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: Notice.

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SUMMARY: The FTC is soliciting public comments on proposed extensions

of Paperwork Reduction Act clearances for information collection

requirements for a regulation that the Commission issues and enforces

and for a study to assess the effectiveness of Commission divestiture

orders in merger cases. These Office of Management and Budget (OMB)

clearances expire on July 31, 1998. The FTC proposes that OMB extend

its approval for the regulation an additional three years from

clearance expiration and that approval for the divestiture order study

be extended through December 31, 1999. The proposed information

collection requirements described below will be submitted to OMB for

review, as required by the Paperwork Reduction Act.

DATES: Comments must be submitted on or before July 13, 1998.

ADDRESSES: Send written comments to Gary M. Greenfield, Office of the

General Counsel, Federal Trade Commission, Washington, D.C. 20580,

(202) 326-2753. All comments should be identified as responding to this

notice.

FOR FURTHER INFORMATION CONTACT:

Requests for additional information or copies of the proposed

information requirements should be addressed to Gary M. Greenfield,

Attorney, Office of the General Counsel, 202-326-2753.

SUPPLEMENTARY INFORMATION: The purpose of this Notice is to solicit

comments from members of the public

[[Page 26608]]

and affected agencies concerning the proposed collections of

information to: (1) Evaluate 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) Evaluate 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) Enhance the

quality, utility, and clarity of the information to be collected; and

(4) 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 FTC will submit the proposed information

collection requirements to OMB for review, as required by the Paperwork

Reduction Act of 1995 (44 U.S.C. Chapter 35, as amended).

The relevant information collection requirements are as follows:

1. The Telemarketing Sales Rule, 16 CFR Part 310 (OMB Control

Number 3084-0097)

Description of the collection of information and proposed use: The

Telemarketing Sales Rule implements the Telemarketing and Consumer

Fraud and Abuse Prevention Act, 15 U.S.C. 6101-6108 (``Telemarketing

Act'' or ``the Act''). The Act seeks to prevent deceptive or abusive

telemarketing practices. The Act mandates certain disclosures by

telemarketers, and directs the Commission to consider recordkeeping

requirements in its promulgation of a telemarketing rule to address

such practices. As required by the Act, the Telemarketing Rule mandates

certain disclosures regarding telephone sales and requires

telemarketers to retain certain records regarding advertising, sales,

and employees. The disclosures provide consumers with information

necessary to make informed purchasing decisions. The records are

available for inspection by the Commission and other law enforcement

personnel to determine compliance with the Rule.

Estimate of information collection annual hourly burden: 9,053,000

hours. The estimated recordkeeping burden hours are 50,000. The

estimated combined burden hours related to the required disclosures

under the Rule are 9,003,000, for an estimated total of 9,053,000

burden hours.

Recordkeeping: At the time the Commission issued the Rule, it

estimated that during the initial and subsequent years after the Rule

took effect, only 100 entities a year would find it necessary to revise

their practices to conform with the Rule and that it would take each

such entity approximately 100 hours to assemble information or develop

a compliant recordkeeping system, for a total of 10,000 burden hours a

year. The Commission received no comments of any kind in connection

with this estimate when it was issued and this estimate continues to be

appropriate. There is no reason to believe that the number of new

entrants into the telemarketing field who find it necessary to create a

different recordkeeping system as a result of the Rule's recordkeeping

requirements has increased. Of the estimated 39,900 industry members

who have already assembled or maintained the required records and

recordkeeping system, staff estimates that each member requires only

one hour a year to comply with the Rule's recordkeeping requirements

(39,900 hours). Therefore, the total yearly burden hours associated

with the Rule's recordkeeping requirements is 49,900. The Commission

requests this figure be rounded to 50,000 hours.

Disclosure: In connection with issuing the Rule and obtaining MOB

clearance, staff previously estimated that the 39,900 (rounded to

40,000) industry members make approximately 9 billion calls per year,

or 225,000 calls per year per company. The Telemarketing Sale Rule

provides that if an industry member chooses to solicit inbound calls

from consumers by advertising media other than direct mail or by using

direct mail solicitations that make certain required disclosures, that

member is exempted from complying with other disclosures required by

the Rule. Because the burden of complying with written disclosures is

less than the burden of complying with the Rule's oral disclosure

requirements, staff estimated that at least 9,000 firms will choose to

adopt marketing methods that exempt them from the oral disclosure

requirements.

