[Federal Register Volume 65, Number 237 (Friday, December 8, 2000)]
[Notices]
[Pages 77031-77032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31337]


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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 Federal Trade Commission (FTC) has submitted to the Office 
of Management and Budget (OMB) for review under the Paperwork Reduction 
Act (PRA) information collection requirements contained in its Mail or 
Telephone Order Merchandise Trade Regulation Rule (MTOR or ``Rule''). 
The FTC is soliciting public comments on the proposal to extend through 
January 31, 2004 the current PRA clearance for information collection 
requirements contained in the Rule. That clearance expires on January 
31, 2001.

DATES: Comments must be filed by January 8, 2001.

ADDRESSES: Send comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, New Executive Office 
Building, Room 10202, Washington, DC 20503, ATTN: Desk Officer for the 
Federal Trade Commission, and 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: On October 3, 2000, the FTC sought comment 
on the information collection requirements associated with MTOR, 16 CFR 
Part 435 (Control Number: 3084-0106). See 65 FR 58997. No comments were 
received.
    The Rule was promulgated in 1975 in response to consumer complaints 
that many merchants were failing to ship merchandise ordered by mail on 
time, failing to ship at all, or failing to provide prompt refunds for 
unshipped merchandise. The Rule 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 Rule, effective on March 1, 1994, to include 
merchandise ordered by telephone, including by telefax or by computer 
through the use of a modem (e.g., Internet sales), and the Rule was 
then renamed the ``Mail or Telephone Order Merchandise Rule.''
    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 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, Dec. 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. 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

[[Page 77032]]

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 2,752,500 hours [(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. Representatives from industry trade associations and 
other knowledgeable individials have consistently stated that 
compliance with the Rule is widely regarded by direct marketers as 
being good business practice. The Rule's notification requirements 
would be voluntarily initiated 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 existing and new companies devote to compliance with the 
Rule 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 less than 
.03% 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, and 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. This training, however, 
would be a small portion of and subsumed within the ordinary training 
that employees receive apart from that associated with the information 
collected under the Rule.

John D. Graubert,
Acting General Counsel.
[FR Doc. 00-31337 Filed 12-7-00; 8:45 am]
BILLING CODE 6750-01-M