Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations 36555

1 15 U.S.C. 2101–2106.

2An imitation political item is ‘‘an item which

purports to be, but in fact is not, an original

political item, or which is a reproduction, copy, or

counterfeit of an original political item.’’ 15 U.S.C.

2106(2).

Comments Invited

Although this action is in the form of

a final rule and was not preceded by a

notice of proposed rulemaking,

comments are invited on this rule.

Interested persons are invited to

comment on this rule by submitting

such written data, views, or arguments

are they may desire. Communications

should identify the Rules Docket

number and be submitted in triplicate to

the address specified under the caption

ADDRESSES. All communications

received on or before the closing date

for comments will be considered, and

this rule may be amended or withdrawn

in light of the comments received.

Factual information that supports the

commenter’s ideas and suggestions is

extremely helpful in evaluating the

effectiveness of this action and

determining whether additional

rulemaking action would be needed.

Comments are specifically invited on

the overall regulatory, economic,

environmental, and energy aspects of

the rule that might suggest a need to

modify the rule. All comments

submitted will be available, both before

and after the closing date for comments,

in the Rules Docket for examination by

interested persons. A report that

summarizes each FAA-public contact

concerned with the substance of this

action will be filed in the Rules Docket.

Commenters wishing the FAA to

acknowledge receipt of their comments

submitted in response to this rule must

submit a self-addressed, stamped

postcard on which the following

statement is made: ‘‘Comments to

Docket No. 98–AWP–16.’’ The postcard

will be date stamped and returned to the

commenter.

Agency Findings

The regulations adopted herein will

not have substantial direct effects on the

States, on the relationship between the

national government and the States, or

on the distribution of power and

responsibilities among the various

levels of government. Therefore, in

accordance with Executive Order 12612,

it is determined that this final rule does

not have sufficient federalism

implications to warrant the preparation

of a Federalism Assessment.

The FAA has determined that this

regulation is noncontroversial and

unlikely to result in adverse or negative

comments. For the reason discussed in

the preamble, this regulation only

involves an established body of

technical regulations for which frequent

and routine amendments are necessary

to keep them operationally current.

Therefore, this regulation—(1) is not a

‘‘significant regulatory action’’ under

Executive Order 12866; (2) is not a

‘‘significant rule’’ under DOT

Regulatory Policies and Procedures (44

FR 11034; February 26, 1979); and (3)

does not warrant preparation of a

Regulatory Evaluation as the anticipated

impact is so minimal. Since this is a

routine matter that will only affect air

traffic procedures and air navigation, it

is certified that this rule will not have

a significant economic impact on a

substantial number of small entities

under the criteria of the Regulatory

Flexibility Act.

List of Subjects in 14 CFR Part 71

Airspace, Incorporation by reference,

Navigation (air)

Adoption of the Amendment

In consideration of the foregoing, the

Federal Aviation Administration

amends 14 CFR part 71 as follows:

PART 71—DESIGNATION OF CLASS A,

CLASS B, CLASS C, CLASS D, AND

CLASS E AIRSPACE AREAS; ROUTES;

AND REPORTING POINTS

1. The authority citation for 14 CFR

part 71 continues to read as follows:

Authority: 49 U.S.C. 106(g), 40103, 40113,

40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–

1963 Comp., p. 389; 14 CFR 11.69.

§ 71.1 [Amended]

2. The incorporation by reference in

14 CFR 71.1 of the Federal Aviation

Administration Order 7400.9E, Airspace

Designations and Reporting Points,

dated September 10, 1997, and effective

September 16, 1997, is amended as

follows:

Paragraph 5000 Class D Airspace

* * * * *

AWP CA D San Diego, North Island NAS, CA

[Revised]

San Diego, North Island NAS (Halsey Field),

CA

(lat. 32°41′57′′ N, long. 117°12′55′′ W)

That airspace extending upward from the

surface to but not including 2,800 feet MSL

within a 4.3-mile radius of North Island NAS

(Halsey Field), excluding the airspace within

the San Diego, CA, Class B airspace area.

This Class D airspace area is effective during

the specific dates and times established in

advance by a Notice to Airmen. The effective

date and time will thereafter be continuously

published in the Airport/Facility Directory.

* * * * *

Issued in Los Angeles, California, on June

23, 1998.

John G. Clancy,

Manager, Air Traffic Division, Western-Pacific

Region.

[FR Doc. 98–17858 Filed 7–6–98; 8:45 am]

BILLING CODE 4910–13–M

FEDERAL TRADE COMMISSION

16 CFR Part 304

Regulatory Review and Regulatory

Flexibility Act Review of Rules and

Regulations Issued Under the Hobby

Protection Act

AGENCY: Federal Trade Commission.

ACTION: Confirmation of rule.

SUMMARY: The Federal Trade

Commission (FTC or Commission) has

completed its regulatory review and

Regulatory Flexibility Act (RFA) review

of the Rules and Regulations Issued

Under the Hobby Protection Act. The

Rule regulates the marking of imitation

political and numismatic items.

Pursuant to its regulatory review, the

Commission concludes that the Rule

continues to be valuable both to

consumers and firms. The Commission

also certifies, pursuant to the RFA, that

the Rule has not had a significant

economic impact upon a substantial

number of small or other entities or

otherwise merits revision.

DATES: This action is effective as of July

7, 1998.

