[Federal Register Volume 74, Number 111 (Thursday, June 11, 2009)]
[Notices]
[Pages 27794-27796]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-13642]


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FEDERAL TRADE COMMISSION


Agency Information Collection Activities; Proposed Collection; 
Comment Request

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

ACTION: Notice.

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SUMMARY: The FTC intends to conduct two exploratory studies on consumer 
susceptibility to fraudulent and deceptive marketing. This research 
will be conducted to further the FTC's mission of protecting consumers 
from unfair and deceptive marketing. Before gathering this information, 
the FTC is seeking public comments on its proposed research. This 
notice seeks comments on the Fraud Susceptibility Experiment Study, one 
of the two studies. The Commission is also seeking comments on the 
other study in a separate Federal Register notice. Comments will be 
considered before the FTC submits a request for Office of Management 
and Budget (OMB) review under the Paperwork Reduction Act (PRA).

DATES: Comments must be submitted on or before August 10, 2009.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form. Comments should refer to ``Fraud 
Susceptibility Experiment, FTC File No. P095501'' to facilitate the 
organization of comments. Please note that your comment--including your 
name and your state--will be placed on the public record of this 
proceeding, including on the publicly accessible FTC Website, at 
(http://www.ftc.gov/os/publiccomments.shtm).
    Because comments will be made public, they should not include any 
sensitive personal information, such as an individual's Social Security 
Number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. Comments also 
should not include any sensitive health information, such as medical 
records or other individually identifiable health information. In 
addition, comments should not include any ``[t]rade secret or any 
commercial or financial information which is obtained from any person 
and which is privileged or confidential. . . .,'' as provided in 
Section 6(f) of the Federal Trade Commission Act (``FTC Act''), 15 
U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). Comments 
containing material for which confidential treatment is requested must 
be filed in paper form, must be clearly labeled ``Confidential,'' and 
must comply with FTC Rule 4.9(c), 16 CFR 4.9(c).\1\
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    \1\ 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 FTC Rule 4.9(c), 16 CFR 
4.9(c).
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    Because paper mail addressed to the FTC is subject to delay due to 
heightened security screening, please consider submitting your comments 
in electronic form. Comments filed in electronic form should be 
submitted by using the following weblink: (https://secure.commentworks.com/ftc-fraudexperiment) (and following the 
instructions on the web-based form). To ensure that the Commission 
considers an electronic comment, you must file it on the web-based form 
at the weblink: (https://secure.commentworks.com/ftc-fraudexperiment). 
If this Notice appears at (http://www.regulations.gov/search/index.jsp), you may also file an electronic comment through that 
website. The Commission will consider all comments that regulations.gov 
forwards to it. You may also visit the FTC Website at http://www.ftc.gov to read the Notice and the news release describing it.
    A comment filed in paper form should include the ``Fraud 
Susceptibility Experiment, FTC File No. P095501''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-135 (Annex J), 600 Pennsylvania Avenue, NW, Washington, DC 
20580. 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.
    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. The Commission will consider all timely and responsive 
public comments that it receives, whether filed in paper or electronic 
form. Comments received will be available to the public on the FTC 
Website, to the extent practicable, at (http://www.ftc.gov/os/publiccomments.shtm). As a matter of discretion, the Commission 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.shtm).

FOR FURTHER INFORMATION CONTACT: Requests for additional information 
should be addressed to Patrick McAlvanah, Economist, Bureau of 
Economics, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Mail 
Stop NJ-4136, Washington, DC 20580. Telephone: (202) 326-2974; e-mail: 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    As part of its consumer protection mission, the FTC has brought 
hundreds of cases targeting fraud, and has committed significant 
resources to educational initiatives designed to protect consumers. The 
Commission

