[Federal Register Volume 65, Number 192 (Tuesday, October 3, 2000)]
[Notices]
[Pages 58997-58999]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25299]


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FEDERAL TRADE COMMISSION


Agency Information Collection Activities: Proposed Collection; 
Comment Requests Extension

AGENCY: Federal Trade 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 Federal Trade 
Commission (FTC) is soliciting public comments on its proposal to 
extend through January 31, 2004 the current PRA clearance for 
information collection requirements contained in its Mail or Telephone 
Order Merchandise Trade Regulation Rule, 16 CFR Part 435 (MTOR or 
``Rule''). That clearance expires on January 31, 2001.

DATES: Comments must be filed by December 4, 2000.

ADDRESSES: Send comments to Secretary, Federal Trade Commission, Room 
H-159, 600 Pennsylvania Ave., NW., Washington, DC 20580. All comments 
should be captioned ``Mail or Telephone Order Merchandise Trade 
Regulation Rule: Paperwork comment.''

FOR FURTHER INFORMATION CONTACT: Requests for additional information 
should be addressed to Joel N. Brewer, Attorney, Division of 
Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 
Room S-4632, 601 Pennsylvania Ave., NW., Washington, DC 20580.

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 MTOR.
    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 Mail Order Merchandise Rule (MOR) was promulgated in 1975 in 
response to consumer complaints that many merchants were failing to 
ship mail order merchandise on time, failing to ship at all, or failing 
to provide prompt refunds for unshipped merchandise. The MOR took 
effect on February 2, 1976. A second rulemaking proceeding in 1993 
demonstrated that the delayed shipment and refund problems of the mail 
order industry were also being experienced by consumers who ordered 
merchandise over the telephone. The Commission amended the MOR, 
effective on March 1, 1994, to include merchandise ordered by 
telephone, including by telefax or by computer through the use of a 
modem, and renamed the Rule to cover ``Mail or Telephone Order 
Merchandise.'' The Rule therefore includes orders placed through the 
Internet.
    Generally, the MTOR requires a merchant to: (1) Have a reasonable 
basis for any express or implied shipment representation made in 
soliciting the sale; (2) ship within the time period promised and, if 
no time period is promised, within 30 days; (3) notify the consumer and 
obtain the consumer's consent to any delay in shipment; and (4) make 
prompt and full refunds when the consumer exercises a cancellation 
option or the merchant is unable to meet the Rule's other requirements.
    The notice provisions in the Rule require a merchant who is unable 
to ship within the promised shipment time or 30 days to notify the 
consumer of a revised date and his or her right to cancel the order and 
obtain a prompt refund. Delays beyond the revised shipment date also 
trigger a notification requirement to consumers. When the

[[Page 58998]]

Rule requires the merchant to make a refund and the consumer has paid 
by credit card, the Rule also requires the merchant to notify the 
consumer either that any charge to the consumer's charge account will 
be reversed or that the merchant will take no action that will result 
in a charge.

