[Federal Register Volume 63, Number 146 (Thursday, July 30, 1998)]
[Notices]
[Pages 40713-40716]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20298]


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FEDERAL TRADE COMMISSION


Submission for OMB Review; Comment Request

AGENCY: Federal Trade Commission.

ACTION: Notice.

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SUMMARY: The FTC has submitted to OMB for review and clearance under 
the Paperwork Reduction Act information collection requirements 
stemming from (1) a regulation that the Commission enforces and (2) a 
study to assess the effectiveness of Commission divestiture orders in 
merger cases. On May 13, 1998, the FTC solicited comments concerning 
these information collection requirements. No comments were received. 
The current Office of Management and Budget (OMB) clearances expire on 
July 31, 1998. The FTC proposes that OMB extend its approval for the 
regulation an additional three years from clearance expiration and that 
approval for the divestiture order study be extended through December 
31, 1999.

DATES: Comments must be submitted on or before August 31, 1998.

EFFECTIVE DATE: Send written comments to the Office of Management and 
Budget, Office of Information and Regulatory Affairs, New Executive 
Office Building, Room 10202, Washington, D.C. 20503, ATTN: Edward 
Clarke, Desk Officer for the Federal Trade Commission, and to Gary M. 
Greenfield, Office of the General Counsel, Federal Trade Commission, 
Washington, D.C. 20580, (202) 326-2753. All comments should be 
identified as responding to this notice.

FOR FURTHER INFORMATION CONTACT:
Requests for additional information or copies of the proposed 
information collection requirements should be addressed to Gary M. 
Greenfield at the address listed above.

SUPPLEMENTARY INFORMATION: The FTC has submitted requests for OMB 
review of the two items described below. Further information concerning 
the entities subject to, and the burden estimates for, these 
requirements can be found at 63 FR 26607 (May 13, 1998). The relevant 
information collection requirements are as follows.

1. The Telemarketing Sales Rule, 16 CFR Part 310 (OMB Control 
Number 3084-0097).

    Description of the information collection and proposed use: The 
Telemarketing Sales Rule implements the Telemarketing and Consumer 
Fraud and Abuse Prevention Act, 15 U.S.C. 6101-6108 (``Telemarketing 
Act'' or ``the Act''). The Act seeks to prevent deceptive or abusive 
telemarketing practices. As specified by the Act, the Telemarketing 
Rule mandates certain disclosures regarding telephone sales and 
requires telemarketers to retain certain records regarding advertising, 
sales, and employees. The disclosures provide consumers with 
information necessary to make informed purchasing decisions. The 
records are to be made available for inspection by the Commission and 
other law enforcement personnel to determine compliance with the Rule.
    Estimate of information collection annual hours burden: 2,301,000 
hours.
    The estimated recordkeeping burden is 50,000 hours for all industry 
members affected by the Rule. The estimated burden related to the 
disclosures that the Rule requires is 2,251,000 hours (rounded to 
nearest thousand) for all affected industry members, for a total of 
2,301,000 burden hours.
    Recordkeeping: At the time the Commission issued the Rule, it 
estimated that during the initial and subsequent years after the Rule 
took effect, 100 new telemarketing entities per year would find it 
necessary to revise their practices to conform with the Rule and that 
it would take each such entity approximately 100 hours to develop a 
compliant recordkeeping system, for a total of 10,000 burden hours a 
year. The Commission received no comments of any kind in connection 
with this estimate when it was issued and this estimate continues to be 
appropriate. There is no reason to believe that the number of new 
entrants into the telemarketing field who find it necessary to revise 
their recordkeeping system as a result of the Rule's recordkeeping 
requirements has increased. Of the estimated 39,900 industry members 
who have already assembled and retained the required records in their 
recordkeeping systems, staff estimates that each member requires only 
one hour per year to file and store records required by the Rule. This 
estimate was rounded up to 40,000 hours. Therefore, the total yearly 
burden hours associated with the Rule's recordkeeping requirements is 
50,000.
    Disclosure: Staff previously calculated the burden associated with 
the Rule's disclosure requirements based primarily on the total number 
of telemarketing calls and the amount of time needed to make the 
required basic disclosures, as well as the number of calls resulting in 
sales and the amount of time needed to make the additional disclosures 
required before a customer pays for goods or services. While this 
methodology remains appropriate in large part, staff has determined 
that the resulting burden estimate substantially overstates the impact 
of the Rule unless the analysis is refined to take into account the 
number of firms that would make the required disclosures even in the 
absence of the Rule.
    As noted above, the purpose of the Rule's disclosure provisions is 
to help prevent consumer injury from deceptive or abusive telemaketing 
practices by ensuring that telemarketers provide consumers with 
information they need to avoid being misled. In fact, however, the vast 
majority of telemarketing firms are legitime businesses. Although 
telemarketing fraud causes significant harm to consumers--Congress has 
estimated that misrepresentations or material omissions in 
telemarketing sales presentations result in $3 billion to $40 billion 
annually in consumer injury--the harm caused by