FOR FURTHER INFORMATION CONTACT:

Robert E. Easton, Special Assistant,

Division of Enforcement, Bureau of

Consumer Protection, FTC, Washington,

DC 20580, (202) 326–3029.

SUPPLEMENTARY INFORMATION:

I. Introduction

The Commission has determined, as

part of its oversight responsibilities, to

review its rules and guides periodically

to seek information about their costs

and benefits and their regulatory and

economic impact. The information

obtained assists the Commission in

identifying rules and guides that

warrant modification or rescission.

Where appropriate, the Commission

will, as it did in this review, combine

such periodic general reviews with

reviews seeking information about the

economic impact of the rule on small

business firms as required by the

Regulatory Flexibility Act.

II. Background

On November 29, 1973, Congress

passed the Hobby Protection Act (Act).1

The Act requires manufacturers and

importers of ‘‘imitation political

items’’ 2 to mark ‘‘plainly and

permanently’’ such items with the
36556 Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations

3An imitation numismatic item is ‘‘an item

which purports to be, but in fact is not, an original

numismatic item or which is a reproduction, copy,

or counterfeit of an original numismatic item.’’ 15

U.S.C. 2106(4).

4 15 U.S.C. 2101(b).

5 15 U.S.C. 2101(c).

6 16 CFR Part 304.

7 53 FR 38942 (1988). Prior to the amendment, if

a coin were too small to comply with the minimum

letter size requirements, the manufacturer or

importer had to individually request from the

Commission a variance from those requirements.

Because imitation miniature coins were becoming

more common, the Commission determined that it

was in the public interest to allow the placing of

the word ‘‘copy’’ on miniature imitation coins in

sizes that could be reduced proportionately with

the size of the item.

8 62 FR 14049 (1997). The comments have been

filed on the Commission’s public record as

Document Nos. B21938200001, B21938200002, etc.

The comments are cited in this notice by the name

of the commenter, a shortened version of the

comment number, and the relevant page(s) of the

comment, e.g., Daugherty, 493, 1. All Rule review

comments are on the public record and are

available for public inspection in the Public

Reference Room, Room 130, Federal Trade

Commission, 6th and Pennsylvania Ave., NW,

Washington, DC, from 8:30 a.m. to 5:00 p.m.,

Monday through Friday, except federal holidays.

9Seven hundred twenty-one comments were form

letters cut out or photo-copied from an Antique

Week newspaper or based thereon (e.g., Lubitz, 61,

1), 223 were form letters from collectors and dealers

of Nippon porcelain (e.g., Dersheimer, 59, 1), and

34 comments used or were based upon an Antiques

Journal form letter (e.g., Mercier, 4, 1).

10American Numismatic Association (ANA), 94;

American Political Items Collectors (APIC), 515;

Antique & Collectibles Dealers Association, Inc.,

495; and Appraisers Association of America, Inc.,

494 and 526.

11Antique & Collectors Reproduction News, 497;

Antique Week, 499 and 540; Antiques Journal, 4;

and Coin World, 514.

12 Gallery Mint Museum (Gallery Mint), 398.

13U.S. Mint, 511.

14See, e.g., Barrie, 19.

15See, e.g., Dilinger, 103.

16See, e.g., Wayne County (PA) Antique Dealers

Assoc., 517.

17See, e.g., APIC, 7, 1; Mint, 511, 1; Prestwood,

512, 1; and Peeling, 254, 1. For example, APIC

stated that, ‘‘We still have some reproductions

today, but the problem is not serious, thanks to the

Hobby Protection Act, and enforcement of the Act.

Further, most campaign items reproduced since the

early 1970’s are in compliance with the Act, marked

in accordance with the regulations.’’ APIC, 7, 1. The

United States Mint similarly favored continued

coverage of imitation numismatic items because,

‘‘[t]he numismatic area is prone to opportunism,

and sanctions for objectionable behavior are hard to

impose. The Hobby Protection Act works as a

preventive to counter attempts to pass off

reproductions as genuine coins.’’ Mint, 511, 1.

Other comments similarly agree that the current Act

protects the political memorabilia and numismatic

collecting areas and should be continued. See, e.g.,

Lubitz, 61, 1.

18APIC pointed out that the advent of color

copying machines, color computer technology, and

digital image creation and enhancement has

increased the capability of individuals to ‘‘create,

maintain, use, transfer, and reproduce high quality

images.’’ APIC, 515, 7. ANA stated that, ‘‘[a]ny

change in relevant technology would only increase

the ability to manufacture more deceiving replicas.’’

ANA, 94, 3.

19ANA, 94, 2.

20 Gallery Mint, 398, 2.

21APIC, 515, 3.

22See e.g., APIC: ‘‘The costs imposed, if any, have

been de minimis. The cost of adding a few more

letters to a printing job * * * when the job is going

to be undertaken regardless is negligible.’’ APIC,

515 6. See also ANA, 94, 2; Coin World, 514, 3; and

Gallery Mint, 398, 3.

23APIC, 515 6; and ANA, 94, 2.

