[Federal Register Volume 66, Number 105 (Thursday, May 31, 2001)]
[Notices]
[Pages 29571-29574]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-13646]


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FEDERAL TRADE COMMISSION


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

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

ACTION: Notice.

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SUMMARY: The information collection requirements described below will 
be submitted to the Office of Management and Budget (``OMB'') for 
review, as required by the Paperwork Reduction Act (``PRA''). The FTC 
is seeking public comments on its proposal to extend through September 
30, 2004 the current PRA clearance for information collection 
requirements contained in (1) the Rule Concerning Disclosure of Written 
Consumer Product Warranty Terms and Conditions; (2) the Rule Governing 
Pre-Sale Availability of Written Warranty Terms; and (3) the Informal 
Dispute Settlement Procedures Rule. These clearances expire on 
September 30, 2001 (collectively, ``Warranty Rules'').

DATES: Comments must be submitted on or before July 30, 2001.

ADDRESSES: Send written comments to Secretary, Federal Trade 
Commission, Room H-159, 600 Pennsylvania Ave., NW., Washington, DC 
20580. All comments should be captioned ``Warranty Rules: Paperwork 
comment.''

FOR FURTHER INFORMATION CONTACT: Requests for additional information or 
copies of the proposed information requirements should be addressed to 
Carole Danielson, Investigator, Division of Marketing Practices, Bureau 
of Consumer Protection, Federal Trade Commission, Room H-238, 600 
Pennsylvania Ave., NW., Washington, DC 20580, (202) 326-3115.

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 
Rules 701, 702, and 703 (OMB Control Numbers 3084-0111, 3084-0112, and 
3084-0113, respectively).
    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 Warranty Rules implement the Magnuson-Moss Warranty Act, 15 
U.S.C. 2301 et seq. (``the Act''), which governs written warranties on 
consumer products. The Act directed the FTC to promulgate rules 
regarding the disclosure of written warranty terms and conditions, 
rules requiring that the terms of any written warranty on a consumer 
product be made available to the prospective purchaser before the sale 
of the product,and rules establishing minimum standards for informal 
dispute settlement mechanisms that are incorporated into a written 
warranty. Pursuant to the Act, the Commission published the instant 
three rules.\1\
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    \1\ 40 FR 60168 (December 31, 1975).
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Consumer Product Warranty Rule (``Warranty Rule'')

    The Warranty Rule specifies the information that must appear in a 
written warranty on a consumer product. It sets forth what warrantors 
must disclose about the terms and conditions of the written warranties 
they offer on consumer products that cost the consumer more than 
$15.00. The Rule tracts the disclosure requirements suggested in 
section 102(a) of the Act,\2\ specifying information that must appear 
in the written warranty and, for certain disclosures, mandates the 
exact language that must be used. The Warranty Rule requires that the 
information be conspicuously disclosed in a single document in simple, 
easily understood language. In promulgating this rule, the Commission 
determined

[[Page 29572]]

that the items required to be disclosed are material facts about 
products warranties, the non-disclosure of which would be deceptive or 
misleading.\3\
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    \2\ 15 U.S.C. 2302(a).
    \3\ 40 FR 60168, 60169-60170.
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The Rule Governing Pre-Sale Availability of Written Warranty Terms 
(``Pre-Sale Availability Rule'')

    In accordance with section 102(b)(1)(A) of the Act, the Pre-sale 
Availability Rule establishes requirements for sellers and warrantors 
to make the text of any written warranty on a consumer product 
available to the consumer before sale. Following the Rule's original 
promulgation, the Commission amended it to provide sellers with greater 
flexibility in how to make warranty information available.\4\
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    \4\ 52 FR 7569 (March 12, 1987).
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    Among other things the amended Rule requires sellers to make the 
text of the warranty readily available either by (1) displaying it in 
close proximity to the product or (2) furnishing it on request and 
posting signs in prominent locations advising consumers that the 
warranty is available. The Rule requires warrantors to provide 
materials to enable sellers to comply with the Rule's requirements, and 
also sets out the methods by which warranty information can be made 
available before the sale if the product is sold through catalogs, mail 
order, or door-to-door sales.