[[Page 40714]]

telemarketing fraud remains a small fraction of the $400 billion in 
total annual sales through telemarketing.
    Staff believes that a substantial majority of telemarketers now 
make the disclosures required by the Rule in the ordinary course of 
business because doing so constitutes good business practice. To the 
extent this is so, the time and financial resources needed to comply 
with disclosure requirements do not constitute ``burden.'' 16 CFR 
1320.3(b)(2). Moreover, many state laws require the same or similar 
disclosures mandated by the Rule. Thus, the disclosure hours burden 
attributable solely to the Rule is far less than the total number of 
hours associated with the disclosure. Staff estimated that the 
disclosures required by the Rule would occur in at least 75 percent of 
telemarketing presentations even in the absence of the Rule. 
Accordingly, staff has determined that the hours burden estimate for 
the Rule's disclosure requirements is 25 percent of the total amount of 
hours associated with disclosures of the type required by the Rule. 
Staff previously estimated this total to be 9,003,000 hours. No 
comments were received refuting this estimate. The portion attributable 
to the Rule is accordingly 2,250,750 hours (.25  x  9,003,000). For 
present purposes, this amount was rounded up to 2,251,000 hours.
    Staff's basis for its underlying estimate of 9,003,000 total 
disclosure hours was derived as follows. In connection with issuing the 
Rule and obtaining OMB clearance, staff previously estimated that the 
39,900 (rounded to 40,000) industry members make approximately 9 
billion calls per year, or 225,000 calls per year per company. The 
Telemarketing Sales Rule provides that if an industry member chooses to 
solicit inbound calls from consumers by advertising media other than 
direct mail or by using direct mail solicitations that make certain 
required disclosures, that member is exempted from complying with other 
disclosures required by the Rule. Because the burden of complying with 
written disclosures is less than the burden of complying with the 
Rule's oral disclosure requirements, staff estimated that at least 
9,000 firms will choose to adopt marketing methods that exempt them 
from the oral disclosure requirements.
    In connection with issuing the Rule, staff estimated that it takes 
7 seconds for telemarketers to disclose the required outbound call 
information orally. Staff also estimated that at least 60 percent of 
calls result in ``hang-ups'' before the seller or telemarketer can make 
all the required disclosures. Staff estimated that ``hang-up'' calls 
last for only 2 seconds. Accordingly, staff estimated that the total 
amount of time associated with these initial disclosure requirements is 
approximately 250 hours per firm (90,000 non-hang up calls (.40  x  
225,000)  x  7 seconds per call + 135,000 hang-up calls (.60  x  
225,000)  x  2 seconds per call). Thus, the total time expenditure for 
the 31,000 firms choosing marketing methods that require these oral 
disclosures is 7.75 million hours. When the Commission initially 
published this estimate, it received no comments and staff believes the 
estimate remains appropriate. Based on the assumption that no more than 
25 percent of this time constitutes ``burden'' imposed solely by the 
Rules (as opposed to the normal business practices of most affected 
entities apart from the Rule's requirements), the burden subtotal 
attributable to the basis disclosure is 1,937,500 hours.
    The Rule also requires additional disclosures before the customers 
pays for goods or services. Specifically, telemarketers must disclose 
the total cost of the offered goods or services; all material 
restrictions; and all material terms and conditions of the seller's 
refund, cancellation, exchange, or repurchase policies (if a 
