[Federal Register Volume 69, Number 197 (Wednesday, October 13, 2004)]
[Notices]
[Pages 60877-60880]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-22931]


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FEDERAL TRADE COMMISSION


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

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

ACTION: Notice.

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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) 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 were scheduled to expire on September 
30, 2004. On September 14, 2004, the OMB granted the FTC's request for 
a short-term extension to October 31, 2004 to allow for this second 
opportunity to comment.

DATES: Comments must be submitted on or before November 12, 2004.

ADDRESSES: Interested parties are invited to submit written comments.

[[Page 60878]]

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.
    All comments should additionally be submitted via facsimile to: 
Office of Management and Budget, Attention: Desk Officer for the 
Federal Trade Commission, fax <greek-i>: (202) 395-6974.
    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.
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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). p

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 
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Pennsylvania Ave., NW., Washington, DC 20580, (202) 326-3115.

SUPPLEMENTARY INFORMATION: On July 14, 2004, the FTC sought comment on 
the information collection requirements associated with the Warranty 
Rules, 16 CFR Parts 701-703 (Control Numbers 3084-0111, 3084-0112, and 
3084-0113). See 69 FR 42172. 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.
    The Warranty Rules implement the Magnuson-Moss Warranty Act, 15 
U.S.C. 2301 et seq. (``the Act''), which required the FTC to issue 
three rules relating to warranties on consumer products: the disclosure 
of written warranty terms and conditions; pre-sale availability of 
warranty terms; and rules establishing minimum standards for informal 
dispute settlement mechanisms that are incorporated into a written 
warranty.\2\
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    \2\ 40 FR 60168 (December 31, 1975).
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    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. The Rule tracks 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.\4\
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    \3\ 15 U.S.C. 2302(a).
    \4\ 40 FR 60168, 60169-60170.
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    The Rule Governing Pre-Sale Availability of Written Warranty Terms 
(``Pre-Sale Availabilty Rule''): The Pre-Sale Availability Rule, 16 CFR 
702, requires sellers and warrantors to make the text of any written 
warranty on a consumer product available to the consumer before sale. 
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 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 standards for IDSMs, 
including 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.
    This rule applies only to those firms that choose to be bound by it 
by requiring consumers to use an IDSM. Neither the Rule nor the Act 
requires warrantors to set up IDSMs. 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

[[Page 60879]]

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 $14 for clerical employees 
and 34,000 total burden hours, the annual labor cost is approximately 
$476,000.\5\
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    \5\ The wage rates in this notice have been updated to reflect 
data from the Bureau of Labor Statistics National Compensation 
Survey.
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    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 $14/hour, the total 
annual labor cost burden is approximately $38,640,000.
    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.
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    \6\ Although some retailers may choose to display a more 
elaborate or expensive sign, that is not required by the Rule.
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Informal Dispute Settlement Rule Burden Statement

    Total annual hours burden: 30,000 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. The burden of the rule's disclosure requirements is limited. 
Staff estimates that recordkeeping and reporting burdens are 21,754 
hours per year and the disclosure burdens are 8,157 hours per year. The 
total estimated burden imposed by the Rule is thus approximately 30,000 
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.\7\
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    \7\ The data and resulting calculations for the hours and cost 
burdens for Rule 703 differ slightly from those published in the 
July 14, 2004, Notice in the Federal Register.
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    Although the Rule's paperwork requirements have not changed since 
the FTC's PRA clearance request in 2001, 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. Most of the recordkeeping 
hours are attributed 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 the ordinary course of 
the IDSM's business; 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 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, Nissan, 
Rolls Royce and Land Rover).\8\ Automobile industry representatives 
have informed staff that all domestic manufacturers and most importers 
now include a ``prior resort'' requirement in their warranties, and

[[Page 60880]]

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 Rule 703. Apart from the BBB audit report, 2002 reports 
were also submitted by the 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 5,295 total disputes. 
The National Center for Dispute Settlement handles disputes for 
Mitsubishi, Toyota and Daimler-Chrysler. The 2002 audits of the 
Center's operations show 154 in-jurisdiction Mitsubishi disputes were 
filed; it handled 2,353 in-jurisdiction cases on behalf of Toyota; and 
closed 1,833 cases involving Daimler-Chrysler. Based on these figures, 
staff estimates that the total number of disputes handled by Rule 703 
mechanisms is approximately 32,631. Thus, staff estimates the total 
burden to be approximately 21,754 hours (32,631 disputes x 40 minutes / 
60).
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    \8\ So far as staff is aware, all or virtually all of the IDSMs 
subject to the Rule are within the auto industry.
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    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 their records. (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 
8,157 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 (32,631) 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.\9\ Thus, the IDSMs currently operating under the Rule have an 
estimated total disclosure burden of 8,157 hours (32,631 claims x 15 
min. / 60).
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    \9\ 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.
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    Total annual labor cost: $438,000.
    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 21,754 
recordkeeping burden hours is $348,064. Staff further assumes that 
IDSMs use clerical support at an hourly rate of $11 to reproduce 
records, and therefore that the labor costs of the 8,157 disclosure 
burden hours is approximately $89,727. Accordingly, the combined total 
labor cost for recordkeeping and disclosures is $437,791, rounded to 
438,000.
    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.\10\ 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.
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    \10\ 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.
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    Other non-labor costs: $127,500 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 32,631 consumers) requests a copy of the file 
relating to his or her dispute. Staff also assumes that, for about 
6,526 (20%) of the estimated 32,631 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 $40,788 (25 pages/file x .05 x 32,631 requests) and 
$65,260 for copies of annual audits (200 pages/audit report x .05 x 
6,526 requests), for total copying costs of $106,048, rounded to 
$106,050. 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. 04-22931 Filed 10-12-04; 8:45 am]
BILLING CODE 6750-01-P