b'UNITED STATES OF AMERICA\n\nFEDERAL TRADE COMMISSION\nWASHINGTON, D.C. 20580\n\n \n\nDivision of Marketing Practices\n\nCraig Tregillus Direct Dial: (202) 326-2970\nctregillus @ftc.gov Facsimile: (202) 326-3395\n\nOctober 1, 2007\n\nT. Scott Gilligan, Esq.\n3734 Eastern Ave.\nCincinnati, OH 45225\n\nDear Mr. Gilligan:\n\nThis letter is in response to your request for an informal staff advisory opinion on\nwhether the FTC Funeral Rule permits funeral providers to display casket information,\nincluding prices, on a computer instead of a printed price list. You state that in the past\nfew years, several of the major casket companies have developed computer programs that\nallow funeral providers to show consumers pictures of caskets together with price\ninformation. Your inquiry notes that the ability to show caskets on the computer greatly\nreduces inventory costs for funeral homes and that many consumers prefer to look at\ncasket information on a computer.\n\nThe Casket Price List (\xe2\x80\x9cCPL\xe2\x80\x9d) provision in Section 453.2(b)(2) of the Funeral\nRule requires funeral providers to \xe2\x80\x9cgive a printed or typewritten price list to people who\ninquire in person about the offerings or prices of caskets or alternative containers,\xe2\x80\x9d and to\noffer consumers the CPL \xe2\x80\x9cupon beginning discussion of, but in any event before showing\ncaskets.\xe2\x80\x9d! The CPL must include: (i) the retail price of all caskets and alternative\ncontainers offered by the provider that do not require special ordering with enough\ninformation to identify each of them;? (ii) the effective date of the CPL;? (iii) the name of\nthe funeral provider\xe2\x80\x99s place of business;\xe2\x80\x98 and (iv) a caption describing the CPL as a\n\n\' 16 CER. \xc2\xa7 453.2(b)(2)(i). The Rule does not require a funeral provider to\nmake the CPL available if the provider includes the required casket price information in\nits General Price List (\xe2\x80\x9cGPL\xe2\x80\x9d). The Rule also does not require funeral providers to give\nconsumers the CPL to keep, unlike the GPL, which they must \xe2\x80\x9cgive\xe2\x80\x9d consumers \xe2\x80\x9cfor\nretention.\xe2\x80\x9d 16 C.F.R. \xc2\xa7 453.2(b)(4)(i)(A).\n\n2 16 CER. \xc2\xa7 453.2(b)(2)(i).\n3 Id.\n\n\xe2\x80\x98 16 C.F.R. \xc2\xa7 453.2(b)(2)Gi).\n\x0cT. Scott Gilligan, Esq.\nPage 2 of 3\n\n\xe2\x80\x9ccasket price list.\xe2\x80\x9d\xc2\xb0 Section 453.2(b)(2)(i) also specifies that \xe2\x80\x9c[i]n lieu of a written list,\nother formats, such as notebooks, brochures, or charts may be used if they contain the\nsame information as the printed or typewritten list, and display it in a clear and\nconspicuous manner.\xe2\x80\x9d\xc2\xae\n\nThe purpose of the CPL, like the other remedial price list requirements of the\nRule, is to \xe2\x80\x9cenhance the operation of market forces and cure the market failure . . . in the\nfuneral industry\xe2\x80\x9d that was demonstrated in the rulemaking record \xe2\x80\x9cby giving consumers\naccess to price information at a time and in a form which will permit them to consider\nprice when making purchase decisions.\xe2\x80\x9d\n\nIn conformity with the language of Section 453.2(b)(2)(i), the Statement of Basis\nand Purpose issued when the Funeral Rule was first promulgated states that \xe2\x80\x9c[t]he casket\nprice list does not have to be prepared as a printed or written list\xe2\x80\x9d and \xe2\x80\x9cmay be displayed\nin other formats, such as a looseleaf notebook with a page for each casket.\xe2\x80\x9d* The\nCompliance Guide similarly notes that the Rule does not require that caskets or\ncontainers be listed in any particular format or order, and that the Casket Price List can be\nin any form as long as it contains the required information displayed in a clear and\nconspicuous manner.\xe2\x80\x9d\n\nAccordingly, it is the opinion of staff that presenting casket and alternative\ncontainer price information along with pictures of caskets offered by the funeral provider\nto consumers on a computer is consistent with the Rule\xe2\x80\x99s provision permitting price\ninformation to be displayed \xe2\x80\x9cin other formats,\xe2\x80\x9d so long as all of the information required\nby the Rule is displayed in a clear and conspicuous manner."\n\n5 Id.\n8 16 CER. \xc2\xa7 453.2(b)(2)(i) (emphasis added).\n\n7 Statement of Basis and Purpose, 47 Fed. Reg. at 42260, 42272 (Sept. 24,\n1982).\n\n8 47 Fed. Reg. at 42273.\n\n\xc2\xb0 Complying with the Funeral Rule, FTC (June 2004) at 15.\n\nto For a discussion of how the FTC determines whether a disclosure\n\npresented to consumers on a computer is \xe2\x80\x9cclear and conspicuous,\xe2\x80\x9d see e.g., Dot Com\nDisclosures, FTC (May 2000) available at http://www ftc.gov/bcp/conline/pubs/\nbuspubs/dotcom.\n\x0cT. Scott Gilligan, Esq.\nPage 3 of 3\n\nPlease be advised that the views expressed in this letter are those of the FTC staff.\nThey have not been reviewed, approved, or adopted by the Commission, and they are not\nbinding upon the Commission. However, they do reflect the opinions of those staff\nmembers charged with enforcement of the Funeral Rule. Staff Funeral Rule opinions are\nroutinely posted on the FTC website at http://www .ftc.gov/bcp/conline/edcams/funerals/\n\nstaffopinions.shtm.\nSincerely,\nfll\n\nCraig Tregillus\nFuneral Rule Coordinator\n\x0c'


b"UNITED STATES OF AMERICA\nFEDERAL TRADE COMMISSION\nWASHINGTON, D.C. 20580\n\n \n\nDivision of Marketing Practices\n\nCraig Tregillus Direct Dial: (202) 326-2970\nctregillus @ftc.gov Facsimile: (202) 326-3395\n\nAugust 21, 2007\n\nT. Scott Gilligan, Esq.\nGilligan Law Offices\n3734 Eastern Ave.\nCincinnati, OH 45226\n\nDear Mr. Gilligan:\n\nThis letter responds to your inquiry about a prior staff opinion interpreting the FTC\nFuneral Rule (\xe2\x80\x9cRule\xe2\x80\x9d) which concluded, inter alia, that a funeral provider may not charge a\nstorage fee if a third party casket is delivered \xe2\x80\x9cseveral days before it is needed for a visitation or\nfuneral service.\xe2\x80\x9d! You ask whether the opinion applies only to \xe2\x80\x9cat need\xe2\x80\x9d arrangements made\nafter a death, as it indicates, or whether the same reasoning would also apply to prohibit a storage\nfee if a third party casket were delivered shortly after \xe2\x80\x9cpre-need\xe2\x80\x9d funeral arrangements are made\nby a consumer who \xe2\x80\x9cwould not need the casket for some indeterminate time.\xe2\x80\x9d\n\nThe prior opinion was based on the prohibition in section 453.4(b)(1)(ii) of the Rule\nwhich bars funeral providers from charging \xe2\x80\x9cany fee as a condition to furnishing any funeral\ngoods or funeral services to a person arranging a funeral\xe2\x80\x9d other than the basic services fee,\npayments for the funeral goods and services selected, and payments for items required to meet\nlegal, cemetery or crematory requirements.\xe2\x80\x9d A related \xe2\x80\x9csafe harbor\xe2\x80\x9d provision in section\n453.4(b)(2)(ii) of the Rule provides, however, that \xe2\x80\x9c[a] funeral provider shall not violate this\nsection by failing to comply with a request for a combination of goods or services which would\nbe impossible, impractical, or excessively burdensome to provide.\xe2\x80\x9d*\n\nIt is staff\xe2\x80\x99s opinion that a request for free storage of a third party casket made in\nconnection with pre-need arrangements would be \xe2\x80\x9cexcessively burdensome.\xe2\x80\x9d Consequently, a\nfuneral provider would be protected by the safe harbor provision from liability for violating the\nRule by \xe2\x80\x9cfailing to comply\xe2\x80\x9d with such a request and refusing to store a third party casket for free\nfor some indeterminate time.\n\n' Staff Opinion to Joseph J. DellaVecchia, Jr. July 12, 2007) at 1, available at\nhttp://www. ftc.gov/bcp/conline/edcams/funerals/opinions/opinion07-4.pdf.\n\n2 16 C.F.R. \xc2\xa7 453.4(b)(1)(ii) (emphasis added).\n\n3 16 CFR. \xc2\xa7 453.4(b)(2)(ii).\n\x0cT. Scott Gilligan, Esq.\nGilligan Law Offices\nPage 2 of 2\n\nAs you know, the views expressed in this letter are those of FTC staff. They have not\nbeen reviewed, approved or adopted by the Commission, and they are not binding on the\nCommission or any individual Commissioner. However, they do reflect the views of FTC staff\ncharged with enforcement of the Funeral Rule. Staff Funeral Rule opinions are routinely posted\non the FTC website at http://www.ftc.gov/bcp/conline/edcams/funerals/staffopinions.shtm.\n\nSincerely,\nIs/\n\nCraig Tregillus\nFuneral Rule Coordinator\n\x0c"