Informal Dispute Settlement Rule ``(Informal Dispute Settlement 
Rule'')

    This rule specifies the minimum standards which must be met by any 
informal dispute settlement mechanism that is incorporated into a 
written consumer product warranty and which the consumer must use 
before pursuing legal remedies in court. In enacting the Warranty Act, 
Congress recognized the potential benefits of consumer dispute 
mechanisms as an alternative to the judicial process. Section 110(a) of 
the Act sets out the Congressional policy to ``encourage warrantors to 
establish procedures whereby consumer disputes are fairly and 
expeditiously settled through informal dispute settlement mechanisms'' 
(``IDSMs'') and erected a framework for their establishment. As an 
incentive to warrantors to establish IDSMs, Congress provided in 
section 110(a)(3), 15 U.S.C. 2310(a)(3), that warrantors may 
incorporate into their written consumer product warranties a 
requirement that a consumer must resort to an IDSM before pursuing a 
legal remedy under the Act for breach of warranty. To ensure fairness 
to consumers, however, Congress also directed that, if a warrantor were 
to incorporate such a ``prior resort requirement'' into its written 
warranty, the warrantor must comply with the minimum standards set by 
the Commission for such IDSMs. Section 110(a)(2) directed the 
Commission to establish those minimum standards.
    The Informal Dispute Settlement Rule contains extensive procedural 
standards for IDSMs. These standards include requirements concerning 
the mechanism's structure (e.g., ,funding, staffing, and neutrality), 
the qualifications of staff or decision makers, the mechanism's 
procedures for resolving disputes (e.g., notification, investigation, 
time limits for decisions, and follow-up), recordkeeping, and annual 
audits. The Rule requires that warrantors establish written operating 
procedures and provide copies of those procedures upon request. The 
Rule's recordkeeping requirements specify that all records may be kept 
confidential or otherwise made available only on terms specified by the 
mechanism. However, the records are available for inspection by the 
Commission and other law enforcement personnel to determine compliance 
with the Rule, and the records relating to a specific dispute are 
available to the parties in that dispute. In addition, the audits and 
certain specified records are available to the general public for 
inspection and copying.
    This rule applies only to those firms that choose to be bound by it 
by placing a prior resort requirement in their written consumer product 
warranties. Neither the Rule nor the Act requires warrantors to set up 
IDSMs. Furthermore, a warrantor is free to set up an IDSM that does not 
comply with this rule as long as the warranty does not contain a prior 
resort requirement.

Warranty Rule Burden Statement

    Total annual hours burden: 34,000 hours. In 1998, the FTC estimated 
that the information collection burden of including the disclosures 
required by the Warranty Rule in consumer product warranties was 
approximately 34,000 hour per year per manufacturer. Since the Rule's 
paperwork requirements have not changed since then, and staff believes 
that the population affected is largely unchanged, staff concludes that 
its prior estimate remains reasonable. Moreover, since most warrantors 
would disclose this information even if there were no statute or rule 
requiring them to do so, this estimate and those below pertaining to 
the Warranty Rule likely overstate the paperwork burden attributable to 
it. The Rule has been in effect since 1976, and most warrantors have 
already modified their warranties to include the information the Rule 
requires.
    The above estimate is derived as follows. Based on conversations 
with various warrantors' representatives over the years, staff 
concluded that eight hours per year is a reasonable estimate of 
warrantors' paperwork burden attributable to the Warranty Rule. This 
estimate includes the task of ensuring that new warranties and changes 
to existing warranties comply with the Rule. In 1995, staff reported 
that the most recently published census data indicated that there was a 
17% increase in manufacturing establishments during the 1980s. 
Adjusting for these increases, staff estimated in 1995 that the number 
of manufacturing entities had increased to 4,241 (3,625  x  1.17), 
which produced an adjusted burden figure of 33,928 (4,241  x  8 hours 
annually/manufacturer), rounded to 34,000. As staff does not believe 
that the population affected nor the burden per entity has changed 
materially, it maintains this prior estimate for the instant purposes.
    Total annual labor costs: Labor costs are derived by applying 
appropriate hourly cost figures to the burden hours described above. 
The work required to comply with the Warranty Rule is predominantly 
clerical. Based on an average hourly rate of $10 for clerical employees 
and 34,000 total burden hours, the annual labor cost is approximately 
$340,000.
    Total annual capital or other non-labor costs: The Rule imposes no 
appreciable current capital or start-up costs. The vast majority of 
warrantors have already modified their warranties to include the 
information the Rule requires. Rule compliance does not require the use 
of any capital goods, other than ordinary office equipment, which 
providers would already have available for general business use.

Pre-Sale Availability Rule Burden Statement

    Total annual hours burden: Staff estimates that the burden of 
including the disclosures required by the Pre-Sale Availability Rule in 
consumer product warranties is 2,760,000 hours, rounded to the nearest 
thousand.
    In 1998, FTC staff estimated that the information collection burden 
of including the disclosures required by the Pre-Sale Availability Rule 
in consumer product warranties was approximately 2, 759,700 hours per 
year per manufacturer. Since then, some online retailers have begun to 
post warranty information on their web sites, which should reduce their 
cost of providing the required information.

