Regulatory Flexibility Act and Periodic Review of Used Motor Vehicle Trade Regulation Rule

FEDERAL TRADE COMMISSION

16 CFR Part 455

Regulatory Flexibility Act and Periodic Review of Used Motor

Vehicle Trade Regulation Rule

AGENCY: Federal Trade Commission.

ACTION: Request for public comments.

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SUMMARY: The Federal Trade Commission (the ``Commission'') is

soliciting comments on the Used Motor Vehicle Trade Regulation Rule

(the ``Used Car Rule'' or ``Rule''). Specifically, the Commission is

requesting comments about the overall costs and benefits of the Rule

and its overall regulatory and economic impact as a part of its

systematic review of all current Commission regulations and guides.

Additionally, in accordance with the Regulatory Flexibility Act, the

Commission is soliciting comments and data on whether the Used Car rule

has had a significant economic impact on small entities, and if it has,

whether the Rule should be amended to minimize any such economic impact

on small entities. The Commission also is soliciting comments on two

nonsubstantive amendments the Commission proposes to make to the

Spanish language version of the Buyers Guide.

DATES: All comments and data should be received by the Commission no

later than July 5, 1994.

ADDRESSES: Comments and data should be sent to Secretary, Federal Trade

Commission, Washington DC 20580. Submissions should be identified as

``Used Car Rule--``Review Comment.''

FOR FURTHER INFORMATION CONTACT:

George Brent Mickum IV, Attorney, Federal Trade Commission, Division of

Enforcement, Bureau of Consumer Protection, Washington, DC 20580, (202)

326-3132.

SUPPLEMENTARY INFORMATION:

I. Background

The Commission promulgated the Used Car Rule, 16 CFR part 455,

under the authority of the Federal Trade Commission Act, 15 U.S.C. 41

et seq. (``FTC Act''), and the Magnuson Moss Warranty Act, 15 U.S.C.

2309, on November 19, 1984. 49 FR 45692 (1984). The Rule became

effective on May 9, 1985. Any violation of the Rule constitutes an

unfair or deceptive act or practice under the FTC Act, and is subject

to civil penalties of up to $10,000 per violation.

The Used Car Rule is primarily intended to prevent oral

misrepresentations and unfair omissions of material facts by used car

dealers concerning warranty coverage. The Rule provides a uniform

method for written disclosure of warranty information on a window

sticker called the ``Buyers Guide.'' The Rule requires clear disclosure

on the Buyers Guide of the basic terms and conditions of any warranty

offered in connection with the sale of a used car, including the

duration of coverage, the percentage of total repair costs to be paid

by the dealer, and the exact systems covered by the warranty.

The Rule also requires other disclosures that must be printed

directly on the Buyers Guide, including:

(1) A suggestion that consumers ask the dealer if a pre-purchase

inspection is permitted;

(2) A warning against reliance on spoken promises that are not

confirmed in writing; and

(3) A list of fourteen major systems of an automobile and the major

problems that may occur in these systems. The Rule also provides that

the Buyers Guide disclosures are to be incorporated by reference into

the sales contract, and are to govern in the event of an inconsistency

between the Buyers Guide and the sales contract. When used car dealers

conduct sales in the Spanish language, Spanish language Buyers Guides

are required.

II. Rule Reviews

The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (the ``RFA''),

requires that the FTC conduct a periodic review of rules that have or

may have a significant economic impact on a substantial number of small

entities. In addition, as part of its oversight responsibilities, the

Commission has determined to review rules and guides periodically. See

59 FR 2955 (Jan. 20, 1994). Both reviews will seek information about

the costs and benefits of the Commission's rules and guides and their

regulatory impact. The information obtained will assist the Commission

in identifying rules and guides that warrant modification or

rescission.