24A few comments noted that the Rule

technically overlaps with certain federal

‘‘calendar year’’ such items were

manufactured. The Act also requires

manufacturers and importers of

‘‘imitation numismatic items’’ 3 to mark

‘‘plainly and permanently’’ such items

with the word ‘‘copy.’’ 4 The Act further

provides that the Commission is to

promulgate regulations for determining

the ‘‘manner and form’’ imitation

political items and imitation

numismatic items are to be permanently

marked with the calendar year of

manufacture or the word ‘‘copy.’’ 5

In response to that requirement, in

1975 the Commission issued Rules and

Regulations under the Hobby Protection

Act (Rule).6 The Rule tracks the

definitions of terms used in the Act and

implements the Act’s ‘‘plain and

permanent’’ marking requirements by

establishing the sizes and dimensions of

the letters and numerals to be used, the

location of the marking on the item, and

how to mark incusable (i.e., those that

can be impressed with a stamp) and

nonincusable items. The Commission

amended the Rule in 1988 to provide

additional guidance on the minimum

size of letters for the word ‘‘copy’’ as a

proportion of the diameter of coin

reproductions.7

As discussed below, the comments

received in this review appear to reflect

a high level of compliance as to the two

products covered by the Act and Rule

(i.e., imitation political and numismatic

items). Many comments also proposed

that the Commission expand coverage of

the Act and Rule to address problems

involving the selling (passing off) as

originals of reproductions of antiques

and collectibles not covered by the Act

and Rule. The Commission does not

propose amending the Rule as requested

because it does not have authority under

the Act to expand coverage of the Act

or Rule. In addition, existing laws and

informational material currently

available address many of the concerns

raised by these comments.

III. Regulatory Review and Regulatory

Flexibility Questions and Comments

The Commission received a total of

1,145 comments in response to its

March 25, 1997 Federal Register request

for comments.8 Of that number, nearly

1,000 comments were form letters that

advocated expanding coverage of the

Act and Rules to all antiques and

collectibles.9 Of the other comments,

four were from national associations,10

four from hobby newspapers,11 one

from a private mint,12 one from the

United States Mint,13 and the remaining

were from individual collectors,14

dealers,15 and local associations.16

The Commission discusses the

comments in two section: In section A,

the Commission analyzes the comments

relating to the products covered by the

Act and Rule (‘‘covered products’’); and,

in section B, the Commission discusses

the comments relating to alleged

problems with products outside the

coverage of the Act and Rule.

A. Comments Relating to Covered

Products

1. Support for the Rule

As noted previously, the Act and

Rule’s scope are limited to imitation

political and numismatic items. The

comments uniformly stated that there is

a continuing need for the Rule and that

is has been successful in protecting

consumers from the passing off of

reproductions of the covered items.17

Indeed, two comments indicated that

the Rule’s protective value may have

increased over the years as

technological changes that have made it

easier to make high quality

reproductions of political and

numismatic items have also made it

easier to deceive consumers.18

The few comments addressing the

issue of what costs the Rule imposes on

purchasers indicated that the costs are

slight and outweighed by the benefits.

For example, one commenter wrote that,

‘‘[a]ssuming that the costs of affixing the

word ‘copy’ or the date is reflected in

the selling price, it would appear that

the increase per item would be an

insignificant amount that any purchaser

would be willing to pay by reason of the

protection afforded by the rule.’’ 19

Another commenter stated that the

process of stamping the word ‘‘copy’’ on

coins ‘‘has no significant bearing on the

price of any individual piece.’’ 20 One

commenter noted that the Rule saves

purchasers money because it lessens

that chance of purchasing a fake.21

In addition, the comments indicated

that the Rule does not impose

significant burdens or costs on firms

subject to its requirements. The

comments addressing this issue

uniformly stated that the Rule has not

imposed significant costs on subject

firms 22 and in fact has benefitted

them. 23 No comment suggested any

changes in the Rule to reduce costs. 24
Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations 36557

counterfeiting laws (Gallery Mint, 398, 3; and Ganz,

1, 1) and a consumer protection law in California

(APIC, 515, 6). These comments, however, did not

state that the Rule conflicted with these laws or that

overlaps caused additional costs or burdens to

small entities or other companies, or in any other

way adversely affected businesses or consumers.

The Commission, therefore, concludes that these

minor overlaps do not warrant modification of the

Rule.

25The Gallery Mint commented that while

compliance with the Rule involves more time in

production or die set-up, this is ‘‘just the nature of

the business’’ and the requirements are ‘‘very easy

to adhere to.’’ Gallery Mint, 398, 4. See also APIC,

515, 7; and Coin World, 514, 3.

26See, e.g., ANA: ‘‘The cost of affixing the word

‘copy’ or the date would be the same for large and

small firms.’’ ANA, 94, 3.

27Coin World, 514, 3, and APIC, 515, 8.

28See. e.g., APIC. 515, 8; ANA, 94, 3; and Coin

World, 514, 3.

29See. e.g., APIC, 515, 6.

30ANA, 94, 2.

31Coin World, 514, 3.

32 16 CFR 304.6(b)(2).

33The Act and Rule do not have requirements

that address the advertising of covered products.

The requirements address only the marking of the

imitation numismatic or political item. Of course,

misrepresenting a copy as an original in advertising

would constitute a ‘‘deceptive’’ practice in violation

of § 5 of the FTC Act. 15 U.S.C. 45.

34APIC, 515, 4.

35 15 U.S.C. 2106; and 16 CFR 304.1.

36See 16 CFR 304.5(3) and (4) (imitation political

items) and 304.6(3) and (4) (imitation numismatic

items).