representation about such a policy is a part of the sales offer). If a 
prize promotion is involved in connection with the sales of goods or 
services, the telemarketer must also disclosure information about the 
non-purchase entry method for the prize promotion. Staff estimated that 
these disclosures take approximately 10 seconds. However, these 
disclosures are required only where a call results in a sale. Staff 
estimated that sales occur in the approximately 6 percent of 
telemarketing calls. Accordingly, the estimated amount of time for the 
disclosures is 17.5 hours per firm (13,500 calls resulting in a 
sale--.06  x  225,000-- x  10 seconds) or 1.163 million hours for the 
31,000 firms choosing marketing methods that require oral disclosure. 
When the Commission initially published this estimate, it received no 
comments and staff believes the estimate remains appropriate. Based on 
the assumption that no more than 25 percent of this time constitutes 
``burden'' imposed solely by the Rule, the burden subtotal attributable 
to these additional disclosures is 290,750 hours.
    As noted, staff estimated that approximately 9,000 telemarketing 
firms will choose to use the written disclosure option. Firms choosing 
this option are likely to be those using written advertising materials. 
Thus, the burden of adding the required disclosures should be minimal. 
Staff estimated that a typical firm will spend approximately 10 hours 
per year engaged in activities ensuring compliance with this provision 
of the Rule, for an estimated total burden of 90,000 hours for all 
9,000 firms using written disclosure. When the Commission initially 
published this estimate, it received no comments and staff believes the 
estimate remains appropriate. Based on the assumption that no more than 
25 percent of this time constitutes ``burden'' imposed solely by the 
Rule, the burden subtotal attributable to these written disclosures is 
22,500 hours.
    Estimate of information collection annual labor cost burden: 
$34,361,250.
    The estimated labor cost for recordkeeping is $600,000. Assuming a 
cumulative burden of 10,000 hours/year to set up compliant 
recordkeeping systems, and applying to that a skilled labor rate of 
$20/hours, set up costs would approximate $200,000 annually for all new 
telemarketing entities. Staff also estimated that existing industry 
members require 40,000 hours to maintain compliance with the Rule's 
recordkeeping provisions. Using a clerical cost rate of $10/hour, 
cumulative recordkeeping maintenance would cost approximately $400,000 
annually. The estimated labor cost for disclosure is $33,761,250, based 
on an estimate of 2,250,750 disclosure burden hours and a wage rate of 
$15/hour.
    Estimate of information collection annual capital and operating 
cost burden: $10,022,000.
    Total capital and start up costs: Staff estimates that the capital 
and start up costs associated with the Telemarketing Sales Rule's 
information collection requirements are de minimis. The Rule's 
recordkeeping requirements mandate that companies maintain records but 
not in any particular form. While the recordkeeping requirements 
necessitate that the affected entity have some storage device, 
virtually every entity is likely already to possess the means to store 
the required records. Most entities keep the type of records required 
by the Rule in the ordinary course of business. Even assuming that an 
entity found it necessary to purchase a storage device, which could be 
as inexpensive as a cardboard box, the annual expenditure is likely to 
be very small when the cost of the device is annualized over its useful 
life. The Rule's disclosure requirements require no capital 
expenditures.
    Total operation/maintenance/purchase of services costs: Affected 
entities need some storage media such as file folders, computer 
diskettes, or paper in order to comply with the Rule's