b'UNITED STATES OF AMERICA\n\nFEDERAL TRADE COMMISSION\nWASHINGTON, D.C. 20580\n\n \n\nDivision of Marketing Practices\n\nCraig Tregillus Direct Dial: (202) 326-2970\nctregillus@ftc.gov Facsimile: (202) 326-3395\n\nAugust 21, 2007\n\nMeredyth P. Partridge, President\n\nRegulatory Support Services, Inc.\nP.O. Box 83\n\nManakin-Sabot, VA 23103-0083\n\nDear Ms. Partridge:\n\nThis letter responds to your request for a staff opinion clarifying whether the Funeral Rule\nrequires a funeral provider to itemize the services provided as part of direct cremation, immediate\nburial, forwarding of remains to another funeral home and receiving remains from another\nfuneral home when providing a Statement of Funeral Goods and Services Selected (\xe2\x80\x9cStatement\xe2\x80\x9d)\nto a consumer.\n\nYour inquiry implicates the interplay between the General Price List (\xe2\x80\x9cGPL\xe2\x80\x9d) and the\nStatement. As you know, the Rule requires a funeral provider to give consumers who inquire in\nperson a copy of its GPL at the beginning of any discussion of funeral arrangements or prices."\nAt the conclusion of the discussion of arrangements, the funeral provider must give the customer\nan \xe2\x80\x9citemized\xe2\x80\x9d copy of the Statement that shows the funeral goods and services selected, their\nprices, and the total cost.\xe2\x80\x9d\n\nAs your inquiry notes, the Rule requires a separate listing in the GPL for each of 16\nspecified services, including the services about which you inquire, \xe2\x80\x9cif offered for sale\xe2\x80\x9d by the\nfuneral provider.? Nothing in the Rule prohibits a funeral provider from offering additional\ngoods or services, however, including funeral packages. In fact, Section 453.2(b)(6) expressly\nauthorizes funeral providers to give consumers \xe2\x80\x9cany other price information, in any format, in\naddition to that required by [the Rule].*\n\n! 16 CFR \xc2\xa7 453.2(b)(4).\n2 16 CFR \xc2\xa7 453.2(b)(5).\n\n3 16 CER \xc2\xa7 453.2(b)(4)(ii).\n\n\xe2\x80\x98 16 CFR \xc2\xa7 453.2(b)(6).\n\x0cMs. Meredyth P. Partridge, President\nRegulatory Support Services, Inc.\nPage 2 of 3\n\nAccordingly, the discussion of requirements for the Statement in the FTC\xe2\x80\x99s compliance\nguidelines for funeral providers, Complying with the Funeral Rule (\xe2\x80\x9cFTC Compliance Guide\xe2\x80\x9d)\nadvises funeral providers:\n\nYou may still offer funeral packages, as long as they are offered in addition to,\nnot in place of, itemized prices. If the consumer selects a package (after you\noffer itemized prices), your Statement should describe the package, listing\nindividually each of the goods and services included in the package, and state the\npackage price.*\n\nThus, as your inquiry and the FTC Compliance Guide note, if a funeral package is\nselected, the Statement must \xe2\x80\x9cdescribe\xe2\x80\x9d each package offered, \xe2\x80\x9clisting individually each of the\ngoods and services included in the package.\xe2\x80\x9d It is this requirement that has led to your question:\nwhether the Rule requires that the four services about which you inquire \xe2\x80\x94 direct cremation,\nimmediate burial, forwarding of remains and receiving remains \xe2\x80\x94 be treated as \xe2\x80\x9cpackages\xe2\x80\x9d that\nmust be \xe2\x80\x9cdescribed\xe2\x80\x9d in this detail in the Statement.\n\nIt is our opinion that the Rule does not require that the four services about which you\ninquire be treated as \xe2\x80\x9cpackages\xe2\x80\x9d because the Rule requires a description in the GPL that lists\n\xe2\x80\x9cindividually each of the goods and services\xe2\x80\x9d provided with these four services. The GPL must\ninclude \xe2\x80\x9ca description of the services and container (where applicable)\xe2\x80\x9d included in each price\nlisted for a direct cremation,\xc2\xae as well as for an immediate burial.\xe2\x80\x99 Likewise, the Rule requires \xe2\x80\x9ca\nlist of the services provided\xe2\x80\x9d for any price stated in the GPL for forwarding of remains,* and for\nreceiving remains.? Consumers may keep the GPL containing these descriptions because the\nRule requires funeral providers to give the GPL to them \xe2\x80\x9cfor retention.\xe2\x80\x9d\xe2\x80\x9d\xc2\xb0\n\nBecause the GPL must include an itemization of the services provided for direct\ncremation, immediate burial, forwarding remains, and receiving remains, staff has long taken the\n\nposition that no additional, duplicative \xe2\x80\x9cdescription\xe2\x80\x9d is required in the Statement for these four\nservices. Thus, the sample statement provided in the FTC Compliance Guide contains only one-\n\nFTC Compliance Guide, p. 18 (bold in original; other emphasis added).\n8 16 CFR \xc2\xa7 453.2(b)(4)(ii(C)G).\n\n7 16 CFR \xc2\xa7 453.2(b)(4)(ii)(D)(3).\n\n8 16 CER \xc2\xa7 453.2(b)(4)(4)(A).\n\n\xc2\xb0 16 CFR \xc2\xa7 453.2(b)(4)(ii)(B).\n\n0 16 CFR \xc2\xa7\xc2\xa7 453.2(b)(4).\n\x0cMs. Meredyth P. Partridge, President\n_ Regulatory Support Services, Inc.\nPage 3 of 3\n\nline entries for the prices of direct cremation, immediate burial, forwarding remains, and\nreceiving remains.\xe2\x80\x9d\n\nAs you know, the views expressed in this letter are those of FTC staff. They have not\nbeen reviewed, approved or adopted by the Commission, and they are not binding on the\nCommission or any individual Commissioner. However, they do reflect the views of FTC staff\ncharged with enforcement of the Funeral Rule. Staff Funeral Rule opinions are routinely posted\non the FTC website at http://www.ftc.gov/bcp/conline/edcams/funerals/staffopinions.shtm.\n\nSincerely,\n/s/\n\nCraig Tregillus\nFuneral Rule Coordinator\n\nn FTC Compliance Guide, pp. 32-33.\n\x0c'


