[Federal Register Volume 70, Number 209 (Monday, October 31, 2005)]
[Notices]
[Pages 62313-62315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-21592]


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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 information collection described below will be submitted 
to the Office of Management and Budget (OMB) for review, as required by 
the Paperwork Reduction Act (PRA) (44 U.S.C. 3501-3520). The FTC 
proposes to issue compulsory process orders to the largest cigarette 
manufacturers and smokeless tobacco manufacturers in order to obtain 
information from those companies concerning, inter alia, their sales 
and marketing expenditures.

DATES: Comments on the proposed information requests must be received 
on or before November 30, 2005.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Tobacco Reports: Paperwork Comment, FTC File 
No. P054507'' 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, with two complete 
copies, to the following address: Federal Trade Commission/Office of 
the Secretary, Room H-135 (Annex G), 600 Pennsylvania Avenue, NW., 
Washington, DC 20580. Because paper mail in the Washington area and at 
the Commission is subject to delay, please consider submitting your 
comments in electronic form (in ASCII format, WordPerfect, or Microsoft 
Word), as part of or as an attachment to e-mail messages directed to 
the following e-mail box: [email protected]. However, 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\
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    \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).
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    All comments should additionally be submitted to: Office of 
Management and Budget, Attention: Desk Officer for the Federal Trade 
Commission. Comments should be submitted via facsimile to (202) 395-
6974 because U.S. Postal Mail is subject to lengthy delays due to 
heightened security precautions.
    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 website. 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 collection of information should be addressed to 
Michael Ostheimer, Attorney, Division of Advertising Practices, Bureau 
of Consumer Protection, Federal Trade Commission, 600 Pennsylvania 
Avenue, NW., Washington, DC 20580. Telephone: (202) 326-2699, e-mail: 
[email protected].

SUPPLEMENTARY INFORMATION: For nearly forty years, the Federal Trade 
Commission has published periodic reports containing data on domestic 
cigarette sales and marketing expenditures by the major U.S. cigarette 
manufacturers. The Commission has published comparable reports on 
smokeless tobacco sales and marketing expenditures since 1987. Both 
reports originally were issued pursuant to statutory mandates. After 
those statutory mandates were terminated, the Commission continued to 
collect and publish information obtained from the cigarette and 
smokeless tobacco industries pursuant to section 6(b) of the FTC Act, 
15 U.S.C. 46(b).
    More recently, the Commission decided to address its information 
requests to the ultimate parent of each of the leading cigarette and 
smokeless tobacco manufacturers in order to ensure that no relevant 
data from affiliated companies go unreported. This change presumably 
increases the number of separately incorporated entities affected by 
the Commission's requests.
    The FTC proposes to send information requests on an annual basis to 
the ultimate parent company of each of the five largest cigarette 
companies and each of the five largest smokeless tobacco companies in 
the United States (``industry members''). The information requests will 
seek data regarding, inter alia: (1) The tobacco sales of industry 
members; (2) how much industry members spend advertising and promoting 
their tobacco products, and the specific amounts spent in each of a 
number of specified expenditure categories; (3) whether industry 
members are involved in the appearance of their tobacco products in 
television shows or movies; (4) how much industry members spend on 
advertising intended to reduce youth tobacco usage; (5) the events, if 
any, during which industry members' tobacco brands are televised; and 
(6) for the cigarette industry, the tar, nicotine, and carbon monoxide 
ratings of their cigarettes, to the extent they possess such data. The 
information will be sought using compulsory process under section 6(b) 
of the FTC Act, 15 U.S.C. 46(b) (hereinafter ``6(b) orders'').
    On May 9, 2005, the FTC sought public comment on its proposed 
information collection requests to the major cigarette and smokeless 
tobacco manufacturers. 70 FR 24415. Nine comments were received, which 
are discussed below.\2\ 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 for the proposed 
information requests.
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    \2\ The comments are available at http://www.ftc.gov/os/comments/pratobaccoreports/index.htm.
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    Comments received: The FTC received seven comments supporting the 
collection and reporting of the data in question. Those comments were 
from: (1) The Tobacco Free Kansas Coalition, Inc.; (2) Michael P. 
Eriksen, Sc.D., of the Institute of Public Health at Georgia State 
University; (3) the California Department of Health Services; (4) the 
San Luis Obispo County Tobacco Control Coalition; (5) the National 
Center for Chronic Disease Prevention and Health Promotion, Centers for 
Disease Control and Prevention; (6) the National Association of 
Attorneys General; and (7) a group of 44 public health organizations, 
including the American Lung Association, the American Medical 
Association, and the American Public

[[Page 62314]]

