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

FEDERAL TRADE COMMISSION

Agency Information Collection Activities; Proposed Collection;

Comment Request; Extension

agency: Federal Trade Commission.

action: None.

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summary: The Federal Trade Commission (FTC or Commission) is announcing

an opportunity for public comment on the proposed extension of OMB

approval under the Paperwork Reduction Act for ``collection of

information'' requirements contained in the Mail or Telephone Order

Merchandise Trade Regulation Rule, 16 CFR Part 435.

dates: Submit written comments on the collection of information on or

before November 3, 1997.

addresses: Send written comments to Elaine W. Crockett, Attorney,

Office of the General Counsel, Room 598, 6th St. and Pennsylvania Ave.,

N.W. 20580. All comments should be identified as responding to this

notice.

supplementary information: Under the Paperwork Reduction Act of 1995

(PRA) (44 U.S.C. 3501-3520), Federal agencies must obtain approval from

the Office of Management and Budget (OMB) for each collection of

information that they conduct or sponsor. ``Collection of information''

is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency

requests or requirements that cause members of the public to submit

reports, keep records, or provide information to a third party. 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 the Mail or Telephone Order

Merchandise Rule.

The FTC invites comments on: (1) Whether the proposed collection of

information is necessary for the proper performance of the FTC's

functions, including whether the information will have practical

utility; (2) the accuracy of the FTC'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 respondents

through the use of automated collection techniques, when appropriate,

and other forms of information technology.

Mail or Telephone Order Merchandise Trade Regulation Rule, 16 CFR Part

435--(OMB Control Number 3084-0106)--Extension

The Mail Order Merchandise Rule was promulgated in 1975 in response

to consumer complaints that many merchants were failing to ship mail

order merchandise on time, failing to ship at all, or failing to

provide prompt refunds for unshipped merchandise. The Rule took effect

on February 2, 1976. A second rulemaking proceeding in 1993

demonstrated that the delayed shipment and refund problems of the mail

order industry were being experienced by consumers who ordered

merchandise over the telephone. The Commission amended the Rule,

effective on March 1, 1994, to include merchandise ordered by

telephone, including by FAX or by computer through the use of a modem.

Generally, the Rule requires a merchant to: (1) Have a reasonable

basis for any express or implied shipment representation made in

soliciting the sale; (2) ship within the time period promised, and if

no time period is promised, within 30 days; (3) notify the consumer and

obtain the consumer's consent to any delay in shipment; and (4) make

prompt and full refunds when the consumer exercises a cancellation

option or the merchant is unable to meet the Rule's other requirements.

The notice provisions in the Rule require a merchant, who is unable

to ship within the promised shipment time or 30 days, to notify the

consumer of a revised date and his or her right to cancel the order and

obtain a prompt refund. Delays beyond the revised shipment date also

trigger a notification requirement to consumers. When the Rule requires

the merchant to make a refund and the consumer paid by credit card, it

also requires the merchant to notify the consumer either that any

charge to the consumer's charge account will be reversed or that the

merchant will take no action that will result in a charge.

Burden statement: In its 1995 PRA submission to OMB, the FTC

estimated that 1,897 large businesses and 68,663 small businesses are

covered by the Rule. As stated in the agency's 1995 submission, the

conditional nature of some of the Rule's requirements makes it

difficult to quantify the exact PRA burden involved. Nonetheless, the

agency estimated that 70,560 businesses spend an average of 229.78

hours per

[[Page 46499]]

year on compliance with the Rule, for a total estimate of 16,213,300

burden hours.

No provisions in the Mail or Telephone Order Merchandise Rule have

been amended or changed in any manner. All of the requirements relating

to disclosure and notification remain the same. We have, however,

reduced the 1995 total burden estimate of 16,213,300 hours for the

reasons discussed below.

In the OMB regulation implementing the PRA, burden is defined to

exclude any effort that would be expended regardless of any regulatory

requirement. 5 CFR 1320.3(b)(2). In past rulemaking proceedings,

industry trade associations and individual witnesses have testified

that compliance with the Rule is now widely regarded by direct

marketers as being good business practice. The Rule's notification

requirements would be followed in any event by most merchants to meet

consumer expectations with respect to timely shipment, notification of

delay, and prompt and full refunds. Providing consumers with notice

about the status of their orders fosters consumer loyalty and

encourages repeat purchases that are important to the success of direct

marketers. Thus, much of the time and expense associated with Rule

compliance is not properly treated as burden under the PRA.

In estimating any remaining burden, the agency has considered ``the

total time, effort, or financial resources expended by persons to

generate, maintain, retain, disclose or provide information to or for a

Federal agency.'' 5 CFR 1320.3(b)(1). This includes ``developing,

acquiring, installing, and utilizing technology and systems for the

purpose of disclosing and providing information.'' 5 CFR

1320.3(b)(1)(iv). Although not expressly stated in the regulation, it

seems reasonable to infer that the definition of burden would include

upgrading and maintaining computer systems used to comply with the

Rule's requirements.

The mail order industry has been subject to the basic provisions of

the Rule since 1976 and the telephone order industry since 1994. Thus,

businesses have had several years (and some have had decades) to

integrate compliance systems into their business procedures.

Nonetheless, staff has allocated some hours, estimated at 150 hours

annually per company, toward the maintenance of computer systems by the

affected companies, even though maintenance and upkeep arguably would

also be part of ordinary business practice in the industry.

Further, in our best judgment (more accurate data from the industry

is not currently available), approximately 1,000 new companies have

entered the market since 1995. Thus, the current total affected firms

would consist of approximately 71,560 companies. Additionally, staff

estimates that the approximately 1,000 new companies enter the covered

market each year. Further, we estimate that new companies entering the

market would need 230 hours per year (1995 figure of 229.78 rounded to

230) for compliance measures associated with system start-up, although

again, it could be argued that such efforts would be undertaken even

absent the Rule. We have therefore estimated that the total burden for

compliance with the Rule would be approximately 10,964,000 hours.

(1,000 x 230=230,000)+(71,560 x 150=10,734,000.)

To emphasize, the FTC has not amended, nor is it in the process of

amending, the Mail or Telephone Order Merchandise Rule. The burden

hours associated with the Rule have been recalculated because the

originally-estimated hours included one-time start up tasks (i.e.,

implementing systems and processes to meet the Rule's requirements)

that have now been completed by most of the affected companies.

FOR FURTHER INFORMATION CONTACT: Elaine W. Crockett (202) 326-2453; FAX

(202) 326-2447; E-mail: [email protected].

Jay C. Shaffer,

Acting General Counsel.

[FR Doc. 97-23311 Filed 9-2-97; 8:45 am]

BILLING CODE 6750-01-M