b'UNITED STATES OF AMERICA,\n\nFEDERAL TRADE COMMISSION\nWASHINGTON, D.C. 20580\n\n \n\nDivision of Marketing Practices\n\nCraig Tregillus Direct Dial: (202) 326-2970\nctregillus @ftc.gov Facsimile: (202) 326-3395\n\nAugust 21, 2007\n\nMeredyth P. Partridge, President\n\nRegulatory Support Services, Inc.\nP.O. Box 83\n\nManakin -Sabot, VA 23103-0083\n\nDear Ms. Partridge:\n\nYou have requested a staff opinion on the circumstances, if any, under which the FTC\nFuneral Rule (\xe2\x80\x9cRule\xe2\x80\x9d) requires a funeral provider to treat embalming as a \xe2\x80\x9ccash advance\xe2\x80\x9d item.\nIn particular, you ask whether a funeral provider that charges a purchaser the embalming fee\nlisted on the funeral provider\xe2\x80\x99s General Price List (\xe2\x80\x9cGPL\xe2\x80\x9d) must list embalming as a \xe2\x80\x9ccash\nadvance\xe2\x80\x9d item when the embalming is performed by a third party who charges the funeral\nprovider less than the funeral provider charges the ultimate purchaser. Your request states that\nthis issue may arise when a funeral provider receives embalmed remains from another funeral\nprovider, or when the funeral provider obtains embalming services from a third party.\n\nYour question arises because of the difference in the Rule\xe2\x80\x99s requirements for cash\nadvance items and non-cash advance items. As you know, the Rule treats the two types of items\ndifferently because Section 453.3(f) requires a funeral provider who is charging a customer more\nfor a cash advance item than the funeral director paid for it to disclose that material fact.\xe2\x80\x99 This\ndisclosure must appear in writing on the Statement of Funeral Goods and Services Selected\n(\xe2\x80\x9cStatement\xe2\x80\x9d) that a funeral provider must give to a consumer at the conclusion of the discussion\nof funeral arrangements.\xe2\x80\x9d\n\nThe Rule requires no similar disclosure for non-cash advance items. In fact, Section\n453.2(b)(4)(ii) of the Rule expressly mandates a disclosure in a funeral provider\xe2\x80\x99s GPL of \xe2\x80\x9cthe\nretail prices\xe2\x80\x9d of specified goods and services offered for sale by a funeral provider that are\n\n! 16 C.F.R. \xc2\xa7 453.3(f). Only the existence of the mark-up must be disclosed, not\nthe amount.\n\n4\n\n- 16 C_E.R. \xc2\xa7453.3(f)(2). In addition, any \xe2\x80\x9ccash advance item\xe2\x80\x9d must be\n\xe2\x80\x9cspecifically itemized\xe2\x80\x9d as a \xe2\x80\x9ccash advance item\xe2\x80\x9d in the Statement. 16 C.F.R. \xc2\xa7 453.2(b)(5)(i)(B).\n\x0cMs. Meredyth P. Partridge, President\nRegulatory Support Services, Inc.\nPage 2 of 3\n\ntypically non-cash advance items.\xe2\x80\x99 Section 453.2(b)(4)(ii)(A) expressly requires such a separate\nretail price disclosure in the GPL for \xe2\x80\x9cembalming.\xe2\x80\x9d Like all other for-profit businesses, a\nfuneral provider\xe2\x80\x99s \xe2\x80\x9cretail prices\xe2\x80\x9d for the funeral goods and services it sells include a sufficient\nmark-up over cost to provide a profit.\n\nA good or service offered by a funeral provider is not a cash advance item unless it meets\none of the two tests provided by the definition of a cash advance item in Section 453.1(b) of the\nRule:\n\nA \xe2\x80\x98cash advance item\xe2\x80\x99 is any item of service or merchandise described to a\npurchaser as a \xe2\x80\x98cash advance,\xe2\x80\x9d \xe2\x80\x98accommodation,\xe2\x80\x99 \xe2\x80\x98cash disbursement,\xe2\x80\x99 or similar\nterm. A cash advance item is also any item obtained from a third party and paid\nfor by the funeral provider on the purchaser\xe2\x80\x99s behalf.>\n\nThe first sentence of the definition specifies that a funeral good or service is a \xe2\x80\x9ccash\nadvance item\xe2\x80\x9d if a funeral provider expressly represents to a consumer that it is a \xe2\x80\x9ccash advance\xe2\x80\x9d\nitem or uses similar terms to describe it. This test is based on the Commission\xe2\x80\x99s finding during\nthe rulemaking that, in describing a particular item to a customer, a funeral provider\xe2\x80\x99s use of the\nterm \xe2\x80\x9ccash advance item,\xe2\x80\x9d or such alternative formulations as \xe2\x80\x9caccommodation\xe2\x80\x9d or \xe2\x80\x9ccash\ndisbursement,\xe2\x80\x9d leads reasonable consumers to believe that the item will be provided at cost.\nThus, in cases where a funeral provider describes an item in this manner, yet charges a consumer\nmore for it than the provider paid, the Commission requires a corrective disclosure to prevent the\ndeception.\n\nThe test in the second sentence of the definition is designed to prevent funeral providers\nfrom evading the cash advance disclosure requirement by avoiding express representations that\nan item is a \xe2\x80\x9ccash advance item\xe2\x80\x9d but implying that they are providing the item at their cost when\nthat is not the case.\xe2\x80\x9d\n\nThus, in the absence of either an express representation that a funeral good or service is a\n\n\xe2\x80\x9ccash advance item\xe2\x80\x9d or similar term, or an implied representation that the funeral provider will\nobtain an item on behalf of a particular consumer at the funeral provider\xe2\x80\x99s cost, a funeral good or\n\n3 16 CFR. \xc2\xa7 453.2(b)(4)(ii) (emphasis added).\n\n4 16 C.F.R. \xc2\xa7 453.2(b)(4)(ii)(A).\n\nuo\n\n16 C.F.R. \xc2\xa7 453.1(b) (omitting examples).\n6 47 Fed. Reg. 42278-42279 (Sept. 24, 1982).\n\n7 See FTC, Letter to The Hon. Dan Flynn (July 7, 2005), at 5, available at\nhttp://www .ftc.gov/os/2005/07/050707 funeralruleadvoopin.pdf.\n\x0cMs. Meredyth P. Partridge, President\nRegulatory Support Services, Inc.\nPage 3 of 3\n\nservice is a non-cash advance item. In that case, the Rule permits a funeral provider to charge a\nretail price that includes a mark-up over cost without disclosing that fact.\n\nSince whether a funeral good or service is a \xe2\x80\x9ccash advance item\xe2\x80\x9d depends on a funeral\nprovider\xe2\x80\x99s express or implied representations about the item, any determination that an item is a\n\xe2\x80\x9ccash advance item\xe2\x80\x9d requires an analysis of the facts of a particular transaction. The mere fact\nthat a funeral good or service is initially obtained from a third party does not turn that item into a\ncash advance item. Indeed, as previously noted, the Rule assumes that funeral providers who\noffer embalming as one of their services ordinarily charge consumers a \xe2\x80\x9cretail price\xe2\x80\x9d for that\nservice. Of course, there could be specific circumstances in which a funeral provider makes an\nexpress or implied representation that leads consumers acting reasonably under the circumstances\nto understand that embalming will be provided at cost. Under these circumstances, the funeral\nprovider must list embalming as a \xe2\x80\x9ccash advance item\xe2\x80\x9d in the Statement provided to consumers\nat the conclusion of the arrangements conference. In addition, if a funeral provider must list\nembalming as a cash advance item, and the price charged by the funeral provider for embalming\nexceeds the funeral provider\xe2\x80\x99s cost, the Statement must include the disclosure required by\nSection 453.3(f)(2).\n\nAs you know, the views expressed in this letter are those of FTC staff. They have not\nbeen reviewed, approved or adopted by the Commission, and they are not binding on the\nCommission or any individual Commissioner. However, they do reflect the views of FTC staff\ncharged with enforcement of the Funeral Rule. Staff Funeral Rule opinions are routinely posted\non the FIC website at http://www .ftc.gov/bcp/conline/edcams/funerals/staffopinions.shtm.\n\nSincerely,\n/s/\n\nCraig Tregillus\nFuneral Rule Coordinator\n\x0c'