Health Association. In addition, Philip Morris USA filed a comment 
raising several issues regarding the proposed information 
collection.\3\ Finally, the Commission also received one comment from 
an individual opposed to the use of federal funds to collect the 
information at issue.
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    \3\ Philip Mossis USA was the only cigarette or smokeless 
tobacco company to submit a comment in response to the Commission's 
notice.
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    1. Comments Supporting the Data Collection. The comments from 
public health and governmental entities supporting the data collection 
note that the Commission's reports are the only source of comprehensive 
information about the marketing and promotion activities of the 
cigarette and smokeless tobacco industries. The Tobacco Free Kansas 
Coalition, Inc. stated that the data reported by the Commission are 
essential in trying to establish funding for tobacco prevention and 
cessation programs. The California Department of Health Services uses 
the data to assess the rate of expansion of tobacco industry marketing 
and promotion, in order to prioritize resources among its various 
tobacco control priorities. The Public Health Service of the Centers 
for Disease Control and Prevention (PHS-CDC) noted that the 
Commission's reports are the only data source available for 
surveillance of industry spending, and are therefore ``essential in 
monitoring industry tactics regarding advertising, including 
documenting important shifts such as increases in promotional 
spending.'' The PHS-CDC also noted that the FTC reports constitute a 
source of information to monitor industry compliance with restrictions 
such as the Master Settlement Agreement that resulted from the 
settlement of 46 states' lawsuits against the tobacco industry, and 
that the data in those reports are also used to help interpret the 
results of evaluations of tobacco control programs. The 44 public 
health organizations stated that the FTC's reports are virtually the 
only source of reliable information on cigarette and smokeless tobacco 
marketing and sales, and that they play a ``vital role'' in enabling 
government officials, organizations and professional communities to do 
their work.
    Some of the commenters supporting continued data collection did 
recommend changes that they believed would increase the utility of the 
Commission's reports. The California Department of Health suggested 
that the data be reported on a state-by-state basis, rather than the 
national basis that the Commission has always used, and that state-by-
state data be further broken down to provide, among other things, 
company-specific or brand-specific data, and marketing expenditures 
targeting ethnic populations. The PHS-CDC stated that the utility of 
the Commission's reports could be increased by the provision of 
detailed information about individual manufacturers' expenditures, as 
well as brand-specific or brand-category-specific, state-specific and 
major-media-market-specific information. The 44 public health 
organizations similarly suggested in their joint comment, among other 
things, that the Commission report its data on a state-by-state basis, 
and, to the extent possible given trade secret and confidentiality 
concerns, by individual company or brand.
    The FTC has determined that even if the cigarette and smokeless 
tobacco companies are able to report their advertising and marketing 
expenditures on a state-by-state or regional basis, requiring them to 
do so at this time would likely increase the burden on those companies 
without a sufficient increase in the utility of the reports. In 
addition, with regard to data such as the amount spent to promote 
individual brands of cigarettes or smokeless tobacco and the amount 
that a particular company spends to promote all of its products, the 
FTC is prohibited from disclosing such information while it remains 
confidential commercial information. 15 U.S.C. 46(f). Accordingly, the 
FTC does not intend to require reporting on a state-by-state or 
regional basis or release disaggregated expenditure data.
    The 44 public health organizations made a number of additional 
suggestions. First, the organizations suggested that the FTC provide 
more detailed information about promotional allowance and retail-value-
added expenditures. In 2002, the Commission did in fact revise a number 
of the categories in which advertising and promotional expenses were to 
be reported by the manufacturers. Those changes included splitting the 
``retail-value-added'' category into two subcategories (retail-value-
added involving free cigarettes, and retail-value-added involving free 
non-cigarette items), and breaking down the ``promotional allowance'' 
category into four new categories (price discounts, promotional 
allowances paid to retailers, promotional allowances paid to 
wholesalers, and other promotional allowances). The public health 
organizations do not specify what kind of additional information about 
these expenditure categories they want.
    Second, the public health organizations suggest that the FTC 
collect information from the top nine companies in the smokeless 
tobacco and cigarette industries. The Commission has traditionally 
issued its cigarette and smokeless tobacco information requests to the 
five or six largest companies in each industry. At this time, it is not 
necessary for the FTC to increase the number of cigarette and smokeless 
tobacco industry members from whom it will collect information to 18, 
as suggested by the 44 public health organizations. In 2003, the five 
cigarette companies from whom the FTC proposes collecting information 
were responsible for over 90% of cigarette sales, and the five 
smokeless tobacco companies were responsible for over 95% of smokeless 
tobacco sales. It is unlikely that collecting information from 18 
companies, as opposed to the 10 to 15 companies contemplated by the 
FTC, would significantly alter the overall picture of the industries 
because the leading companies also are responsible for most cigarette 
and smokeless tobacco advertising. In light of the aggregated nature of 
the information reported, the incremental benefit of collecting 
information from increasingly small companies would appear to outweigh 
the burden on those companies.
    Finally, the public health organizations made a number of 
additional suggestions, including a request that the FTC report 
cigarette company television advertising regarding their charitable 
activities. The FTC will consider these suggestions when it next issues 
6(b) orders to the cigarette and smokeless tobacco companies for sales 
and marketing expenditure data, bearing in mind not only the potential 
benefits to those who desire the information, but also the feasibility 
of requiring the companies to provide that information and the burden 
of requiring them to do so.
    2. Comment Opposing the Data Collection. The sole comment opposing 
the data collection objected to the expenditure of taxpayer money for 
the purpose of collecting the data in question, stating that ``if the 
tobacco industry wants it, let them pay for it.'' This comment appears 
to be based on the erroneous assumption that the Commission collects 
the data in question for the benefit of the cigarette and smokeless 
tobacco companies.
    3. Comment of Philip Morris USA. Philip Morris USA took no position 
on the proposed collection of information and offered no comment on the 
FTC staff's estimate of the burden of the proposed collection. It did, 
however,

