.

FOR FURTHER INFORMATION CONTACT: Jonathan L. Kessler, Federal Trade 
Commission, 1111 Superior Avenue, Suite 200, Cleveland, Ohio, 44114, 
telephone number (216) 263-3436, E-mail <[email protected]>.

SUPPLEMENTARY INFORMATION:

I. Overview of FTC Tire Advertising Regulation and the Consumer Tire 
Industry

    The Commission's Tire Guides address aspects of the marketing, use, 
and servicing of tires ``for use on passenger automobiles, station 
wagons, and similar vehicles.'' \1\ 16 CFR 228.0. The Commission first 
promulgated Trade Practice Rules For The Tire Industry in 1936. The 
Tire Guides in their current form were published in 1968.\2\ Commission 
hearings in the mid-1960s revealed problems with deceptive advertising 
by sellers, and the Commission concluded that consumers lacked the 
information needed to make informed purchasing decisions. The problems 
appear to have revolved around the lack of standard definitions for the 
terms ``ply'' and ``ply rated,'' the lack of recognized standards for 
safety and quality, and pricing practices.
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    \1\ This definition does not include minivans and sport utility 
vehicles.
    \2\ The only change since 1968 was the addition of a provision 
regarding retreaded tires in 1994.
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    The tire industry, however, has changed considerably in the last 35 
years. First, in 1968, bias ply tires were standard on passenger cars. 
Today, radial tires dominate the consumer market, with bias tires 
relegated to large trucks and historical vehicles. As a result, factors 
such as the number of plies in a tire or its cord material are no 
longer relevant to consumer decision making. Second, in 1968, consumers 
bought tires at full-service gas stations or locally-owned stores that 
carried only one brand of tire. Today, sales also occur through 
national retailers, regional tire stores, new car dealerships, and the 
Internet.\3\ These new retail establishments offer multiple brands, 
tread patterns, and mileage warranties. Moreover, prices for these 
tires are widely advertised, often in full-page newspaper ads or 
inserts. As a result, consumers have more choices of tires and more 
information about prices and options. Third, in 1968, no government or 
industry association established standards for measuring tire quality 
or insuring safety. Today, the National Highway Traffic Safety 
Administration (``NHTSA'') oversees the industry and has promulgated 
comprehensive regulations requiring disclosure of important safety and 
quality features.\4\
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    \3\ In the United States, six tire manufacturers sell nearly 200 
million passenger car replacement tires every year. Almost three-
fourths (72%) of these tires are sold through independent tire 
dealers, including chain stores like Tire Kingdom and NTB. Mass 
merchandisers like Wal-Mart, Sears, and K-Mart account for 18% of 
replacement tire sales. Company-owned stores (e.g., Goodyear and 
Firestone), service stations, new car dealers, and, more recently, 
the Internet, account for the remainder.
    \4\ NHTSA's Uniform Tire Quality Grading System regulations 
(``NHTSA regulations'') set standards for treadwear, traction, and 
temperature ratings, giving consumers the ability to compare the 
quality of one tire with that of another. See 49 CFR 575.104. 
NHTSA's New Pneumatic Tires for Light Vehicles regulations, 49 CFR 
571.139 (TREAD Act regulations), require disclosure on the tire of, 
among other things, the tire's size, maximum inflation pressure, 
maximum load, generic name of cord material, number of plies, 
whether it has radial plies, and whether it is tube or tubeless.

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[[Page 56933]]

II. Regulatory Review of the Guides and Public Comment

    The Commission reviewed the Tire Guides as part of its continuing 
review of all current rules and guides.\5\ On August 25, 2003, the 
Commission published a Federal Register notice seeking comments about 
the costs and benefits of the Guides. Three written comments were 
received, all in favor of significantly revising the Guides.\6\ For 
example, one comment stated: ``[A]s currently written, the Guides have 
limited utility to tire manufacturers, tire dealers and tire consumers, 
appear to be redundant with other consumer protection laws, and have 
been superseded in part by regulations issued by another government 
agency.'' \7\ All three comments substantially agreed on four points:
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    \5\ The Commission periodically reviews its rules and guides. 
These reviews seek and assess information about the costs and 
benefits of the rules and guides, as well as their regulatory and 
economic impact. The information obtained assists the Commission in 
identifying rules and guides that warrant modification or 
rescission. In this instance, the Commission sought comments on, 
among other things: the economic impact of and the continuing need 
for the Guides; possible conflicts between the Guides and other 
federal, state, or local laws and regulations; and the effect of any 
technological, economic, or other industry changes on the Guides.
    \6\ Comments came from the Rubber Manufacturers Association, the 
National Automobile Dealers Association, and the Tire Industry 
Association.
    \7\ Letter dated October 24, 2003, from Ann Wilson, Rubber 
Manufacturers Association, to Secretary, Federal Trade Commission, 
at 2.
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    (1) If retained, the Guides should be expanded from passenger car 
and station wagon tires to include tires for minivans, sport utility 
vehicles, and other light trucks.
    (2) Section 228.2 is obsolete and in need of substantial revision 
or deletion. This provision requires that ads making comparative 
quality claims across tire brands also disclose that no generally 
accepted standards of tire quality exist. In 1978, however, NHTSA 
promulgated its Uniform Tire Quality Grading System, which establishes 
tests and criteria for grading tire quality.
    (3) The ply count and cord material provisions of Sections 228.6 
and 228.7 are obsolete because of the market change from bias ply to 
radial tires (nearly 100% of tires sold for consumer vehicles are 
radials).\8\
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    \8\ The comments differed on whether to revise these sections or 
delete them entirely, however.
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    (4) Ads for used and retreaded tires should continue to disclose 
that those tires are not new, as required by Section 228.9.
    Not all comments addressed each section of the Guides, but the 
overall suggestion of each comment was to revise and retain the Guides 
rather than to rescind them.