[[Page 40715]]

recordkeeping requirements. Although staff believes that most affected 
entities would maintain the required records in the ordinary course of 
business, staff estimated that the approximately 40,000 industry 
members affected by the Rules spend an annual amount of $50 each on 
office supplies as a result of the Rule's recordkeeping requirements, 
for a total recordkeeping cost burden of $2,000,000.
    In connection with the Rule's disclosure requirements, 
telemarketing firms likely incur additional costs for telephone 
service, assuming that the firms spend more time on the telephone with 
customers as a result of the required disclosures. Staff believes that 
the hour burdens relating to the required oral disclosures amount to 
8,913,000 hours (7.75 million initial disclosure hours + 1.163 million 
hours regarding sales). Assuming all calls to customers are long 
distance, at a commercial calling rate of 6 cents per minute ($3.60 per 
hour), affected entities as a whole may incur up to $32,086,800 in 
telecommunications costs as a result of the Rule's disclosure 
requirements. However, as noted above, only 25 percent of such 
disclosures constitute ``burden.'' Accordingly, the adjusted oral 
disclosure cost burden is $8,021,700, rounded to $8,022,000.
    As indicated previously, staff estimated that approximately 9,000 
entities will choose to comply with the Rule through written 
disclosures. However, staff estimated that those companies incur no 
additional capital or operating expenses as a result of the Rule's 
requirements because they are likely to provide written information to 
prospective customers in the ordinary course of business and adding the 
required disclosures to that written information requires no 
supplemental expenditures.
    Thus, the total estimated operating cost burdens associated with 
the Rule is $10,022,000 (rounded to nearest thousand).

2. Study of the Effectiveness of Commission Divestiture Orders in 
Merger Cases (OMB Control Number 3084-0115)

    Description of the information collection and proposed use: The 
Commission is directed to prevent ``unfair methods of competition'' 
under Section 5 of the Federal Trade Commission Act (``FTC Act''), 15 
U.S.C. 45, and is authorized to enforce the Clayton Act's proscriptions 
against anticompetitive mergers. 15 U.S.C. 18, 21. Under these 
authorities, the Commission examines proposed transactions to determine 
whether anticompetitive effects are likely. If it has reason to believe 
that a transaction is unlawful, the Commission either seeks to enjoin 
the transaction or seeks a remedy that it believes will alleviate the 
likely anticompetitive effects.
    When a proposed merger raises competitive concerns, it is sometimes 
the case that the problem arises in only a limited number of markets in 
which the parties compete, while the remainder of the proposed 
transaction poses no competitive harm. Thus, in 1978, the Commission 
began requiring respondents in certain merger cases with likely 
anticompetitive effects, as a condition for the Commission's decision 
not to oppose a transaction, to divest certain assets of business(es) 
in order to cure the competitive problem. The Commission requires that 
the divested assets or business(es) be commercially viable, and that 
the buyer of the assets or business(es) have the capability of 
competing effectively in the applicable market(s).
    In 1995, the FTC's Bureau of Competition and Bureau of Economics 
undertook a pilot study to determine whether a more comprehensive study 
of these Commission divestiture orders would be feasible and 
productive. The staff concluded that further study is necessary to draw 
more general conclusions about the effectiveness of the Commission's 
divestiture process, as the circumstances surrounding the orders vary 
widely. OMB subsequently granted clearance of such an expanded study. 
Pursuant to that authority, FTC staff has interviewed numerous parties 
subject to divestiture orders (``respondents'') and buyers of divested 
assets or businesses (``buyers''). As with the pilot study, the 
information that staff has obtained continues to offer important 
insights into the effectiveness of the divestiture process.
    Accordingly, the Commission's Bureau of Competition and Bureau of 
Economics intend to continue to conduct interviews with respondents and 
buyers in order to complete their review of the 36 sample orders 
comprising the study. Thereafter, staff will interview third parties 
and solicit sales data from respondents and buyers. The objectives of 
the study continue to be to determine: (1) The effectiveness of 
Commission orders that seek to preserve or reestablish competition 
where the Commission required divestiture of certain assets; (2) the 
effect of certain provisions in Commission orders (e.g., length of time 
permitted for divestiture, ``crown jewels'' provisions, etc.) on the 
timeliness of divestitures and on the success of the business or assets 
divested; (3) the effect of the procedures that respondents use to find 
a buyer on the timeliness of the divestitures and on the success of the 
business or assets divested; (4) the effect of the divestiture contract 
on the success of the divested business or assets; (5) the effect of 
the type of assets divested on the success of the divested business; 
(6) the effect of the type of buyer on the success of the divested 
business; and (7) the extent to which respondents fully complied with 
the requirements under the order.
    Securing information about the success of divested businesses (or 
businesses that have acquired divested assets) will provide a better 
understanding of the kind of order provisions most likely to lead to 
successful divestitures in merger transactions. The survey is designed 
to expand the Commission's knowledge by eliciting information across a 
broad spectrum of industries. Such information will be used to enhance 
the effectiveness of Commission divestiture orders.
    Estimate of information collection annual hours burden: 1,000 hours 
(rounded).
    The information to be collected will be obtained by telephone 
interviews, document requests, and a questionnaire. Staff will conduct 
telephone interviews with respondents, buyers, and third parties (such 
as competitors, customers, and suppliers). The divestiture study 
includes a total of 51 divestitures arising out of 36 orders. Staff has 
already interviewed 32 buyers and 6 respondents; thus it will contact 
another 19 buyers and 30 respondents. It will also contact 153 third-
parties (on average, three per divestiture) for a total of 202 
remaining telephone interviews. All of the remaining interviews, like 
those already conducted, should take about 1.5 hours to complete, for a 
total burden estimate of approximately 303 hours.
    After interviewing respondents and buyers, staff will ask them to 
submit certain existing financial documents for a five-year period 
beginning the year before the divestiture occurred. Staff will not 
request that any new documents be created. Because only documents 
already in existence will be requested, the anticipated burden of 
producing these documents will be minimal, approximately two hours per 
participant, for a total of 174 hours (51 buyers + 36 respondents = 87, 
87  x  2 = 174).
    Staff is also asking respondents and buyers to complete a two-
question chart that requests sales in dollars and units of each product 
or asset that was the subject of the Commission's competitive concern 
in the case over a five-year