37For example, the minimum total horizontal

dimension of the word ‘‘copy’’ should be six

millimeters or ‘‘not less than one-half of the

diameter of the reproduction.’’ 16 CFR 304.6(3).

38 62 FR 14049.

39ANA, 94, 3; Coin World, 514, 3; and, Ganz, 1,

1.

Commenters that addressed the issue

of whether the Rule imposes significant

costs on small businesses indicated that

the Rule imposes only de minimis costs

on small firms 25 and several

commenters stated there is no difference

in the cost of compliance for small or

large firms, 26 and that these costs are no

different than a small business would

incur under standard and prudent

business practices. 27 For this reason, no

commenters believed changes to the

Rule were needed to reduce small

business costs. 28

Some comments indicated that the

Rule is valuable to manufacturers and

firms. One commenter stated that, ‘‘The

rules * * * have benefitted firms which

intend to be good players. The rules

have provided a standard means of

denoting lawful status as a ‘copy’ which

in turn has been recognized and

accepted in the hobby and consumer

marketplace.’’29 Similarly, another

commenter noted the addition of the

word ‘‘copy’’ or the date of manufacture

may avoid litigation costs resulting from

the intentional or unintentional sale of

unmarked items as originals.30

2. Proposed amendments regarding

covered products

a. Double-sided marking of ‘‘copy’’ on

numismatic items.

One comment suggested amending

the Rule to require that the word ‘‘copy’’

be marked on both sides of imitation

numismatic items.31 The Rule currently

requires that the word ‘‘copy’’ be

marked on either side of the coin (i.e.,

either the obverse or the reverse side of

the item).32 The comment argued that

marking ‘‘copy’’ on only one side does

not let potential buyers know that a

replica on exhibit with only one side

displayed or in an advertisement is an

imitation because ‘‘copy’’ may be on the

side not displayed.

The Commission has concluded that a

requirement that ‘‘copy’’ be marked on

both sides of an imitation coin is not

warranted. The comments indicate that

the current requirement for marking

coins on only one side is highly

successful. Regarding exhibited coins,

the potential buyer would normally

have the opportunity to fully view and

physically handle the item, thus

affording the opportunity to see the

‘‘copy’’ marking prior to purchase.

Regarding the concern that the word

‘‘copy’’ may not be displayed in

advertising,33 the Commission believes

that coin depictions in advertising are

likely to be small, making any ‘‘copy’’

marking proportionately even smaller.

Double-sided marking of a coin is

therefore unlikely to result in a

prominent disclosure of the word

‘‘copy,’’ and thus would not remedy the

alleged problem raised in the comment.

The Commission also believes that

double-sided marking would not be

without costs. Although the costs of

marking ‘‘copy’’ on an additional side of

the item might be slight, there would

still be some cost to manufacturers. In

addition, double-sided marking might

detract from the esthetic appeal of the

replica and could have adverse effects

on the market for imitation numismatic

items.

b. Require that all political items be

marked with year of manufacture.

The Rule currently requires that

imitation political items be marked with

the date of manufacture. One comment

recommended broadening the Rule to

require that all political items, both

original and imitation, be permanently

and prominently marked with the year

that the manufacturing process was

completed.34 According to the

comment, requiring that the date of

manufacture appear on all political

items would prevent the consumer

confusion and deception that occurs

with certain types of political buttons.

According to this comment,

manufacturers routinely print excess

‘‘button papers’’ so that if they receive

additional orders during the campaign

they will not need to print additional

papers. These excess papers may not be

manufactured into finished political

buttons, however, until years later. For

example, the comment described a

situation in which paper sheets of

images created and printed in 1920 for

the 1920 Cox-Roosevelt campaign were

not put on buttons until 1997.

The Commission does not propose to

expand the Rule to require the marking

of original political items. First, the

Commission does not have the authority

to require such marking under the Act,

which requires the marking of only

imitation items. Second, the problem

raised by the comment is already

covered by the Act and Rule. The Act

and Rule define ‘‘Original political

item’’ as including ‘‘any political button

* * * produced for use in any political

cause.’’ 35 Until button paper is

incorporated into a political button, a

political button cannot have been

‘‘produced’’ for use in any political

cause. A subsequently produced

political button therefore would not be

an ‘‘original political item’’ as defined

in the Act and Rule. The type of button

described by the comment would thus

be an imitation political item that,

under the current Rule, must be marked

with the year of manufacture.

c. Replace minimum size

requirements for required markings with

a performanced-based standard.

The Rule currently mandates the font

style and minimum size for the

markings required by the Rule 36 but

allows the minimum marking size for

imitation numismatic items to be

proportional to the size of the item.37

The FRN asked whether the

Commission should amend the Rule to

replace the mandated minimum sizes

with a performance-based standard, for

example, with a clear and prominent

disclosure requirement.38

Five commenters involved in the

numismatic field addressed this issue.

Three of those five favored keeping the

existing size standards because they

believe that the precise requirements of

the current standard provide clear

guidance as to what is lawful.

According to these comments, a

performance standard would introduce

uncertainty that could cause delay,

additional costs, or lead to litigation.39

Two comments appeared to favor a

performance-based standard, although

both comments also noted the benefits

of mandated size requirements.
36558 Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations

40APIC, 515, 10.