[[Page 62315]]

comment on ways to enhance the quality of the information that the 
Commission proposes to collect, and on ways to minimize the burden 
imposed on tobacco companies in responding to the Commission. 
Specifically, Philip Morris suggested that the Commission: (1) Identify 
the companies from which it seeks data based on a particular sales 
volume or market share, instead of from a preset number of companies; 
(2) solicit information from the tobacco companies on a predetermined 
schedule; (3) increase from 60 days to 90 days the amount of time 
provided to the companies to submit the requested data; (4) announce in 
advance any changes in the kinds of data to be collected or in the ways 
that specific data should be reported; (5) allow advertising and 
promotional expenditure data to be reported to the nearest $1,000, 
rather than to the dollar; and (6) allow expenses to be reported based 
on generally accepted accounting principles.
    Philip Morris suggests that the FTC use sales volume or market 
share benchmarks to identify those companies to whom it will send 
information requests. The FTC does, in fact, consider changes in 
industry market share in determining whether requests should be issued 
to new companies that have not previously received them, but does not 
believe it must adopt any one specific mechanism for determining to 
whom it will issue information requests. Insofar as the FTC is asking 
for clearance from OMB under the PRA to send information requests to up 
to 15 companies, it will retain the flexibility to adapt to major 
changes in either industry.
    Philip Morris suggests several reasonable ways to decrease the 
burden on the cigarette and smokeless tobacco companies. Accordingly, 
after the first set of 6(b) orders, which will be issued after the FTC 
obtains OMB clearance to do so, the FTC will attempt to issue its 6(b) 
orders in the second calendar quarter of the year; unforeseen events 
may, however, change this schedule in any particular year. The FTC will 
also extend the time period for companies to submit their responses 
from 60 days to 90 days, and permit advertising and promotional 
expenditure data to be reported to the nearest $1,000. Furthermore, the 
FTC intends that expenses be reported based on generally accepted 
accounting principles, and Philip Morris's suggestion provides an 
opportunity to clear up any confusion on this issue.
    Philip Morris states that it would like advance notice of any 
changes to the information requirements in the 6(b) orders. The FTC 
provided advance notice of certain relatively significant changes to 
the cigarette and smokeless tobacco 6(b) orders in 2002, so that the 
companies would have additional time to prepare for these changes. The 
FTC will consider whether any additional burden on the companies from 
relatively minor changes in the reporting requirements will be 
outweighed by the costs of the significant delay in obtaining the data 
that would result from providing advance notice.
    Estimated hours burden: The FTC staff's estimate of the hours 
burden is based on the time required to respond to each information 
request. Although the FTC intends to issue the information requests 
only to the five largest cigarette companies and the five largest 
smokeless tobacco companies (for a total of ten information requests), 
the burden estimate is based on up to 15 information requests being 
issued per year to take into account any future changes in these 
industries. Because these companies vary greatly in size, in the number 
of products that they sell, and in the extent and variety of their 
advertising and promotion, the staff has provided a range of the 
estimated hours burden. Based upon its knowledge of the industries, the 
staff estimates that the time required to gather, organize, format, and 
produce their responses ranges between 30 and 80 hours per information 
request for all but the very largest companies. The very largest 
companies could require hundreds of hours per year. Thus, the staff 
estimates a total of 1,800 hours per year, with an average burden per 
company for each of the intended ten recipients of 180 hours. The staff 
estimates that for possible additional recipients, which would be 
smaller companies, the burden should not exceed 300 hours (60 hours per 
company x 5 companies). Thus the staff's estimate of the total burden 
is 2,100 hours. These estimates include any time spent by separately 
incorporated subsidiaries and other entities affiliated with the 
ultimate parent company that has received the information request.\4\
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    \4\ The staff's burden estimate takes into account that the 
first request to the five smokeless tobacco companies may cover data 
for three calendar years.
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    Estimated cost burden: It is not possible to calculate with 
precision the labor costs associated with this data production, as they 
entail varying compensation levels of management and/or support staff 
among companies of different sizes. Financial, legal, marketing, and 
clerical personnel may be involved in the information collection 
process. The staff assumes that professional personnel will handle most 
of the tasks involved in gathering and producing responsive 
information, and have applied an average hourly wage of $150/hour for 
their labor. The staff's best estimate for the total labor costs for up 
to 15 information requests is $315,000.
    The staff estimates that the capital or other non-labor costs 
associated with the information requests are minimal. Although the 
information requests may necessitate that industry members maintain the 
requested information provided to the Commission, they should already 
have in place the means to compile and maintain business records.

William Blumenthal,
General Counsel.
[FR Doc. 05-21592 Filed 10-28-05; 8:45 am]
BILLING CODE 6750-01-P