[[Page 40716]]

period beginning the year before the divestiture. Staff estimates that 
the burden on each participant to provide this information will be 4 
hours, for a total of 348 hours (51 buyers + 36 respondents = 87, 87 
x  4 = 348). The total cumulative burden of the document production and 
chart completion will be 522 hours (174+348). The estimated total 
burden for the entire study is therefore calculated to be 825 hours 
(303+522), which has been rounded to 1,000 hours to allow for small 
additions such as interviews with and follow-up document requests of 
subsequent buyers.
    Estimate of information collection annual labor cost burden: 
$75,000.
    It is difficult to calculate reliably the costs associated with 
this information collection, as they entail varying compensation levels 
of executives, management, and/or support staff among many companies 
and various industries. Individuals among some or all of those labor 
categories may be involved in the information collection process. 
Nonetheless, assuming that responses to interviews, the questionnaire, 
and the document request are handled by executive and mid-management 
level personnel alone, and applying a blended average hourly 
compensation rate of $75/hour for their labor, the total cost should 
not exceed $75,000 (based on the upward rounding of estimated total 
hourly burden for the study).
    Estimate of information collection annual capital and operating 
cost burden: None.
    The data for the study are being collected in two principal ways. 
Staff is conducting telephone interviews and asking respondents and 
buyers to respond to a brief questionnaire and produce existing 
documents. None of these means of collecting information requires any 
capital expenditure. Interviews solely involve respondents and buyers 
making available one or more company officials for approximately 1\1/2\ 
hours. The questionnaires and document requests seek only information 
that the respondents and buyers maintain in the ordinary and usual 
course of their business. No additional cost burden is imposed.
Debra A. Valentine,
General Counsel.
[FR Doc. 98-20298 Filed 7-29-98; 8:45 am]
BILLING CODE 6750-01-M