The purpose of the RFA review is limited to determining whether the

Rule should be continued without change, or should be amended or

rescinded, consistent with the state objectives of applicable statutes,

to minimize any significant economic impact of the Rule upon a

substantial number of small entities. For the purpose of the RFA

review, a ``small entity'' is a used motor vehicle dealer with less

than $11.5 million in annual sales, as defined by the Small Business

Size Standards, 13 CFR 121.601. The purpose of the Commission's

periodic review is to solicit comment on issues relating to the

operation of the Rule. This review is not limited to the Rule's impact

on small entities, but encompass all affected entities.

III. Request for Comment

The Commission solicits comment on the following questions and

requests that any factual data (e.g., economic and accounting

information, statistical analysis, surveys, studies, etc.) upon which

submitted comments are based be included with the comments.

1. Is there a continuing need for the Rule?

a. What benefits has the Rule provided to purchasers of the

products or services affected by the Rule?

b. Has the Rule imposed costs on purchasers?

2. What changes, if any, should be made to the Rule to increase the

benefits of the Rule to purchasers?

a. How would these changes affect the costs the Rule imposes on

firms subject to its requirements?

3. What significant burdens or costs, including costs of

compliance, has the Rule imposed on firms subject to its requirements?

a. Has the Rule provided benefits to such firms?

4. What changes, if any, should be made to the Rule to reduce the

burdens or costs imposed on firms subject to its requirements?

a. How would these changes affect the benefits provided by the

Rule?

5. Does the Rule overlap or conflict with other federal, state, or

local laws or regulations?

6. Since the Rule was issued, what effects, if any, have changes in

relevant technology or economic conditions had on the Rule?

7. What significant burdens or costs, including costs of

compliance, has the Rule imposed on small firms subject to its

requirements?

a. How do these burdens or costs differ from those imposed on

larger firms subject to the Rule's requirements?

8. To what extent are the burdens or costs that the Rule imposes on

small firms similar to those that small firms would incur under

standard and prudent business practices?

9. What changes, if any, should be made to the Rule to reduce the

burdens or costs imposed on small firms?

a. How would these changes affect the benefits of the Rule?

b. Would such changes adversely affect the competitive position of

larger firms?

10. How many used vehicles (as defined by Sec. 455.1(d)(2) of the

Rule) are sold annually in the United States?

11. How many used car dealers have under $11.5 million in annual

sales?

12. Should the Rule's requirement that the Buyers Guide be posted

in a side window of a used vehicle, as set forth in Sec. 455.2(a)(1) of

the Rule, be modified to allow posting in a different location (for

example, in the rear window of a pickup truck or other vehicle without

side rear windows), as long as the Buyers Guide is conspicuous and both

sides may be readily viewed?

13. What changes to the format of the Buyers Guide should be

considered in order to reduce compliance costs or burdens? Would such

changes have any detrimental effect on the benefits provided by the

Rule? Is there any empirical or other evidence to support opinions that

such changes would or would not have a detrimental effect on benefits?

14. What changes to the format of the Buyers Guide should be

considered in order to increase its benefits? What effect would such

changes have on the costs or burdens imposed by the Rule? Is there any

empirical or other evidence to support opinions that such changes would

or would not increase costs or burdens?

IV. Non-Substantive Amendments to the Rule

The Commission also solicits comment on two non-substantive

amendments the Commission proposes to the Rule involving the Spanish

language version of the Buyers Guide, Sec. 455.5 of the Rule. The first

proposed change is grammatical: The ``As Is'' (``Como Esta-Sin

Garantia'') section of the Buyers Guide reads ``El vendedor no asume

ninguna responsabilidad por cualquier las reparaciones * * *''

(emphasis added). This language will be amended to read: ``El vendedor

no asume ninguna responsabilidad por cualquier reparacione * * *'' The

second suggested modification appears in the ``Warranty''

(``Garantia'') section of the Buyers Guide. The word ``vendedo'' in the

second full sentence will be amended to read ``Pida al vendedor una

copia del documento * * *.''

List of Subjects in 16 CFR Part 455

Motor vehicles, Trade practices.

Authority: The Regulatory Flexibility Act, 5 U.S.C. 601 et seq.

(1980).

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 94-10937 Filed 5-5-94; 8:45 am]

BILLING CODE 6750-01-M