b'UNITED STATES OF AMERICA\n\nFEDERAL TRADE COMMISSION\nWASHINGTON, D.C. 20580\n\nDivision of Marketing Practices\nCraig Tregillus\nctregillus@ftc.gov\n\nDirect Dial: (202) 326-2970\nFacsimile: (202) 326-3395\n\nJuly 19, 2007\nHarvey I. Lapin, Esq.\nHarvey I. Lapin, PC\nP.O. Box 1327\nNorthbrook, IL 60065-1327\nDear Mr. Lapin:\nYou have requested a staff opinion on whether the FTC Funeral Rule requires a funeral\nprovider to make its facilities available for a memorial service to families who do not wish to\nmake any other funeral arrangements with the provider. It is staff\xe2\x80\x99s opinion, for the reasons\nwhich follow, that the Rule does not require a funeral provider to do so.\nAs you know, Section 453.4(b)(1)(i) of the Rule makes it unlawful for a \xe2\x80\x9cfuneral\nprovider\xe2\x80\x9d to \xe2\x80\x9c[c]ondition the furnishing of any funeral good or funeral service to a person\narranging a funeral upon the purchase of any other funeral good or funeral service, except as\nrequired by law or as otherwise permitted by this part.\xe2\x80\x9d1 Section 453.4(b)(2)(ii) grants a safe\nharbor, however, providing that \xe2\x80\x9c[a] funeral provider shall not violate this section by failing to\ncomply with a request for a combination of goods or services which would be impossible,\nimpractical, or excessively burdensome to provide.\xe2\x80\x9d2\nSection 453.1(i) of the Rule defines a \xe2\x80\x9cfuneral provider\xe2\x80\x9d as \xe2\x80\x9cany person, partnership or\ncorporation that sells or offers to sell funeral goods and funeral services to the public.\xe2\x80\x9d3 Because\nfuneral providers are, by definition, in the business of providing both funeral goods and funeral\nservices to the public, staff has determined in a prior opinion that the Rule is premised on the\nunderstanding that \xe2\x80\x9cfuneral providers are persons who furnish funeral arrangements, and not\npersons who simply sell a particular good or service as a separate sales transaction.\xe2\x80\x9d4 Staff\nconcluded in that ruling that \xe2\x80\x9cfor a business operation thus defined to be required to function as\n1\n\n16 CFR \xc2\xa7 453.4(b)(1).\n\n2\n\n16 CFR \xc2\xa7 453.4(b)(2)(ii).\n\n3\n\n16 CFR \xc2\xa7 453.1(i).\n\n4\n\nStaff Opinion, Casket & Funeral Supply Association of America (July 18, 1995)\nat 1-2, available at http://www.ftc.gov/bcp/conline/edcams/funerals/opinions/opinion95-3.pdf.\n\n\x0cMr. Harvey I. Lapin, Esq.\nJuly 19, 2007\nPage 2 of 2\nsomething else, such as a casket seller\xe2\x80\x9d would be \xe2\x80\x9cimpractical,\xe2\x80\x9d and that a funeral provider\xe2\x80\x99s\nrefusal to sell caskets at retail to individuals who do not also wish to make funeral arrangements\naccordingly would fall within the safe harbor provided by Section 453.4(b)(2)(ii).5\nYour request similarly asks whether the Rule requires a funeral provider to make its\nfacilities available for a memorial service to families who do not wish to make any other funeral\narrangements with the provider. Our prior staff opinion quotes the following excerpt from the\noriginal Statement of Basis and Purpose for the Rule that is of particular relevance to this\nquestion:\n\xe2\x80\x9c[T]he Commission would not consider it a violation of section 453.4(b) for a\nfuneral provider to refuse doing business with a consumer who said \xe2\x80\x98we have our\nown casket, transportation, flowers, etc., but wish to use your viewing facilities\nfor two hours next Monday.\xe2\x80\x99\xe2\x80\x9d6\nIn view of this unambiguous statement of the Commission\xe2\x80\x99s views, it continues to be\nstaff\xe2\x80\x99s opinion that it is not \xe2\x80\x9cthe Commission\xe2\x80\x99s intention to require a funeral provider to sell an\nisolated good or service that is not to be used in conjunction with a funeral arranged by that\nfuneral provider.\xe2\x80\x9d7 We see no principled basis for distinguishing the use of a funeral provider\xe2\x80\x99s\nfacilities for a memorial service from their use for a viewing.\nAs you know, the views expressed in this letter are those of the FTC staff. They have not\nbeen reviewed, approved, or adopted by the Commission, and they are not binding on the\nCommission or any individual Commissioner. However, they do reflect the views of FTC staff\ncharged with enforcement of the Funeral Rule. Staff Funeral Rule opinions are routinely posted\non the FTC website at http://www.ftc.gov/bcp/conline/edcams/funerals/staffopinions.shtm.\nSincerely,\n/s/\nCraig Tregillus\nFuneral Rule Coordinator\n\n5\n\nId. at 2.\n\n6\n\n47 FR 42260, 42282 n.230 (Sept 24, 1982).\n\n7\n\nStaff Opinion, supra n.4, at 2.\n\n\x0c'


b"UNITED STATES OF AMERICA\n\nFEDERAL TRADE COMMISSION\nWASHINGTON, D.C. 20580\n\n \n\nDivision of Marketing Practices\n\nCraig Tregillus Direct Dial: (202) 326-2970\nctregillus@ftc.gov Facsimile: (202) 326-3395\n\nMarch 21, 2007\n\nT. Scott Gilligan, Esq.\nGilligan Law Offices\n3734 Eastern Avenue\nCincinnati, OH 45226\n\nRe: Requiring Consumer Inspection of Third-Party Caskets\n\nDear Mr. Gilligan:\n\nYou have requested clarification of a staff opinion on the FTC Funeral Rule\n(\xe2\x80\x9cFuneral Rule\xe2\x80\x9d or \xe2\x80\x9cRule\xe2\x80\x9d) issued on June 22, 2004, which noted that \xe2\x80\x9cit may be a violation of\n\xc2\xa7 453.4(b)(1) for funeral providers to refuse to use third-party merchandise in conducting agreed-\nupon funeral arrangements until the consumer or his/her representative physically inspects and/or\naccepts such merchandise.\xe2\x80\x9d\n\nAs you know, Section 453.4(b)(1) of the Rule prohibits a funeral provider from \xe2\x80\x9ctying\xe2\x80\x9d or\nconditioning the purchase of any funeral good or service offered by the provider on the purchase\nof any other funeral good or service from the provider. The purpose of this prohibition is to\nprevent funeral providers from requiring consumers to purchase goods or services from them that\nthe consumer does not want. Thus, it has been the consistent position of FTC staff since 1988, as\nyour request recognizes, that the refusal of a funeral provider to sign an acknowledgment of\ndelivery of a third-party casket is tantamount to a refusal to accept delivery, thereby unreasonably\nburdening a consumer\xe2\x80\x99s right to use a third-party casket and effectively preventing its use in\nviolation of \xc2\xa7 453.4(b)(1) of the Rule. Staff Opinions of March 10, 1988, and May 12, 2004.\n\nIna letter issued on June 22, 2004, FIC staff concluded that the use by funeral providers\nof a Receipt of Third Party Merchandise form to acknowledge delivery of third-party caskets\nwould not violate the Funeral Rule. The form, which was prepared and disseminated by the\nNational Funeral Directors Association (\xe2\x80\x9cNFDA\xe2\x80\x9d), states that the funeral provider acknowledges\nreceipt of the merchandise, but that the acknowledgment does not constitute acceptance of the\nmerchandise or its condition, which can only be given by the purchaser. The form also provides\na space where the funeral provider can note any visible defects or conditions that were present at\ntime of delivery.\n\nAt the same time, the staff opinion made it clear that we interpret Section 453.4(b)(1) as\nprohibiting funeral providers from \xe2\x80\x9cunreasonably\xe2\x80\x9d burdening a consumer\xe2\x80\x99s choice to purchase an\n\x0citem from a third-party, such as by refusing to sign for the delivery of a casket or requiring the\nconsumer to be present when it is delivered. Consequently, the staff\xe2\x80\x99s conclusion that the use of\nthe NFDA Receipt would not \xe2\x80\x9cunreasonably burden\xe2\x80\x9d consumer choice was conditioned on the\ncaveat that the Receipt not be \xe2\x80\x9cused as a justification for requiring the consumer to be present\nwhen the merchandise is delivered or for otherwise unreasonably requiring the consumer\xe2\x80\x99 s\nphysical presence to inspect or accept the merchandise.\xe2\x80\x9d\n\nYour request for clarification of the staff opinion argues that funeral providers may be\nliable if the wrong casket is delivered and then used by the provider without first requiring an\ninspection by the purchaser. You state that funeral providers should be allowed to \xe2\x80\x9crequire a\nconsumer to inspect the casket prior to placing a body in it,\xe2\x80\x9d because once a body is placed in a\ncasket, it cannot be reused or resold.