[[Page 29573]]

However, this method of compliance is still evolving and involves a 
relatively small number of firms. Furthermore, those online retailers 
that also operate ``brick-and-mortar'' operations would still have to 
provide paper copies of the warranty for review by those customers who 
do not do business online. Thus, online methods of complying with the 
Rule do not yet appear to be sufficiently widespread so as to 
significantly alter the measure of burden associated with the Rule.
    Given no change in the Rule's paperwork requirements since 1998, 
the considerations noted above, and staff's belief that the population 
affected is largely unchanged, staff believes that its prior estimate 
remains reasonable. That estimate was based on the following 
calculations regarding retailers and manufacturers. As of 1995, there 
were 6,552 large retailers, 422,100 small retailers, 146 large 
manufacturers, and 4,095 small manufacturers. Because of the reduced 
burden due to the Rule's amendments, large retailers now spend an 
average of 26 hours per year and small retailers an average of 6 hours 
per year to comply with the Rule. This yields a total burden of 
2,702,952 hours for retailers. Large manufacturers spend an average of 
52 hours per year and small manufacturers spend an average of 12 hours 
per year, for a total burden estimate of 56,732 hours. Thus, the 
combined total burden is 2,760,000 hours, rounded to the nearest 
thousand.
    Total annual labor cost: The work required to comply with the Pre-
Sale Availability Rule is predominantly clerical, e.g., providing 
copies of manufacturer warranties to retailers and retailer maintenance 
of them. Assuming a clerical labor cost rate of $10/hour, the total 
annual labor cost burden is approximately $27,600,000.
    Total annual capital or other non-labor costs: De minimis. The vast 
majority of retailers and warrantors already have developed systems to 
provide the information the Rule requires. Compliance by retailers 
typically entails simply filing warranties in binders and posting an 
inexpensive sign indicating warranty availability.\5\ Manufacturer 
compliance entails providing retailers with a copy of the warranties 
included with their products.
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    \5\ Although some retailers may choose to display a more 
elaborate or expensive sign, that is not required by the Rule.
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Informal Dispute Settlement Rule Burden Statement

    Total annual hours burden: 36,000 hours. The primary burden from 
the Informal Dispute Settlement Rule comes from its recordkeeping 
requirements that apply to IDSMs incorporated into a consumer product 
warranty. Disclosure requirements are much more limited. Staff 
estimates that recordkeeping and reporting burdens are 24,625 hours per 
year and the disclosure burdens are 9,235 hours per year. The total 
estimated burden imposed by the Rule is thus approximately 34,000 
hours, rounded to the nearest thousand. This marks an increase over 
staff's estimates dating back to the FTC's prior clearance request 
regarding the Rule. At that time, staff estimated that recordkeeping 
and reporting burden was 4,334 hours per year and 1,625 hours per year 
for disclosure requirements or, cumulatively, approximately 6,000 
hours.
    Although the Rule's paperwork requirements have not changed since 
the FTC's immediately preceding PRA clearance request, staff now has 
reason to believe that more manufacturers have since chosen to be 
covered by the Rule. The calculations underlying these increased 
estimates follow.
    Recordkeeping: The Rule requires that IDSMs maintain individual 
case files, update indexes, complete semi-annual statistical summaries, 
and submit an annual audit report to the FTC. The greatest amount of 
time to meet recordkeeping requirements is devoted to compiling 
individual case records. Since maintaining individual case records is a 
necessary function for any IDSM, much of the burden would be incurred 
in any event; however, staff estimates that the Rule's recordkeeping 
requirements impose an additional burden of 30 minutes per case. Staff 
also has allocated 10 minutes per case for compiling indexes, 
statistical summaries, and the annual audit required by the Rule, 
resulting in a total recordkeeping requirement of 40 minutes per case.
    The amount of work required will depend on the total number of 
dispute resolution proceedings undertaken in each IDSM. The 1999 audit 
report for the BBB AUTO LINE states that, during calendar year 1999, it 
handled 21,392 warranty disputes on behalf of 14 manufacturers 
(including General Motors, Saturn, Honda, Volkswagen, Isuzu, and 
Nissan, as well as smaller companies such as Rolls Royce and Land 
Rover). Industry representatives have informed staff that all domestic 
manufacturers and most importers now include a ``prior resort`` 
requirement in their warranties, and thus are covered by the Informal 
Dispute Settlement Rule. Therefore, staff assumes that virtually all of 
the 21,392 disputes handled by the BBB fall within the Rule's 
parameters. Apart from the BBB audit report, 1999 reports were also 
submitted by the two mechanisms that handle dispute resolution for 
Toyota and Ford, both of which are covered by the Rule.\6\ The Ford 
IDSM states that it handled 7,246 total disputes. The audit of the 
Toyota ISDM did not state the total number of disputes handled; 
however, based on consumer publications tracking the auto industry, 
staff conservatively estimates that the Toyota IDSM handled 
approximately 3,600 total disputes. All of the Toyota and Ford disputes 
are covered by the Informal Dispute Settlement Rule. Daimler-Chrysler 
is the only major domestic auto manufacturer for which staff has no 
data. However, assuming that the incidence of disputes relative to 
sales is proportional to that experienced by Ford, the number of 
disputes handled by Chrysler's IDSM would be approximately two-thirds 
of the Ford total, i.e., roughly 4,700 disputes. Based on the above 
data and assumptions, staff projects that the total number of disputes 
handled by the Rule's mechanisms total is 36,938. Thus, staff estimates 
the total burden to be approximately 24,625 hours (36,938 disputes  x  
40 minutes <divide> 60 min./hr.).
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    \6\ So far as staff is aware, all or virtually all of the IDSMs 
subject to the Rule are within the auto industry.
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    Disclosure: The Rule requires that information about the mechanism 
be disclosed in the written warranty. Any incremental costs to the 
warrantor of including this additional information in the warranty are 
negligible. The majority of such costs would be borne by the IDSM, 
which is required to provide to interested consumers upon request 
copies of the various types of information the IDSM possesses, 
including annual audits. Consumers who have dealt with the IDSM also 
have a right to copies of records relating to their disputes. (IDSMs 
are permitted to charge for providing both types of information.) Given 
the small number of entities that have operated programs over the 
years, staff estimates that the burden imposed by the disclosure 
requirements is approximately 9,235 hours per year for the existing 
IDSMs to provide copies of this information. This estimate draws from 
the estimated number of consumers file claims each year with the IDSMs 
(36,938) and the assumption that each consumer individually requests 
copies of the records relating to their dispute. Staff estimates that 
the copying would require approximately 15 minutes per consumer, 
including copies of the

