Submission for OMB Review; Comment Request

FEDERAL TRADE COMMISSION

Submission for OMB Review; Comment Request

AGENCY: Federal Trade Commission.

ACTION: Notice.

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SUMMARY: The Federal Trade Commission (FTC or Commission) has submitted

information collection requirements associated with the Mail or

Telephone Order Merchandise Trade Regulation Rule, 16 CFR Part 435, to

the Office of Management and Budget (OMB) for review and clearance

under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520).

The FTC previously solicited comments from the public concerning these

information collection requirements, and provided the information

specified in 5 CFR 1320.5(a)(1)(iv). 62 FR 46498 (September 3, 1997).

No comments were received. The current OMB clearance for these

requirements expires on December 31, 1997. The FTC has requested that

OMB extend the PRA clearance through December 31, 2000.

DATES: Comments must be filed by January 2, 1998.

ADDRESSES: Send comments to the Office of Information and Regulatory

Affairs, Office of Management and Budget, New Executive Office

Building, Room 3228, Washington, D.C. 20530, ATTN: Edward Clarke, Desk

Officer for the Federal Trade Commission. Comments may also be sent to

Elaine W. Crockett, Attorney, Office of the General Counsel, Room 598,

6th St. and Pennsylvania Ave., N.W. 20580, telephone: (202) 326-2453;

fax: (202) 326-2477; e-mail [email protected]

SUPPLEMENTARY INFORMATION:

Title: 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 also being experienced by consumers who ordered

merchandise over the telephone. The Commission therefore 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.

Under the notice provisions in the Rule, a merchant who is unable

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

consumer of a revised date and of 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 resulting 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 were

covered by the Rule, for a total of 70,560 businesses. 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, at that time, 70,560

businesses spent an average of 229.78 hours per year on compliance with

the Rule, for a total estimate of 16,213,300 burden hours. In the

September 3, 1997,

[[Page 63718]]

Federal Register notice, we calculated that established businesses

would need 150 hours annually toward maintenance of associated computer

programs. We have now reduced that figure further after determining

that most maintenance and upkeep of computer systems would be part of

ordinary business practice in the industry. The OMB regulation that

implements the PRA defines ``burden'' to exclude any effort that would

be expended regardless of any regulatory requirement. 5 CFR

1320.3(b)(2).

No provisions in the Mail or Telephone Order Merchandise Rule have

been amended or changed in any manner. All of the Rule's requirements

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

however, reduced the 1995 total burden estimate for the following

reasons.

Most of the 1995 estimated burden hours were associated with one-

time start up tasks associated with establishing implementing standard

systems and processes. This is because the Rule had recently been

amended (in 1994) to include the telephone order industry. The mail

order industry, in contrast, had been subject to the basic provisions

of the Rule since 1976. Thus, most of the 230 burden hours that we

estimated per firm related to the development and installation of

computer systems to handle telephone ordering, and not to the

maintenance of such systems.

As noted above, the OMB regulation that implements the PRA defines

``burden'' 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 encourages

repeat purchase behavior that is essential to the survival of direct

mail or telephone order businesses.

Also, the industry is highly automated; notices are produced

mechanically and little labor is involved. Nonetheless, even for

established businesses, there may be some burden attributable strictly

to the existence of the rule. For example, some merchants rely on

contractors to handle orders and must therefore monitor how the

contractor complies with the Rule. This entails reviewing consumer

complaints to determine whether appropriate delay notification is being

provided. The Rule allows merchants to use as much or as little time as

necessary to assure that notification and disclosure requirements are

being met. Companies employ a broad range of energy, time, and

resources for performing these tasks. Also, while established companies

spend some time maintaining existing compliance systems, their

expenditures are only a fraction of those by new businesses required to

establish entirely new systems. An exact figure is difficult to

quantify; however, based on staff's familiarity with the industry, we

have determined that the average among the industry is unlikely to be

more than 50 hours per year.

Staff responsible for the Rule have also estimated that

approximately 1,000 additional companies have entered the market since

1995 (for a total of 71,560 incumbent firms) and that, due to

escalating sales, approximately 1,000 new companies will enter the

market during the coming year. We estimate that these 1,000 new

companies will each expend 230 hours per year (the 1995 figure of

229.78 rounded to 230) to establish compliance measures associated with

system start-up, although it could be argued once again that most of

these efforts would be undertaken even absent the Rule. Nonetheless, we

have estimated the total burden imposed by the disclosure and

notification requirements at approximately 3,808,000 hours

(1,000 x 230=230,000)+(71,560 x 50+3,578,000).

Debra A. Valentine,

General Counsel.

[FR Doc. 97-31728 Filed 12-1-97; 8:45 am]

BILLING CODE 6750-01-P