\n\nIn fact, Funeral providers can choose any number of other mechanisms to protect\nthemselves from liability, but they cannot require consumers to inspect the casket. For example,\nthey could ask the consumer to provide the make, model and a description of the casket and\ntelephone the consumer if it appears that the wrong casket has been delivered, or if the casket\nappears damaged. Indeed, such a practice would appear to mesh neatly with the NFDA\nGuidelines for Handling Third Party Caskets, which advise funeral providers who receive a\ndefective or damaged third-party casket to \xe2\x80\x9cimmediately alert the family and indicate to them the\ndefect or damage noted.\xe2\x80\x9d!\n\nAbsent clear evidence that funeral providers lack the means to avoid legal liability other\nthan to require an inspection of third-party caskets or other merchandise by the purchaser, staff is\nnot inclined to reverse its prior opinion, as your request for clarification would have us do. It\nremains staff\xe2\x80\x99s opinion that a funeral provider\xe2\x80\x99s refusal to use third party merchandise until the\nconsumer has inspected it may place an unreasonable burden on consumer choice, in violation of\nSection 453.4(b)(1) of the Rule.\n\nPlease note that the views expressed in this letter are those of the FIC staff. They have\nnot been reviewed, approved, or adopted by the Commission, and they are not binding on the\nCommission or any individual Commissioner. However, they do reflect the views of FIC staff\n\nSincerely,\n\ncharged with enforcement of the Funeral Rule.\n(1. ibe\ncoi tooane\n\nFuneral Rule Coordinator\n\n' This letter does not express an opinion on any portion of the NFDA Guidelines\n\nsubmitted with your request except to the extent the Guidelines suggest that funeral providers\nmay require consumers to inspect caskets purchased from third-party dealers, contrary to the\nviews expressed in this opinion.\n\x0c"


b'UNITED STATES OF AMERICA\n\nFEDERAL TRADE COMMISSION\nWASHINGTON, D.C. 20580\n\nDivision of Enforcement\nBureau of Consumer Protection\n\nDecember 20,2006\n\nChristopher Smith, Esq. and Elaine Kolish, Esq.\nSonnenschein, Nath & Rosenthal LLP\n1301 K Street, NW\nSuite 600, East Tower\nWashington, DC 20005-3364\nDear Mr. Smith and Ms. Kolish:\nThis letter responds to your request on behalf of your client, Sony Electronics Inc.\n("Sony"), for a staff advisory opinion regarding Sony\'s proposal to resell, as "new," returned\nconsumer electronics products when the company or its authorized vendor can reliably determine\nthat the products have never been turned on and other particular conditions are met. This\nadvisory opinion is based on the information that you have provided to us in your letter of\nNovember 15,2006. All references to facts regarding your proposal are based on your\nrepresentations; we have not conducted an independent investigation, or otherwise verified the\ninformation that you provided.\nYou note that Sony, as well as other companies in the consumer electronics industry,\nexperience high return volumes.\' Sony\'s uniform practice has been to treat all opened and\nreturned products as used. As a result, following inspection and servicing, these products are\nsold as "refurbished" at significantly discounted prices and include a 90-day limited warranty.\nYou state that, because many of the returned products in fact have never been used, the current\nresale policy comes at a substantial financial cost to the company. Sony proposes modifying its\npractices by distinguishing between returned products that previously have been turned on and\nwith the latter category of products being eligible for resale as new, if\nthose that have notY2\nspecific criteria are met.\n\n1\n\nConsumer electronics products sold by Sony include video products (DVD\nplayers/recorders, digital cameras, camcorders, televisions, and combination TVNCR or\nTV/DVD players), computers (desktop and notebook PCs and related equipment), video game\nsystems, audio products (desktop, component and portable devices), cell phones, portable digital\nassistants, and vehicle electronics.\n2\n\nSony would regard a product has having been "turned on" if electrical power had\nbeen applied to any of the product\'s circuitry.\n\n\x0cChristopher Smith and Elaine Kolish\nDecember 12,2006\nPage 2\nYou state that Sony would implement the policy modification by having it or one of its\nauthorized vendors:\ni.\n\n..\n\nintroduce reliable product packaging technologies that ensure an objective\nand verifiable process for identifying returned products that have never\nbeen turned on.3\n\n11.\n\nidentify, fiom among the products returned by retailers to Sony or its\nauthorized vendor, those that have never been turned on;\n\niii.\n\nvisually inspect those products that have not been turned on and reject any\ndamaged products;\n\niv.\n\nensure that returned products that satisfy the first two conditions have all\nof their requisite parts, components, and manuals;\n\nv.\n\nrepackage the returned products that meet the above conditions;\n\nvi.\n\nprovide the same warranty for these returned products as for new products\nthat have never been sold; and\n\nvii.\n\nreturn them to a retailer for sale as new products.\n\nYou then ask for the staffs opinion as to whether Sony\'s proposed course of conduct complies\nwith the FTC Act and other Commission policy statements.\nSection 5 of the FTC Act, which prohibits deceptive acts or practices, governs the issue.\n15 U.S.C. tj 45. The Commission has explored the concept of deception under Section 5 in two\nrelevant policy statements.\nOur analysis begins with the Commission\'s 1969 Enforcement Policy on Merchandise\nWhich Has Been Subjected to Previous Use on Trial Basis and Subsequently Resold as New. 34\nFed. Reg. 176-77. The 1969 Enforcement Policy concerned the then-prevalent business practice\nof selling, as new, products that previously had been used on a trial basis by prospective\npurchasers. Id. at 176. In that policy statement, the Commission set out the broad principle that\ndeception lies where a marketer "[fails] to disclose material facts relevant to a purchaser\'s\ndecision to buy or not to buy." Id. Because consumers have a preference for new or unused\nproducts, the Commission found that prior use was material to the purchase decision. Id. The\nCommission, therefore, concluded that the failure to disclose prior use was unlawfbl even where\n3\n\nSome of these technologies include internal chips or clocks with the ability to\nindicate whether a product has been turned on; and tamper-evident tape, seals, or labels affixed to\nAC plugs, connectors, or battery compartments.\n\n\x0cChristopher Smith and Elaine Kolish\nDecember 12,2006\nPage 3\nreturned merchandise had been refurbished to "good as new" condition. Id. at 177. The\nCommission noted, however, that this policy applied only to products that in fact had been\n"used," as distinguished from products that had "merely been inspected but not used." Id.\nThe Commission provided more specific guidance in its Policy Statement on Deception,\nappended to Clifldale Assocs., Inc., 103 F.T.C. 110, 174 (1984). The Commission stated that it\nwill find deception where a representation, omission or practice is likely to materially mislead a\nconsumer acting reasonably under the circumstances. Id. at 176. Materiality is a core element of\ndeception. A misrepresentation or omission is material if it is "likely to affect a consumer\'s\nchoice of or conduct regarding the product," and therefore, injures the consumer who may have\notherwise made a different choice. Id. at 182-83.