41 Id. at 2.

42 Id. at 10.

43 Gallery Mint, 398, 5.

44As described above, the Commission received

over 1,000 letters advocating that the Act or Rule

be expanded to cover all antiques and collectibles.

E.g., Sprowls, 276, 1; Bucher, 244, 1; Anderson, 58,

2; and Whitehouse, 20, 1. Many comments also

described specific examples of individual instances

involving the passing off of a reproduction as an

original.

45As one comment stated, ‘‘Fake and Repros exist

in almost every sector of the collecting hobby.’’

Donaldson, 11,1. The comments cite the passing off

of the following products, among others: Nippon

porcelain (Puckett, 45 1 and 223 form letter

comments); Cambridge glassware (Upton, 505, 1);

Griswold cast iron cookware (Smith, 498, 1); Coca

Cola memorabilia and postcards (Wildman, 40, 1;

Rutledge, 43, 1); antique quilts, transferware,

majolica, and ironstone (Nickel, 18, 1); Tiffany

lamps (Curry, 575, 1); calendars, calendar plates,

almanacs and calendar art (Moses, 74, 1); Parrish

and Nutting prints, powder horns and scrimshaw,

Shaker items, Sterling Victorian match safes and

lockets, Brilliant period cut glass patterns, Galle art

glass, and perfume and scent bottles (Donaldson,

11, 1); and confederate veteran reunion badges and

medals (Finlayson, 240, 1).

46See, e.g., Berndt, 52, 1; and LaBatt, 366, 1.

These comments state that the commenter has

visited many venues that allegedly sell

reproductions as originals.

47See, e.g., Chervenka, 497, 2; ‘‘Now, antique

reproduction importers are manufacturing goods

that are virtually identical copies of old originals

including factory names, artist signatures and

trademarks. Many of these new pieces * * * are

cast in molds taken directly from old originals. This

means new pieces do not just loosely resemble the

original, they are an exact clone of the original.’’

48Thoe, 540, 2; and Skeim, 225, 1.

49Billings, 22, 1.

50See, e.g., Tucker, 495, 1, who states that

reproductions are made overseas, shipped to the

United States with country-of-origin labels attached

which then are removed somewhere in the

distribution system and sold as originals. According

to the commenter ‘‘[t]his is fraud and * * * [t]he

manufacturers of these items are well aware of what

happens.’’ Another commenter claims that, ‘‘[m]ost

of these items [reproductions] are expressly made

to fool the general public as to authenticity.’’ Porta,

572, 1.

51One comment noted that both domestic and

overseas companies have mastered techniques for

making pottery, wood, metals, and glass appear to

be hundreds of years old. Thoe, 540, 1.

52See, e.g., Tucker, 495, 1. The comments state

that a variety of countries are the sources of

reproductions. For example, one comment states

that Brazil, France, Italy, and several Far East

countries export all types of reproductions of

antiques and collectibles while the Philippines

manufactures ‘‘antique’’ oak furniture which is

imported into the United States and sold as

authentic antiques. Sprowls, 276, 1. Another

comment alleges that Galle glassware reproductions

are ‘‘being mass produced’’ in Romania, China, and

Japan while Roseville pottery is being produced in

China. Chervenka, 497, 2.

Several comments also cite the domestic

production of replicas that are passed off as

originals. See, e.g., Finlayson, 240, 1.

Although one comment noted that in

general mandated disclaimers are often

so small as to render them worthless,40

this comment also stated that the

current Rule, with its mandated size

standard, has materially lessened the

amount of counterfeit political items in

the marketplace.41 This comment

voiced support for modification of the

current standard to a performance-based

standard coupled with a ‘‘though not

smaller than’’ requirement, with the

caveat that ‘‘the result must be at least

as effective as the status quo.’’ 42

Another comment supported adoption

of a performance-based standard,

specifically a clear and prominent

standard, while at the same time

expressing concern that ‘‘there is too

much room for individual translation’’

without specific size requirements.43

The Commission has determined to

keep the present minimum size

standard. As noted previously, the

comments indicated generally that the

current standard is working well and

does not impose significant costs on

small entities or others. Second, several

comments indicated that the certainty

provided by the current standard allows

them to plan and anticipate costs, and

that a performance-based standard

would eliminate these benefits and

could cause confusion. Finally, the

current standard already addresses a

concern of those suggesting that the

Commission consider a performancebased standard by allowing a minimum

size for the word ‘‘copy’’ that is

proportional to the size of the imitation

numismatic item.

B. Comments Relating to Expanding

Coverage of the Act and Rule to

Antiques and Collectibles in General

As previously noted, the scope of the

Act and Rule is limited to imitation

political and numismatic items. This

section discusses the numerous

comments that related to products not

presently covered by the Act and Rule.44

In essence, these comments state that

reproductions of many types of antiques

and collectibles are being passed off as

originals, causing economic harm to

collectors and dealers. Because of

improvements in technology, the

comments alleged, even knowledgeable

persons have difficulty differentiating

the reproductions from the originals.

The comments suggested two

amendments to the Rules to address

these problems. First, some comments

proposed that the coverage of the Act

and Rule be expanded to all

reproductions of antiques and

collectibles. Second, many comments

also recommended that the Commission

require permanent country-of-origin

labeling for all reproductions of

antiques and collectibles.