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annual audit.\7\ Thus, the IDSMs currently operating under the Rule 
would have a total estimated burden of about 9,235 hours (36,936  x  15 
min. 60 min./hr.).
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    \7\ This estimate incorporates any additional time needed to 
reproduce copies of audit reports for consumers upon their request. 
Inasmuch as consumers request such copies in only a minority of 
cases, this estimate is likely an overstatement.
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    Total annual labor cost: $461,725.
    Assuming that IDSMs use skilled clerical or technical support staff 
to compile and maintain the records required by the Rule at an hourly 
rate of $15, the labor cost associated with the 24,625 recordkeeping 
burden hours would be $369,375. If IDSMs use clerical support at an 
hourly rate of $10 to reproduce records, the labor costs of the 9,235 
disclosure burden hours is approximately $92,350. The combined total 
labor cost for recordkeeping and disclosures is $461,725.
    Total annual capital or other non-labor costs: $300,000.
    Total capital and start-up costs: The Rule imposes no appreciable 
current capital or start-up costs. The vast majority of warrantors have 
already developed systems to retain the records and provide the 
disclosures required by the Rule. Rule compliance does not require the 
use of any capital goods, other than ordinary office equipment, to 
which providers would already have access.
    The only additional cost imposed on IDSMs operating under the Rule 
that would not be incurred for other IDSMs is the annual audit 
requirement. One of the IDSMs currently operating under the Rule 
estimates the total annual costs of this requirement to be under 
$100,000. Since there are three IDSMs operating under the Rule (Toyota 
and Chrysler share the same IDSM, though each company is reported 
separately), staff estimates the total non-labor costs associated with 
the Rule to be three times that amount, or $300,000.\8\ This 
extrapolated total, however, also reflects an estimated $120,000 for 
copying costs, which is accounted for separately under the category 
below. Thus, estimated costs attribute solely to capital or start-up 
expenditures is $180,000.
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    \8\ The industry source did not break down this estimate by cost 
item. Staff conservatively included the entire $100,000 in its 
estimate of capital and other non-labor costs, even though some of 
this burden is likely already accounted for as labor costs.
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    Other non-labor costs: $120,000 in copying costs. This total is 
based on estimated copying costs of 5 cents per page and several 
conservative assumptions or estimates. Staff estimates that the 
``average'' dispute-related file is about 25 pages long and that a 
typical annual audit file is about 200 pages in length. For purposes of 
estimating copying costs, staff assumes that every consumer complainant 
(or approximately 36,938 consumers) requests a copy of the file 
relating to his or her dispute. Staff also assumes that, for about 
7,388 (20%) of the estimated 36,938 disputes each year, consumers 
request copies of warrantors' annual audit reports (although, based on 
requests for audit reports made directly to the FTC, the indications 
are that considerably fewer requests are actually made). Thus, the 
estimated total annual copying costs for avarage-sized files would be 
approximately $46,173 (25 pages/file  x .05 x 36,938 requests) and 
$73,880 for copies of annual audits (200 pages/audit 
report x .05 x 7,388 requests), for total copying costs of $120,053, 
rounded to $120,000).

John D. Graubert,
Acting General Counsel.
[FR Doc. 01-13646 Filed 5-30-01; 8:45 am]
BILLING CODE 6750-01-M