III. Determination To Rescind the Guides

    After reviewing the Tire Guides, the consumer tire industry, the 
NHTSA regulations, the above-referenced comments, and other industry 
guides, the Commission has decided to rescind the Guides. This decision 
is based on the fact that many provisions in the Guides duplicate other 
laws and regulations or are obsolete. In addition, some provisions 
describe conduct that is addressed by section 5 of the FTC Act, which 
generally prohibits unfair or deceptive acts or practices.\9\ A 
description and analysis of each of the Guides' nineteen substantive 
provisions follows.\10\
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    \9\ 15 U.S.C. 45.
    \10\ Section 228.0 contains definitions and Section 228.0-1 
provides ``[u]se of guide principles.'' Sections 228.1 through 
228.19 are the substantive sections.
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    Section 228.1 requires point-of-sale disclosure of the load 
carrying capacity of the tire, the composition of the cord material and 
the actual number of plies. It also provides for permanent disclosures 
on the tire itself of the tire's size, whether it is tube or tubeless, 
and its number of plies. This section also requires disclosure via a 
label or tag on the tire of its cord material, load-carrying capacity, 
and inflation pressure. Today, however, NHTSA regulations require this 
information on the tire. Moreover, with radial tires dominating the 
market, the ply count and cord material disclosures provide no 
meaningful information to consumers buying tires for personal, family, 
or household use; NHTSA requires this information because it is 
important to tire retreaders.\11\
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    \11\ The Guides recognize the unique features of radials and 
allow the ply count disclosure to be satisfied with just the 
statement ``radial ply.'' 16 CFR 228.2(b)(1) and (2).
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    Section 228.2 prohibits the use of terms like ``line,'' ``level,'' 
and ``premium'' without also disclosing the lack of any ``industry-wide 
or other accepted system of quality standards or grading of industry 
products' and that any representations of grade or level only apply to 
the marketer's brand. Marketers are prohibited from describing tires as 
``first line'' ``unless the products so described are the best 
products, exclusive of premium quality products embodying special 
features, of the manufacturer or brand name distributor.'' Sec. 228.2 
(d). Today, however, NHTSA regulations enable consumers to compare 
tires on several measures of quality: treadwear, traction, load 
capability, and temperature. Consumers also have the benefit of tire 
warranties, which typically warrant a tire for a particular number of 
miles.\12\
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    \12\ Tire ads for name-brand tires almost always state a mileage 
warranty. Such warranties provide additional, albeit non-specific, 
information about a tire's quality.
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    Section 228.3 complements Section 228.2 by prohibiting a 
manufacturer from using terms that imply that one of its tires is 
better than another unless the first is actually superior. Section 
228.4 prohibits describing a tire as ``original equipment'' unless it 
is currently used on new cars or the manufacturer discloses when the 
tire was last used on new cars. Under the Guides, original equipment 
tires are considered to be ``the same brand and quality tires used 
generally as original equipment on new current models of vehicles of 
domestic manufacture.'' There is no evidence, however, whether 
consumers still understand the term ``original equipment'' in this way 
or have changed their understanding over the years, and none of the 
commenters mentioned this section. Section 228.5 prohibits any other 
quality or performance claim unless the claim maker has test results to 
substantiate the claim. Today, most of these claims would clearly be 
covered by the FTC's deception standard and substantiation 
doctrine.\13\
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    \13\ Section 5 of the FTC Act, 15 U.S.C. 45, prohibits, among 
other things, deceptive acts or practices. The substantiation 
doctrine requires advertisers to have reasonable substantiation for 
claims in advertisements at the time the advertisement is published.
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    Sections 228.6 and 228.7 govern representations of ``ply count,'' 
``plies,'' ``ply rating,'' and ``cord material.'' These factors were 
important indicators of tire quality with bias ply tires. Today, 
however, radial tires make these measures far less meaningful; NHTSA 
requires them only because they affect the retread process. In their 
place, NHTSA regulations require more direct information about tire 
quality.
    Sections 228.8, 228.9, and 228.11 require disclosures in ads for 
tires that are used or imperfect. In 1968, consumers who did not want 
to pay for new, perfect tires could purchase used, retreaded, or 
blemished tires. Today, however, these tires are seldom found in the 
consumer market. (Large truck tires, such as those for semis, are often 
retreaded, and retreads account for as much as 60% of that market.) 
Moreover, if a business were to sell a used, blemished, or defective 
tire without proper disclosures, such conduct would likely constitute 
deception in violation of section 5 of the FTC Act.
    Section 228.10 requires disclosure if an advertised tire is a 
discontinued or