After carefully considering these

proposals, the Commission has

determined not to amend the Rule as

suggested. First, as discussed above, the

Hobby Protection Act applies only to

imitation political and numismatic

items. The Act does not provide the

commission with authority to expand

the Rule beyond the Congressionally

mandated scope of the Act to cover all

reproductions. The Commission also

notes that existing laws and other

resources address many of the problems

discussed in the comments. In

particular, country-of-origin marking for

imports is under the jurisdiction of the

U.S. Customs Service. Because many

comments indicated that foreign-made

reproductions pose the greatest

problems, the Commission has brought

the issues raised in this proceeding to

the attention of the Customs Service,

which has authority to take action

where goods fail to bear a required

country-of-origin marking.

1. The Scope and Source of the PassingOff Problem

The comments suggested that there

are many categories of collectibles

subject to being passed off,45 and that

the volume of reproductions being

offered for sale as originals may be

large.46 The comments provided several

explanations for the passing-off

problems. First, the comments

uniformly stated that the quality of

reproductions has greatly improved to

the point that reproductions can be

virtually indistinguishable from the

originals.47 Several comments noted

that even experts may not be able to

distinguish originals from

reproductions.48

The comments appeared to agree that

the quality of reproductions has

improved, but were not in agreement

regarding how these reproductions

come to be passed off as originals.

According to one commenter, the

problem is not with reproductions being

made for decorative purposes and sold

in retail stores, where it is likely that

purchasers are aware that they are

buying reproductions. The problem

begins when a reproduction

subsequently enters the secondary

market and may be passed off as an

original.49 Other commenters, however,

argued that reproductions are

intentionally sold as originals.50

The comments indicated that

reproductions are made both overseas

and domestically.51 Although the

comments do not present quantitative

data that establishes the number of

foreign-made reproductions being sold

as originals in the United States, the

majority of the commenters indicated

that they believe the problems lie

chiefly in overseas production.52
Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations 36559

53See, e.g., Chervenka, 497, 2, describing

circumstances in which buyers mistook new Galle

glassware for old and paid $10,000 for a

reproduction which cost about $500 wholesale and

paid $3,500 for a different reproduction which cost

$450 wholesale. Another example mentioned was a

buyer allegedly spending ‘‘tens of thousands’’ of

dollars for a Tiffany lamp at ‘‘one of the better

known auction houses that employed in-house

experts’’ only to find out later that it was not

genuine and worth less. Craig, 575, 1.

54 Due to the glut of reproductions, ‘‘[m]any older

people who wish to sell their antiques and

collectible are not getting the full value’’ (Dillinger,

103, 1) while some collections ‘‘will never recover

their value because of the flood of * * *

reproductions.’’ Nickel, 18, 1.

55The comments allege that uncertainties of

investment value caused by reproductions ‘‘scare

off novices who might otherwise collect these items

[original antiques and collectibles]’’ (Billings, 22, 1)

and make collectors not buy ‘‘for fear of

reproductions.’’ Skeim, 225, 1. Dealers have

commented that customers’ fear of buying

reproductions have adversely affected their

business. Vierling, 532, 1; and Craven, 508, 1.

56The 721 comments generated from the Antique

Week form comment stated that the Act should be

expanded to all antiques and collectibles and that

the Commission recommend such expansion to

Congress. E.g., Lubitz, 61, 1. The 223 comments

using or based on the Nippon Collector’s Club form

letter as well as the 34 comments using or based

upon the Antiques Journal form letter urged the

extension of the regulatory powers of the Act to

require permanent, non-removable marking for

collectibles other than those currently covered. E.g.,

Dersheimer, 59, 1; and Mercier, 4, 1. Additionally,

numerous non-form comments suggested the

expansion of coverage of the Act to other antiques

and collectibles. E.g., Gregory, 5, 1; Ritchie, 9, 1;

Nickel, 18, 1; SeGall, 26, 1; Castle, 295, 1; James,

381, 1; Reid, 415, 1; Fendelman, 494, 1; and Curry,

575, 1. Presumably, these comments intend that all

antiques and collectibles would be marked with the

word ‘‘copy’’ or the date of manufacture.

57See, e.g., Brady, 47, 1. See also Reynolds, 169,

1; Barrie, 19, 2; Cotton, 21, 1; Berndt, 52, 1; and

Carner, 213, 1.

58 19 U.S.C. 1304. The Tariff Act of 1930, as

amended, and implementing regulations (19 CFR

134) are available at Customs Website:

‘‘www.customs.ustreas.gov’’.

59See note 50 supra.

60E.g., Castle, 295, Attachment 1 (describing a

criminal law enforcement inquiry regarding

reproduction ‘‘acid cutback’’ lamps and vases and

bronze statues being sold as antiques).

61Section 2–721 of the Uniform Commercial

Code provides civil remedies for material

misrepresentation and fraud in sales transactions;

62 15 U.S.C. 1125. See also Goshe, 528, 1

(describing collector’s club successful law suit

against manufacturer of reproductions that had

illegally obtained logo trademark).

63Section 5 of the Federal Trade Commission Act

prohibits deceptive acts or practices in commerce.

15 U.S.C. 45. A deceptive act or practice is one that

is likely to mislead consumers acting reasonably

under the circumstances. See Cliffdale Associates,

Inc., 103 F.T.C. 110 (1984). As a matter of policy,

however, the Commission does not generally

intervene in individual disputes. Generally, the

instances of passing off described in the comments

reflect specific individual transactions, rather than

a pattern or practice of passing off. Where the

Commission obtains evidence of such a pattern or

practice, however, it can take action. For example,

the Commission recently sued a company that had

telemarketed purportedly rare ‘‘error’’ postage

stamps to consumers as valuable, safe, and liquid

investments, at highly inflated prices. FTC v.