[[Page 27795]]

hosted a Fraud Forum \2\ on February 25-26, 2009 to examine fraud in 
the market place. The Commission has also conducted telephone surveys 
in 2003 and 2005 designed to measure the proportion of the U.S. adult 
population that has fallen victim to various consumer frauds.\3\ 
Despite this, surprisingly little is known about what determines 
consumers' susceptibility to fraud. For example, the 2003 and 2005 FTC 
Consumer Fraud surveys found that education was not a significant 
predictor of fraud victimization. Understanding when and why people are 
vulnerable to fraud would better inform the FTC's substantial, ongoing 
efforts to fight fraud through law enforcement and consumer education. 
Any additional insights into how and why people fall victim to fraud 
could also help improve any future fraud surveys the Commission may 
undertake. The study announced in this notice is a preliminary and 
exploratory step toward facilitating those efforts. The study is not 
intended to lead to enforcement actions; rather, study results may aid 
the FTC's efforts to better target its enforcement actions and consumer 
education initiatives, and improve future fraud surveys.
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    \2\ Information on the Fraud Forum is available at: (http://www.ftc.gov/bcp/workshops/fraudforum/index.shtm).
    \3\ The Commission has published two staff reports describing 
the results of these surveys -- Consumer Fraud in the United States: 
An FTC Survey (published August 2004 and available at (http://www.ftc.gov/reports/consumerfraud/040805confraudrpt.pdf)) and 
Consumer Fraud in the United States: The Second FTC Survey 
(published in October 2007 and available at (http://www.ftc.gov/opa/2007/10/fraud.pdf).
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    Economic and psychological experiments have identified several 
decision-making biases, such as impulsivity, over-confidence, over-
optimism, and loss aversion, that can cause inaccurate assessments of 
the risks, costs, and benefits of various choices. FTC staff proposes 
to conduct an economic laboratory experiment to study whether these 
types of decision biases are related to consumer susceptibility to 
fraudulent or deceptive marketing claims. Staff intends to study 
consumers' assessment of potentially deceptive advertisements, in 
addition to their assessment of non-deceptive advertisements. Staff 
seeks to understand which characteristics of individuals and 
advertisements predict consumers' ability to differentiate between 
apparently fraudulent materials and apparently legitimate materials.

II. Paperwork Reduction Act

    As required by Section 3506(c)(2)(A) of the PRA, 44 U.S.C. 3501-21, 
the FTC is providing this opportunity for public comment before 
requesting that OMB approve the study. Under the PRA, federal agencies 
must obtain OMB approval 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).
    Specifically, the FTC invites comments on: (1) whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the FTC, including whether the information will have 
practical utility; (2) the accuracy of the FTC's estimate of the burden 
of the proposed collection of information; (3) ways to enhance the 
quality, utility, and clarity of the information to be collected; and 
(4) ways to minimize the burden of collecting information on those who 
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. All comments should be filed as prescribed in 
the ADDRESS section above, and must be received on or before August 10, 
2009.

A. Description of the Collection of Information and Proposed Use

    The FTC proposes to conduct an experiment in a university's 
economics laboratory with 250 subjects drawn from the campus 
community.\4\ A sampling of 250 persons enables random assignment of 
subjects into different experimental conditions of sufficient size for 
analytic power. The sample is not intended to be nationally 
representative, but will still provide useful insights into consumer 
susceptibility to fraud.
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    \4\ Staff has contracted with a faculty member of George Mason 
University who will recruit the study subjects and oversee and 
administer the experiment.
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    The study will gauge consumer attitudes towards legitimate and 
potentially fraudulent or deceptive advertisements. Staff plans to ask 
subjects to examine advertisements or other descriptions of fraudulent 
products and report their opinion about the credibility of product 
claims. Staff also plans to ask participants to rate the credibility of 
advertisements for apparently legitimate products to gauge how 
participants distinguish between apparently fraudulent product claims 
and legitimate product claims. Staff plans to measure consumer 
knowledge, risk attitudes, impulsivity, and skepticism using existing 
methods from economics and psychology research. Staff may measure 
consumer knowledge using consumer literacy and financial literacy 
surveys \5\ in order to test subjects' marketplace understanding and 
sophistication. Staff seeks to determine if people with such knowledge 
deem fraudulent advertisements to be less credible than legitimate 
advertisements. Staff plans to measure subjects' risk attitudes through 
a series of choices between smaller certain amounts of money or larger 
risky amounts.\6\ Staff may describe the product to some subjects as 
creating benefits, while presenting to other subjects nearly identical 
information depicted as a reduction in harm. Staff would then test 
whether risk-averse and loss-averse subjects are particularly 
susceptible to fraudulent claims framed as opportunities to escape 
losses.\7\ Staff may measure subjects' impulsivity through a series of 
choices between smaller monetary amounts received sooner or larger 
amounts but received later.\8\ Staff would then test to see if 
impulsive subjects are more susceptible to fraudulent claims. Staff 
plans to elicit measures of optimism \9\ and skepticism \10\ to 
determine their roles in deeming advertisements, both of fraudulent and 
legitimate products, as credible. In addition, staff anticipates 
collecting demographic information from the surveyed subjects. The FTC 
has contracted with the faculty of a university-run experimental 
economics