\nPursuant to the guidance provided by these policy statements, we do not believe that\nconsumers would be deceived by Sony\'s resale of returned consumer electronics within the\nguidelines described above. As an initial matter, by limiting its program to products that have\nnever been turned on, it appears that Sony would be reselling products that fall within the\n"inspected but not used" category referenced in the 1969 Enforcement Policy. However, the\nanalysis does not end there. The products, as a result of prior purchase, may carry defects upon\nreturn. For example, a returned product may never have been turned on, but nonetheless may be\ndamaged or missing requisite parts and inserts. Sony\'s program appears comprehensive enough\nto avoid such defects and protect consumers from injury, thereby likely rendering the fact of prior\npurchase immaterial. Therefore, we believe Sony would be acting lawfblly under Section 5 of\nthe FTC Act in implementing its proposed program, as represented to Commission staff.\nThis letter sets out the views of the staff of the Bureau of Consumer Protection, as\nauthorized by the Commission\'s Rules of Practice. Those views are based on information\nprovided to Commission staff by you. Staff have not engaged in independent factual\ninvestigation regarding the proposal. In accordance with Section 1.3(c) of the Commission\'s\nRules of Practice and Procedure, 16 C.F.R. 5 1.3(c), this is a staff opinion only and has not been\nreviewed or approved by the Commission or by any individual Commissioner, and is given\nwithout prejudice to the right of the Commission later to rescind the advice and, where\nappropriate, to commence an enforcement action. In accordance with Section 1.4 of the\nCommission\'s Rules of Practice and Procedure, 16 C.F.R. 5 1.4, your request for advice, along\nwith this response, will be placed on the public record.\nWe appreciate your taking the time to\n\n~ssdciateDirector for Enforcement\n\n\x0c'


b'S~nnenschein\n\n1301 K Street N.W.\nSuite 600, East Tower Chicago\nWashington, D.C. 20005-3364 Kansas\n202.408.6400 Los Angeles\n202.408.6399 fax New Vork\nwww,sonnenscheln.com Phoenix\n\nS O N N E N S C H E I N N A T H & R O S E N T H A L LLP\n\nChristopher Smith\n202.408.923 1\n\nkitsmith@sonnenschein.com\n\nSan Francisco\nShort Hills, N.J.\nSt. Louis\nWashington, D.C.\nWesf Palm Beach\n\nElaine D. Kolish\n202.408.3243\n\neltolish@sonnenschein.com\n\nNovember 15,2006\n\nThe Honorable Donald S. Clark\nSecretary\nFederal Trade Commission\n600 Pennsylvania Ave., N.W.\nWashington, DC 20580\nRe:\n\nRequest For a Staff Advisory Opinion\n\nDear Mr. Clark:\nOn behalf of Sony Electronics Inc. (Sony) we are requesting a staff advisory opinion,\npursuant to 16 C.F.R. fj 1.1, on the question of whether Sony may lawfully market and sell as\nnew certain returned consumer electronics products that have never been used and that are\nindistinguishable from products straight fiom the factory. Specifically, Sony seeks guidance on\nthe acceptability of selling consumer electronics products as new products under a narrowly\ndefined program in which Sony or its authorized vendor would:\n(i)\n\nidentify, fi-om among the products returned by retailers to Sony or its authorized\nvendor, those that have never been turned on;\n\n(ii) visually inspect those products that have not been turned on and reject any damaged\nproducts;\n(iii) ensure that returned products that satisfy the first two conditions have all of their\nrequisite parts, components, and manuals;\n(iv) repackage the returned products that meet the above conditions;\n(v)\n\nprovide the same warranty for these returned products as for new products that have\nnever been sold; and\n\nY\n\nE\n\n2\n\nA\n\n0\n\nR\n\n0\n\nS\n\n6\n\n\x0cS~nnenschein\n\nSONNENSCHEIN NATH & ROSENTHAL LLP\n\nFederal Trade Commission\nNovember 15,2006\nPage 2\n\n(vi) return them to a retailer for sale as new products.\'\nThis request is based on our understanding of prior Commission policy and precedent\nthat require a seller to disclose when it is selling goods that have been previously used, but do\nnot require returned goods that have merely been "inspected" by consumers to be described as\nused when resold. Sony3srequest does not require the FTC staff to define the entire scope of\nactions that can reasonably constitute inspection. Instead, we only ask the staff to conclude (a)\nthat a product that has never been turned on will not be considered used, and (b) that the other\nelements of Sony\'s proposed program will assure that a consumer buying such a product will\nencounter the same product purchase and usage experience as if he or she had bought a new\nconsumer electronics product that had not been purchased previously.\nWe explain below the reasons for Sony\'s proposed course of action and provide\nadditional details about how the program would be implemented. Additionally, we set forth an\nanalysis of why we believe Sony\'s proposed conduct is legally permissible and why it is\nappropriate for the FTC staff to provide the requested guidance.\n\nSony\'s Proposal to Sell Certain Unused Returned Consumer Electronics as New\nLike many other consumer electronics companies, Sony experiences a high volume of\nproduct returns from consumers, the wholesale value of which has grown dramatically in recent\nyears. As a matter of policy, Sony generally treats all opened returned products as if they have\nbeen used by consumers. These returned products, which are often inspected and serviced, are\ndesignated by Sony as "Class B" products. These products are sold as refurbished products at a\nsignificantly discounted price, and they typically include a 90-day limited warranty rather than a\nlonger new product warranty.\nBecause of the undifferentiating nature of its resale policy, many products designated as\nClass B by Sony have never even been turned on - having merely been inspected by purchasers\nbefore being returned to Sony. Such products have nothing wrong with them when returned by\nconsumers and require no servicing before they are sold at a Class B discount.\n\n\'\n\nThe consumer electronics products potentially covered by Sony\'s program include but are not limited to the\nfollowing products: video products (e.g.,DVD playerslrecorders, digital cameras, camcorders, televisions, and\ncombination TVIVCR or TVDVD players); computers (desktop and notebook PCs and related equipment); video\ngame systems; audio products (desktop, component and portable devices); cell phones; portable digital assistants;\nand vehicle electronics.\n\nEGRITY\nY\n\nE\n2\n\nA\n0\n\nR\n0\n\nS\n6\n\n\x0cS~nnenschein\n\nSONNENSCHEIN NATH & ROSENTHAL LLP\n\nFederal Trade Commission\nNovember 15,2006\nPage 3\n\nThe financial cost to Sony of its Class B resale policy is substantial. Consequently, Sony\nwould like to modify its policy to distinguish between returned products that have not been\nturned on and those that have been operated. Such a modification would provide Sony with\ngreater flexibility in both inventory control and supply chain management while ensuring\ncompliance with the Commission\'s policies.\nAlthough even some use of a product reasonably could be considered mere "inspection,"\nSony proposes to take an extremely conservative approach to the question of whether a returned\nSony product has been used by a consumer. Sony\'s proposed program is based on the simple,\nbright line standard of whether a product has been turned on - i.e., if it has not been turned on, it\nhas not been used. This approach avoids a potential slippery slope, because it does not require\nthe FTC to evaluate or determine how much use is acceptable.