Equifin International, Inc., Financial Frontiers, and

F. Jerold Hildreth, No. CV–97–4526–DT (CWx) (C.D.

Cal. Dec. 11, 1997).

The comments present numerous

anecdotes regarding the harm caused by

passing off. Although these anecdotes

do not present information sufficient to

quantify or determine the amount of

economic and other harm caused, the

following is a summary of the adverse

effects noted in the comments: That the

individual buyer pays considerably

more than the product is worth;53 that

owners of original antiques or

collectibles which are heavily

reproduced lose the value of their

investment;54 that the uncertainty

regarding the genuineness of antiques

and collectibles dissuade persons from

purchasing originals or from becoming

collectors, which also adversely affects

businesses that deal in originals.55

2. Proposals To Expand Coverage of the

Rule to Non-Covered Products

Many comments propose that the

coverage of the Act be expanded to all

antiques and collectibles.56 A number of

comments suggest, as an alternative to

expanding the coverage of the Act or in

addition to such expansion, that both

foreign and domestic reproductions be

marked permanently with the countryof-origin. The comments generally

suggested that foreign reproductions

with country-of-origin labels that are

non-permanent are the primary source

of the passing-off problem.57 For several

reasons, however, the Commission does

not propose to adopt the remedies

suggested by the comments.

First, the Act does not provide the

Commission with legal authority to

expand the coverage of the Act to all

antiques and collectibles. The plain

language of the Act encompasses only

numismatic and political items and

directs the Commission to promulgate

rules regarding the marking of only

these covered products. For this reason,

the Commission cannot amend the Rule

to include products not itemized in the

Act to require the marking of items not

covered by the Act.

Second, the Commission believes that

existing federal and state laws

adequately address the key issues raised

in the comments. For example, the

majority of comments cited imported

reproduction as the most significant

source of passed-off goods. Wellestablished laws and regulations already

in existence address country-of-origin

markings for goods imported into the

United States. Specifically, country-oforigin marking for imports is under the

jurisdiction of the U.S. Customs Service,

which enforces the Tariff Act.58 Under

the Tariff Act, every article of foreign

origin must be legible, indelibly, and

permanently marked in a conspicuous

place to indicate the country of origin.

The Act also allows the container of an

imported good to bear the origin

marking rather than the good itself, as

long as the good reaches the ultimate

purchaser in the container. Under the

Tariff Act, then, a permanent marking is

a marking that will remain on the article

or container until it reaches the ultimate

purchaser, although the marking may be

removed by the ultimate purchaser and

need not be of a permanence to remain

affixed once in his or her possession.

This marking may not be removed prior

to delivery to the ultimate purchaser,

however, and anyone who removes this

marking prior to such delivery could be

subject to prosecution and criminal

penalties.

Commission staff has brought the

concerns regarding foreign origin

marking raised in this proceeding to the

attention of the Customs Service

because Customs regulations have an

impact on several of the problems

discussed in the comments. For

example, several comments indicated

their belief that country-of-origin labels

are deliberately removed.59 The

Customs Service urges persons with

information regarding the violative

removal of required country-of-origin

markings to write to: Office of Field

Operations, ATTN: Commercial

Enforcement Branch, U.S. Customs

Service, 1300 Pennsylvania Ave., NW,

Washington, DC 20229 or to call

Customs’ toll free Commercial Fraud

Hotline, 1–800–ITS–FAKE.

In addition to the deliberate removal

of country-of-origin labels, many

comments suggested that the lack of

truly permanent country-of-origin labels

on reproductions results in these

reproductions being passed off as

originals in the secondary market.

The Commission declines to prohibit

the legal removal or loss of country-oforigin labels and does not have

authority under the Act to require the

origin marking of domestic

reproductions. Other legal remedies are

available, however. For example,

passing off can be prosecuted as

criminal fraud 60 or as civil fraud in a

lawsuit by the buyer.61 Additionally, if

the passing off involves illegal

trademark infringement, it may be

actionable in a private lawsuit under the

Lanham Act.62 Further, a pattern or

practice of significant affirmative

misrepresentations or failures to

disclose material information relating to

reproductions passed off as originals

may violate Section 5 of the Federal

Trade Commission Act.63
36560 Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations

64See Chervenka, 497, 3 (publisher of Antique &

Collectors Reproduction News) and Antique Week,

499, attachments.

In addition to legal remedies, the

record indicates that there are non-legal

resources available to educate

consumers about antiques and

collectibles and thus reduce consumers’

susceptibility to the practice of passing

off. For example, several newsletters

and hobby newspapers regularly warn

and advise buyers of antiques and

collectibles about reproductions of

specific items and classes of items 64

Many comments also indicate that there

are collector clubs for many categories

of collectibles that provide members

with similar information. Commission

staff will explore whether there is a role

for the Commission in these efforts to

increase consumer awareness.