[[Page 27796]]

laboratory to locate and recruit subjects and conduct the experiments.
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    \5\ See Annamaria Lusardi, Financial Literacy: An Essential Tool 
for Informed Consumer Choice?, Working Paper, Joint Center for 
Housing Studies, Harvard University (2008), for examples of 
financial literacy questions similar to those the FTC is 
considering.
    \6\ Staff anticipates using standard risk aversion measurement 
methodologies akin to those in Charles Holt and Susan Laury, Risk 
Aversion and Incentive Effects, American Economic Review, December 
2002, 1644-1655.
    \7\ Several academic articles report that people are more 
willing to take identical risks over monetary gambles if the risk is 
presented as an opportunity to escape losses rather than as a chance 
to gain. Our ``framing'' methodologies may emulate those in Amos 
Tversky and Daniel Kahneman, The Framing of Decisions and the 
Psychology of Choice, Science, Vol. 211, No. 4481 (Jan. 30, 1981), 
453-458.
    \8\ Staff anticipates using methodology similar to that in 
Stephan Meier and Charles Sprenger, Impatience and Credit Behavior: 
Evidence from a Field Experiment, Working Papers 07-3, Federal 
Reserve Bank of Boston (2007).
    \9\ Staff plans to use standard questions similar to those in 
Manju Puri and David Robinson, Optimism and Economic Choice, Journal 
of Financial Economics, 2007, Vol. 86, 71-99.
    \10\ Staff may use the scale developed in Carl Obermiller and 
Eric Spangenberg, Development of a Scale to Measure Consumer 
Skepticism toward Advertising, Journal of Consumer Psychology, Vol. 
7, No. 2, 1998, 159-186.
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    Staff will pre-test the experimental procedures with 9 subjects to 
ensure that the instructions provided to participants are clear and 
comprehensible, and that the experimental procedures are workable. Pre-
test subjects will be drawn from FTC staff not involved with the study.

B. Estimated Hours Burden

    The FTC plans to seek information from up to 250 respondents for 
approximately 90 minutes each; thus, approximately 375 hours in total. 
Pre-testing hours are not included in the estimated burden because the 
pre-test subjects will be FTC employees.

C. Estimated Costs Burden

    The cost per respondent should be negligible. Participation will 
not require start-up, capital, or labor expenditures by respondents. 
The above-noted contractor will recruit the student and community 
member subjects to participate in this study; subjects will be asked to 
respond to an initial recruitment email to participate voluntarily. 
Staff will compensate all subjects for their participation in the 90-
minute study. Subjects will receive approximately $8 as a show-up fee; 
in addition, they will be compensated according to their choices for 
some of the tasks. Staff expects subjects to earn on average $22 for 
these tasks, with a range of approximately $12-$32, based on 
expectations of possible experimental outcomes. As such, subjects will 
receive approximately $20-$40 for the 90-minute study.


    By direction of the Commission.
Donald S. Clark,
Secretary
[FR Doc. E9-13642 Filed 6-10-09: 8:45 am]
[BILLING CODE 6750-01-S]