Burden Statement

    Estimated total annual hours burden: 2,753,000 hours (rounded up to 
the nearest thousand).
    In its 1997 PRA notice and submission to OMB regarding the Rule, 
FTC staff estimated that 71,560 established companies each spend an 
average of 50 hours per year on compliance with the Rule, and that 
approximately 1,000 new industry entrants spend an average of 230 hours 
(an industry estimate) for compliance measures associated with start-
up.\1\ 62 FR 63717 (December 2, 1997). Thus, the total estimated hours 
burden was 3,808,000 hours [(71,560  x  50 hours) + (1,000  x  230 
hours)].
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    \1\ Most of the estimated start-up time relates to the 
development and installation of computer systems geared to more 
efficiently handle customer orders.
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    No provisions in the Rule have been amended or changed in any 
manner since staff's 1997 PRA submission to OMB. Thus, all of the 
requirements relating to disclosure and notification remain the same. 
However, while staff's estimate of average time required by companies 
to comply with the Rule is unchanged, staff has reduced its estimate of 
total industry hours based on more current data revealing a smaller 
industry population than it previously accounted for. Based on 1999 
Statistical Abstract data (the most current industry data 
available),\2\ there are approximately 45,919 existing establishments 
subject to the Rule.
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    \2\ Statistical Abstract of the United States, 119th edition, 
1999, U.S. Department of Commerce, Economics and Statistics 
Administration.
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    Staff, however, has increased its estimate of the number of new 
companies that enter the market each year from 1,000 to 1,985. This, 
too, is based on 1999 Statistical Abstract data. Thus, the current 
total of affected firms consists of approximately 47,904 established 
and new companies.
    Accordingly, staff estimates total industry hours to comply with 
the MTOR is ((45,919  x  50 hours) + (1,985  x  230 hours)).
    This is a conservative estimate. Arguably much of the estimated 
time burden for disclosure-related compliance would be incurred even 
absent the Rule. Industry trade associations and individual witnesses 
have consistently taken the position that compliance with the Rule is 
widely regarded by direct marketers as being good business practice. 
The Rule's notification requirements would be followed in any event by 
most merchants to meet consumer expectations regarding timely shipment, 
notification of delay, and prompt and full refunds. Providing consumers 
with notice about the status of their orders fosters consumer loyalty 
and encourages repeat purchases, which are important to direct 
marketers' success. Thus, it appears that much of the time and expense 
associated with Rule compliance may not constitute ``burden'' under the 
PRA \3\ although the above estimates account for it as such.
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    \3\ Under the OMB regulation implementing the PRA, burden is 
defined to exclude any effort that would be expended regardless of 
any regulatory requirement. 5 CFR 1320.3(b)(2).
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    In estimating PRA burden, staff considered ``the total time, 
effort, or financial resources expended by persons to generate, 
maintain, retain, disclose or provide information to or for a Federal 
agency.'' 5 CFR 1320.3(b)(1). This includes ``developing, acquiring, 
installing, and utilizing technology and systems for the purpose of 
disclosing and providing information.'' 5 CFR 1320.3(b)(1)(iv). 
Although not expressly stated in the OMB regulation implementing the 
PRA, the definition of burden arguably includes upgrading and 
maintaining computer and other systems used to comply with a rule's 
requirements. Conversely, to the extent that these systems are used in 
the ordinary course of business independent of the Rule, their 
associated upkeep would fall outside the realm of PRA ``burden.''
    The mail order industry has been subject to the basic provisions of 
the Rule since 1976 and the telephone order industry since 1994. Thus, 
businesses have had several years (and some have had decades) to 
integrate compliance systems into their business procedures. Since 1997 
many businesses have upgraded the information management systems they 
need, in part, to comply with the Rule, and to more effectively track 
orders. These upgrades, however, mostly were needed to deal with 
growing consumer demand for merchandise resulting, in part, from 
increased public acceptance of making purchases over the telephone and, 
more recently, the Internet.
    Accordingly, most companies now maintain records and provide 
updated order information of the kind required by the Rule in their 
ordinary course of business. Nevertheless, staff conservatively assumes 
that the time devoted to compliance with the Rule by existing and new 
companies remains the same as in 1997.
    Estimated labor costs: $31,136,000, rounded to the nearest 
thousand.
    Labor costs are derived by applying appropriate hourly cost figures 
to the burden hours described above. According to the 1999 Statistical 
Abstract, average payroll for ``non-store catalogue and mail order 
houses'' and ``non-store direct selling establishments'' rose $0.322 
per hour per year between 1991 and 1996. In 1996, average payroll was 
$10.34 per hour. Assuming average payroll continued to increase $0.322 
per hour per year, in 1999 average payroll would have reached $11.31 
per hour. Because the bulk of the burden of complying with the MTOR is 
borne by clerical personnel, staff believes that the average hourly 
payroll figure for non-store catalogue and mail order houses and non-
store direct selling establishments is an appropriate measure of a 
direct marketer's average labor cost to comply with the Rule. Thus, the 
total annual labor cost to new and established businesses in 1999 for 
Rule compliance is approximately $31,136,000 (2,753,000 hours  x  
$11.31/hr.). Relative to direct industry sales, this total is 
negligible.\4\
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    \4\ Projecting sales for ``non-store catalogue and mail order 
houses'' and ``non-store direct selling establishments'' (according 
to the 1999 Statistical Abstract) to all merchants subject to the 
MTOR, staff estimates that direct sales to consumers in 1999 would 
have been $109.45 billion. Thus, the labor cost of compliance by 
existing and new businesses in 1999 would have amounted to .07% of 
sales.
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    Estimated annual non-labor cost burden: $0 or minimal.
    The applicable requirements impose minimal start-up costs, as 
businesses subject to the Rule generally have or obtain necessary 
equipment for other business purposes, i.e., inventory and order 
management, customer relations. For the same reason, staff anticipates 
printing and copying costs to be minimal, especially given that 
telephone order merchants have increasingly turned to electronic 
communications to notify consumers of delay and to provide cancellation 
options. Staff believes that the above requirements necessitate 
ongoing, regular training so that covered entities stay current and 
have a clear understanding of federal mandates, but that this would be 
a small portion of and subsumed within the ordinary training that 
employees receive apart

[[Page 58999]]

from that associated with the information collected under the Rule.

Debra A. Valentine,
General Counsel.
[FR Doc. 00-25299 Filed 10-2-00; 8:45 am]
BILLING CODE 6750-01-M