IV. Conclusion

The comments uniformly favor

retention of the Rule and state that there

is a continuing need for the Rule with

regard to currently covered products,

i.e., imitation numismatic and political

items; that the Rule provides benefits to

consumers and industry; that the Rule

does not impose substantial economic

burdens; and that the benefits of the

Rule outweigh the minimal costs it

imposes. Although the comments

addressing the impact of the Rule on

small entities were minimal, these

comments, including comments from

major national associations in the

numismatic and political items trade,

indicate that the Rule does not place

significant burdens on small entities.

Accordingly, the Commission certifies

that the Rule has not had a significant

impact on a substantial number of small

entities.

Although many comments

recommended that the Act and Rule be

expanded to cover all antiques and

collectibles, the Commission does not

have the authority under the Act to

expand the Rule in this manner. In

addition, there are a variety of legal and

non-legal resources that address many

of the issues raised by the commenters

favoring expansion of the Act’s

coverage. Accordingly, the Commission

has determined to retain the current

Rule and is terminating this review.

List of Subjects in 16 CFR Part 304

Hobbies, Labeling, Trade practices.

Authority: The Federal Trade Commission

Act, 15 U.S.C. 41–58 and the Regulatory

Flexibility Act, 5 U.S.C. 601.

By direction of the Commission.

Benjamin I. Berman,

Acting Secretary.

[FR Doc. 98–17929 Filed 7–6–98; 8:45 am]

BILLING CODE 6750–01–M

SOCIAL SECURITY ADMINISTRATION

20 CFR Parts 404 and 416

RIN 0960–AE53

Administrative Review Process;

Identification and Referral of Cases for

Quality Review Under the Appeals

Council’s Authority To Review Cases

on Its Own Motion

AGENCY: Social Security Administration

(SSA).

ACTION: Final rule.

SUMMARY: We are amending our

regulations to include rules under

which a decision or order of dismissal

that is issued after the filing of a request

for a hearing by an administrative law

judge (ALJ) may be referred to the

Appeals Council for possible review

under the Appeals Council’s existing

authority to review cases on its own

motion. These final rules codify

identification and referral procedures

that we currently use to ensure the

accuracy of decisions that ALJs and

other adjudicators make at the ALJhearing step (hearing level) of the

administrative review process. The rules

also codify new quality assurance

procedures to ensure the quality of

dispositions at the hearing level.

DATES: This rule is effective August 6,

1998.

FOR FURTHER INFORMATION CONTACT:

Harry J. Short, Legal Assistant, Office of

Process and Innovation Management,

Social Security Administration, 6401

Security Boulevard, Baltimore, MD

21235, (410) 965–6243 for information

about this notice. For information on

eligibility or claiming benefits, call our

national toll-free number, 1–800–772–

1213.

SUPPLEMENTARY INFORMATION:

Background

Under procedures set forth in

§§ 404.967 ff. and 416.1467 ff., and

pursuant to a direct delegation of

authority from the Commissioner of

Social Security, the Appeals Council, a

component in our Office of Hearings

and Appeals (OHA), reviews hearing

decisions and orders of dismissal issued

by ALJs and decisions issued by certain

other adjudicators. The Appeals Council

may review an ALJ’s decision or

dismissal of a hearing request at the

request of a party to the action or,

pursuant to §§ 404.969 and 416.1469, on

its own motion. Through the exercise of

its authority to review cases, the

Appeals Council is responsible for

ensuring that the final decisions of the

Commissioner of Social Security in

claims arising under titles II and XVI of

the Social Security Act (the Act), as

amended, are proper and in accordance

with the law, regulations, and rulings.

The Appeals Council’s authority to

review cases on its own motion also

applies, at present, to two types of

hearing-level cases that do not result in

decisions by ALJs. Under §§ 404.942

and 416.1442, attorney advisors in OHA

are authorized until July 1, 1998, to

conduct certain prehearing proceedings

and to issue, where warranted by the

documentary evidence, wholly

favorable decisions. Under the

provisions of §§ 404.942 (e)(2) and (f)(3)

and 416.1442 (e)(2) and (f)(3), such

decisions are subject to review under

the own-motion authority of the

Appeals Council established in

§§ 404.969 and 416.1469. In addition,

under §§ 404.943 and 416.1443,

adjudication officers are authorized, for

test purposes, to conduct certain

prehearing proceedings and to issue,

where warranted by the documentary

evidence, wholly favorable decisions.

Under the provisions of

§§ 404.943(c)(2)(ii) and

416.1443(c)(2)(ii), such decisions are

also subject to review on the Appeals

Council’s own motion.

Under our regulations on the Appeals

Council’s procedures, if the Appeals

Council decides to review a case in

response to a request for review or on

its own motion, it may issue a decision

or remand the case to an ALJ. The

Appeals Council may also dismiss a

request for hearing for any reason that

the ALJ could have dismissed the

request.

A decision by the Appeals Council

‘‘to review’’ a hearing-level decision

means that the Appeals Council

assumes jurisdiction and causes that

decision not to be the final decision of

the Commissioner of Social Security. A

decision that the Appeals Council

‘‘reviews’’ will be replaced by a new

final decision or dismissal order of the

Appeals Council or, if a hearing or other

hearing-level proceedings are required,

by a decision or dismissal order issued

following remand of the case from the

Council to an ALJ.

A decision by the Appeals Council to

review a case is made when, following

a consideration of the case to determine

if review is appropriate, the Council

issues a notice of its decision to review.

The Council’s standard notice of review