\nTo implement this policy change in a consistent, verifiable manner, Sony would use\nexisting, reliable product and packaging technologies to determine if a purchaser has turned on a\nreturned product. For example, some of Sony\'s electronic products contain an internal chip or\nclock that allows Sony to determine if a product has been turned on and for how long. Sony also\nmay use tamper-evident tape, seals or labels, which can be affixed to AC plugs, connectors or\nbattery compartments, to provide a clear indicator of consumer use of a product. Sony would\ndetermine on a product-by-product basis which technology it would use to determine if a\nconsumer has turned on a product. If the consumer has turned on the product at all - even if only\nto conduct a cursory inspection of the product\'s operation - Sony would disqualify the product\nfi-om future sale as a new product. Sony\'s plan thus avoids subjective evaluations about whether\nor to what extent a returned product has been used by a consumer. Stated in its simplest terms, if\nelectrical power has been applied to any of the product\'s circuitry, then it cannot be sold as\nnew."\nLC\n\nThe other elements of Sony\'s program ensure that the consumer purchasing experience\nwould be the same as it would be with other new products. Sony would visually examine unused\nproducts to ensure that they are complete and undamaged, and if so, place them in new\npackaging.2 sony also would provide the same wmanty for these repackaged products as for\nThis program will not involve refurbishment of products to a "good as new" condition. If there is visible damage,\nsuch as scratches, dents or cracks, the product would not be eligible for the program. Of course, minor cosmetic\nblemishes, such as fingerprints that a consumer might leave on a product when handling it, would be removed and\nwould not render the product ineligible for the program. Otherwise damaged products would be designated for\nSony\'s refurbished sales program. Moreover, if the product is otherwise acceptable but a minor part or piece of\nproduct dormation (e.g.,a headphone, manual, or warranty card) is missing because the consumer omitted the item\nfrom the package when returning the product, then the missing item would be replaced.\n\n\x0cS~nnenschein\n\nSONNENSCHEIN NATH & ROSENTHALLLP\n\nFederal Trade Commission\nNovember 15,2006\nPage 4\n\nother new similar products. Because Sony (or its authorized agent), and not retailers, would run\nthe program, Sony can ensure that the policy is properly and uniformly applied across all returns.\n\nSony and Industry Experience With Returns Show the Significance of Sony\'s Request\nCurrently, as would be the case under the new program, retailers send all returned\nproducts to return centers operated by Sony or its authorized agent. These return centers perfom\nthe necessary inspections and refurbishment to prepare a returned item for resale as Class B\nproducts. Sony\'s experience through these return centers indicates that only a very small\npercentage of returns are actually defective products and that a very significant percentage fall\ninto the "no problems found" (NPF) category. Because many of the NPF products are items that\nhave never been turned on, Sony incurs significant losses from their sale as Class B products.\nSimilar industry-wide patterns of returns also have been reported. For example, a\nconsumer survey conducted by the Consumer Electronics Association (CEA) in 2005 indicated\nthat many consumers return products for reasons other than a defect, including (a) to obtain a\ndifferent brand or model, (b) because they no longer wanted it, (c) because they already owned\nit, or (d) because they spent too much money on i t 3 The CEA survey also indicated that nearly\n50 percent of all returns occur within a week after purchase. Overall, these statistics suggest that\nmany purchasers of consumer electronics products may merely open the box and inspect the\nproduct without using it before returning it to the retailer or to the manufacturer.\n\nSony\'s Proposed Course of Action Is Lawful\nSony believes that its proposed course of action, as described in this letter, is lawful and\nwould not be deceptive under the FTC Act or under the standards the Commission has expressed\nin its 1984 Policy Statement on Deception and in its 1969 Enforcement Policy on "Merchandise\nWhich Has Been Subjected To Previous Use On Trial Basis and Subsequently Resold as New."\nThe 1969 policy statement is particularly relevant. Although the 1969 Enforcement Policy\npredates the Commission\'s Policy Statement on Deception, it has not been repudiated by the\nCommission. Moreover, we believe that application of the Deception Statement\'s analytical\ntools leads to the same conclusion the Commission reached in its 1969 Enforcement Policy.\nThe 1969 statement, whle reaffirming the Commission\'s long-held view that consumers\nhave a preference for new or unused goods, also draws an important distinction between\n3\n\n"Return Rates and Issues for CE Products Update," Consumer Electronics Association (CEA) Market Research\nReport (Nov. 2005).\n\nEGRITY\nY\n\nE\n\nA\n\nR\n\nS\n\n\x0cS~nnenschein\nSONNENSCHEIN NATH & ROSENTHALLLP\n\nFederal Trade Commission\nNovember 15,2006\nPage 5\n\n"inspectionyyand\nSpecifically, the Commission concluded that trial use by a consumer\nand subsequent refix-bishment of returned products to a good-as-new conhtion requires\ndisclosure, but that its "policy applies only to merchandise that has been used, and not to\nmerchandise that has merely been inspected but not used."\'\nUnder the Deception Policy Statement there must be a representation, omission or\npractice that is likely to mislead a consumer, acting reasonably under the circumstances, to his or\nher detriment.6 In other words, the representation, omission or practice must be a material one.\nUnder its proposed program, Sony would treat the products as new, in terms of their pricing,\npackaging and warranty. The resulting implied representation that the repackaged products are\nnew would not be misleading to consumers because the products would in fact be new, having\nnever been used by their previous purchasers.7\nAlthough Sony recognizes that the FTC appreciates empirical data on consumer\nexpectations when it is available, we are unaware of any such empirical data in this case.\nNevertheless, the absence of such data is not a bar to an advisory opinion. It is well established\nin Cornmission case law that the Commission may use its accumulated expertise to determine\nwhat facts are material to consumers and when it is deceptive to omit those facts from marketing\nmaterials.\' In the past, the Commission has generally alleged a deceptive failure to disclose\ninformation only when the omitted information involved health or safety or the key financial\nterms and conditions of a transaction.\nWe also suggest that the FTC can find additional support for Sony\'s proposed course of\naction in various state laws that expressly or impliedly permit "unused" goods to be sold as new.\nMany of these states have based their laws on the Uniform Deceptive Trade Practices Act and\nthe Uniform Consumer Sales Act, which prohbit the resale, as new, of returned products only if\nthe products have been used, altered, reconditioned or reclaimed. Under those statutes, mere\n34. Fed. Reg. 176, 177.\n\nId. at 177.\nAppended to ClzffdaleAssociates, Inc., 103 F.T.C. 110, 174 (1984).