[[Page 56934]]

obsolete model. Tire manufacturers today, however, often change models, 
so it is questionable whether such information is material to 
consumers. None of the commenters discussed this provision and there is 
no evidence whether consumers are concerned about or would be adversely 
affected by purchasing a tire that is being discontinued. If problems 
were to surface in this area, they likely could be addressed by section 
5 of the FTC Act.
    Sections 228.12 and 228.13 address advertisements that use pictures 
or racing themes. Pictures must be of the tire advertised and ads using 
racing themes must disclose that the tires on race cars ``are not 
generally available all purpose tires, unless such is the fact.'' As in 
1968, pictures and video can be used today to misrepresent the 
qualities of tires, but any material misrepresentations would violate 
section 5 of the FTC Act.
    Sections 228.14 and 228.15 address price advertising. Section 
228.14 prohibits bait advertising, and Section 228.15 addresses price 
comparisons. Although both sections address concerns that may be 
relevant to the current tire market, the Commission has published 
guides devoted to both issues. See 16 CFR 238 (bait advertising) and 16 
CFR 233 (deceptive pricing). These guides should provide adequate 
information for tire industry members to understand how section 5 of 
the FTC Act applies to their products, making Sections 228.14 and 
228.15 redundant.
    Section 228.16 requires ads containing guarantees to disclose 
details of those guarantees, including how price adjustments will be 
calculated if a tire fails during the guarantee period. Today, however, 
warranties must be available at a store for inspection before purchase. 
16 CFR 702 (rule on the Presale Availability of Written Warranty 
Terms). Requiring disclosure of guarantee details in ads themselves 
thus appears unnecessary. Advertising claims about warranties and 
guarantees are also addressed by the Guides for the Advertising of 
Warranties and Guarantees, 16 CFR 239.
    Section 228.17 prohibits absolute performance or safety claims such 
as ``blowout proof'' or ``skid proof'' unless the claims are true under 
all driving conditions. Any problems attributable to these or similar 
claims can be addressed by section 5 of the FTC Act.
    Section 228.18 prohibits claims that deceive purchasers or 
prospective purchasers in any material respect. Even if updated, this 
section would still only restate established law and not provide 
additional guidance to the tire industry.
    Section 228.19 requires that ads for metal studded snow tires 
disclose that their use is illegal in some places. Non-metal studded 
mud and snow tires and all weather tires, however, have made metal 
studded tires far less common now than in 1968.
    In sum, the Commission's review has produced no clear reason for 
retaining the Guides. Even if revised as the comments suggested, the 
Guides would not provide consumers with any information not already 
required to be available to them by other laws and regulations. 
Moreover, neither the comments nor the Commission staff's own review of 
tire advertising has identified benefits to consumers from the existing 
Guides or areas where businesses are in particular need of Commission 
guidance. Indeed, one comment, after noting several changes in the 
industry that would make significant revisions necessary if the Guides 
were to be retained, admitted that ``[t]hese changes will not make a 
huge difference to consumers. They will simply update the Guides to 
reflect today's market.''\14\ Because the vast majority of Tire Guide 
provisions are adequately addressed by other laws and regulations 
(including NHTSA regulations and Section 5 of the Federal Trade 
Commission Act) or have been rendered obsolete because of changes in 
the market, the Commission has determined to rescind the Guides.
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    \14\ Letter dated October 24, 2003 from Becky MacDicken, Tire 
Industry Association, to Secretary, Federal Trade Commission, at 3.
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List of Subjects in 16 CFR Part 228

    Advertising, Automobile tires, Trade practices.

PART 228--[REMOVED]

0
The Commission, under authority of sections 5(a)(1) and 6(g) of the 
Federal Trade Commission Act, 15 U.S.C. 45(a)(1) and 46(g), amends 
Chapter 1 of Title 16 of the Code of Federal Regulations by removing 
part 228.

    By direction of the Commission, Commissioner Leibowitz not 
participating.
Donald S. Clark,
Secretary.
[FR Doc. 04-21404 Filed 9-22-04; 8:45 am]
BILLING CODE 6750-01-P