\nJust as we believe that Sony has no legal obligation to disclose that goods are "used" because they have never been\nturned on and thus fall squarely into the "inspected" category, we also believe that disclosure of the mere fact of\nprior purchase is not a material omission that might trigger a disclosure requirement. The Commission\'s Policy\nStatement expressly recognizes that "not all omissions are deceptive, even if providing the information would\nbenefit consumers.. .." Id. at 183, n.4. Such a disclosure requirement also would be inconsistent with state laws, as\ndiscussed below.\n\nSee, e.g., PJzer, 81 F.T.C. 23, 58 (1972).\n\n\x0cS~nnenschein\n\nSONNENSCHEIN NATH & ROSENTHAL LLP\n\nFederal Trade Commission\nNovember 15,2006\nPage 6\n\ninspection that does not entail use or alteration of the product would not change the status of the\nNotably, the Ohio Administrative Code states affirmatively that\nproduct fiom "new" to\n"returned goods, which have not been used by a previous purchaser, shall be considered new or\nunused."I0\nFurthermore, in 1998 the Office of the Attorney General of the State of California came\nto the same conclusion reached by the FTC in 1969 when it analyzed the question: "must\nmerchandise be advertised as \'secondhand or usedyif it is used, worn, or sampled for a short\ntime by a consumer and then returned in like-new condition pursuant to the retailer\'s policy\nallowing returns of merchandise at the customer\'s discretion." Attorney General Daniel E.\nLungren concluded that it must be so advertised," unless such use is for inspection purposes\nonlY.\'~"\n\nIn analyzing the question, Attorney General Lungren was guided in part by the Oregon\nSupreme Court\'s decision in Weigel v. Ron Tonkin Chevrolet co.12 In that case the court held\nthat because there was a transfer of legal possession of the auto and the purchaser had\ndiscretionary use of the vehicle for his or her own purposes for five days, the auto must be\nrepresented as used or secondhand. The court\'s decision was based not on the fact of the sale,\nbut on the purchaser\'s use of the product. In that case, the court also commented on the common\npractice of using goods for inspection purposes only, stating that "merchandise other than\nautomobiles sometimes is sold, examined, or tried out at home, and returned to the seller.\nWhether such merchandise is \'new\' or \'usedy does not depend on the fact of an earlier sale; it\ndepends on whether the article was used."I3 The Attorney General believed that Weigel correctly\ninterpreted the terms "secondhand or used" for its purposes. Thus, under the Attorney General\'s\nopinion, disclosure of the prior purchase of a product depends upon whether the product has been\nused, unless such use is for inspection purposes only.\n\nSee Michael P. Sullivan, \'What Goods or Property are \'Used,\' \'Secondhand,\' or the Like, for Purposes of State\nConsumer Laws Prohibiting Claims that Such Items are New," 59 A.L.R. 4\' 1192,s 2.\n10\n\nSection 109:4-3-08. Other states such as Mississippi and Idaho have taken similar positions ("goods are not\nconsidered used if a prior consumer was given a full refund or exchange for the goods, in the normal course of\nbusiness, and if the goods are not known to presently or formerly have defects"). See, e.g., Mississippi, 24 000 002\nR.5 1 (2006), and Idaho, IDAPA 04.02.02.113 (Returned Goods) (2005). See also Louisiana, LAC 16:III.S11(2003).\nI \' Opinion of Daniel E. Lungren, Attorney General, Clayton P. Roche, Deputy Attorney General, No. 97-1009\n(May 22, 1998) (emphasis added).\n\nl3\n\nId. at 490, n.2.\n\nY\n\nE\n2\n\nA\n0\n\nR\n0\n\nS\n6\n\n\x0cS~nnenschein\n\nSONNENSCHEIN NATH & ROSENTHAL LLP\n\nFederal Trade Commission\nNovember 15,2006\nPage 7\n\nSony believes that, under its proposed program, consumer electronics products that have\nnot been turned on will not have been subjected to any use. The act of merely opening the\npackaging and examining a product without turning it on should be considered "inspection" and\nshould not trigger any affirmative disclosure duties nor any prohibition on representing the goods\nas new.\nAt its most basic level, Sony\'s proposed program embodies the principles contained in\nthe Commission\'s 1969 policy statement and in the principles expressed in state laws and in the\nCalifornia Attorney General\'s opinion regarding a company\'s disclosure duty. We believe that\nthe principles of the 1969 policy statement remain valid and are consistent with those in the more\nrecent Deception Policy Statement. Accordingly, Sony submits that it would be appropriate for\nthe FTC to conclude that Sony consumer electronics products returned by consumers without\never being turned on can be considered "merely inspected" and not "used" and thus be eligible\nfor sale as new products.\n\nSony\'s Request Satisfies the Commission\'s Criteria for a Staff Advisory Opinion\nSony believes that the issues raised by this request satisfy the criteria in the Commission\'s\nRules of Practice for issuance of a staff advisory opinion. The question posed by Sony is not a\npurely hypothetical or theoretical one, because Sony is prepared to act upon a favorable opinion\nissued by the staff. Sony is seeking this advisory opinion because, as noted above, the FTC has\nnot issued guidance in this area in nearly 40 years, and there is no clear FTC or other guidance\non the particular question posed by Sony. Furthermore, because of uncertainty about this issue,\nSony and possibly other manufacturers are unnecessarily designating unused, "merely inspected"\nproducts as Class B products. This situation creates substantial economic injury to\nmanufacturers such as Sony, as well as to consumers, who may pay higher overall retail prices or\nmay experience the effects of reduced marketplace competition resulting from lower\nmanufacturer profitability. Thus, resolution of Sony\'s question is likely to be of significant\npublic interest.\n\nConclusion\nThe conservative approach Sony is proposing will assure that returned products that\nqualify under this program will be indistinguishable from new products delivered &om the\nfactory. The fact that a qualifylng product was previously purchased will not affect its\nperformance because the product will never have been turned on and thus never have been used.\nMoreover, Sony\'s plan to examine qualifylng returned products visually for damage and\ncompleteness prior to repackaging and to provide a new product warranty will ensure that the\nreturned products are indistinguishable from products that have never been sold. This\n\nEGRlN\nY\n\nE\n\nA\n\nR\n\nS\n\n\x0cS~nnenschein\nSONNENSCHEIN NATH & ROSENTHAL LLP\n\nFederal Trade Commission\nNovember 15,2006\nPage 8\n\ncomprehensive plan will eliminate any potential harm to subsequent purchasers resulting from\nthe qualifying products\' previous purchase. Accordingly, Sony believes that its proposed\nprogram to sell, as new, returned products that have not been turned on and that meet the\nprogram\'s other criteria will satisfy the Commission\'s consmer protection objectives and\nrequirements.\nWe appreciate your consideration of this request. Please let us know if you would like us\nto provide additional information to assist the staffs review. We would also be pleased to meet\nwith the staff to discuss any questions they might have.\n.\n\n..\n\nYours very truly,\n\nChristopher Smith\nElaine D. Kolish\ncc:\n\nLydia B. Parnes, Director, Bureau of Consumer Protection\nJames A. Kohm, Associate Director, Division of Enforcement\nSandy Prabhu, Esq., Division of Enforcement\n\nY\n\nE\n\n2\n\nA\n\n0\n\nR\n\n0\n\nS\n\n6\n\n\x0c'