In connection with issuing the Rule, staff estimated that it takes

7 seconds for telemarketers to disclose the required outbound call

information described above. Staff also estimated that at least 60% of

calls result in ``hang-ups'' before the seller or telemarketer can make

all the required disclosures. Staff estimated that ``hang-up'' calls

last for only 2 seconds. Accordingly, staff estimates that the total

disclosure burden associated with these initial disclosure requirements

is approximately 250 hours per firm (90,000 non-hang up calls (40% of

225,000) x 7 seconds per call + 135,000 hang-up calls (60% of

225,000) x 2 seconds per call). Thus, the total burden for the 31,000

firms choosing marketing methods that require these oral disclosures is

7.75 million hours. When the Commission initially published this

estimate, it received no comments and staff believes such estimates

remain appropriate.

The Rule also requires additional disclosures before the customer

pays for goods or services. Specifically, the sellers or telemarketers

must disclose the total costs to purchase, receive, or use the offered

goods or services; all material restrictions; and all material terms

and conditions of the seller's refund, cancellation, exchange, or

repurchase policies if a representation about the policy is a part of

the sales offer. If a prize promotion is involved, the telemarketer

must also disclose information about the non-purchase entry method for

the prize promotion. Staff estimates that approximately 10 seconds is

necessary to make these required disclosures. However, these

disclosures need only be made where a call results in an actual sale or

before the consumer pays. Staff estimates that sales occur in

approximately 6 percent of telemarketing calls. Accordingly, the

estimated burden for the disclosures is 37.5 hours per firm (13,500

calls--6% of 225,000--resulting in a sale x 10 seconds) or 1.163

million hours for the 31,000 firms choosing marketing methods that

require oral disclosures. When the Commission initially published this

estimate, it received no comments and staff believes such estimates

remain appropriate.

Alternatively, the disclosures required before the customer pays

for goods or services may be in writing. Usually, this would occur

during a solicitation or mass mailing. Staff estimates that

approximately 9,000 firms will choose to comply with this optional

written disclosure requirement. Those firms are likely to be the same

firms that would choose to advertise through written materials, and the

burden of adding the disclosures required by the Rule is probably

minimal. However, staff has no reliable data from which to conclude

that there is no separately identifiable burden associated with this

provision. Therefore, staff estimates that a typical firm will spend

approximately 10 hours per year engaged in activities ensuring

compliance with this provision of the Rule, for an estimated burden of

90,000 hours. When the Commission initially published this estimate, it

received no

[[Page 26609]]

comments and staff believes such estimates remain appropriate.

Estimate of information collection and cost burden: $34,411,000.

(a) Total capital and start up costs: Staff estimates that the

capital and start up costs associated with the Telemarketing Sales

Rule's information collection requirements are de minimis. The Rule's

recordkeeping requirements do not mandate that records be kept in any

particular form. While the recordkeeping requirements necessitate that

the affected entity have some storage device, virtually every entity is

likely to already possess the means to store the required records. Most

entities keep the type of records required by the Rule in the ordinary

course of business. Even assuming that an entity found it necessary to

purchase a storage device, which could be as inexpensive as a cardboard

box, when the cost of the device is annualized over its useful life,

the annual expenditure is likely to be very small.

The Rule's disclosure requirements require no capital expenditures.

(b) Total operation/maintenance/purchase of services costs: The

Rule's recordkeeping requirements necessitate that companies maintain

records. Accordingly, affected entities have to expend some capital on

office supplies such as file folders, computer diskettes, or paper in

order to comply with the Rule's recordkeeping requirements. Although

staff believes that most affected entities would maintain the required

records in the ordinary course of business, staff estimates that the

approximately 40,000 industry members affected by the Rule spend an

annual amount of $50 each on office supplies as a result of the Rule's

recordkeeping requirements, for a total recordkeeping cost burden of

$2,000,000.

In connection with the Rule's disclosure requirements,

telemarketing firms may incur additional costs for telephone service,

assuming that the firms spend more time on the telephone with customers

as a result of the required disclosures. As indicated above, staff

believes that the hour burdens relating to the required disclosures

amount to 9,003,000 hours. Assuming all calls to customers are long

distance and a commercial calling rate of 6 cents per minute ($3.60 an

hour), affected entities as a whole may incur up to $32,410,800 in

telecommunications costs as a result of the Rule's disclosure

requirements.

As indicated previously, staff estimates that approximately 9,000

entities will choose to comply with the Rule through written

disclosures. However, staff estimated that those companies incur no

additional capital expenses as a result of the Rule's requirements

because they are likely to provide written information to prospective

customers in the ordinary course of business and adding the required

disclosures to that written information does not require any

supplemental expenditures. Thus, the total estimated cost burdens

associated with the Rule's information collection is $34,411,000

(rounded to nearest thousand).

2. Study of the Effectiveness of Commission Divestiture Orders in

Merger Cases (OMB Control Number 3084-0115)

Description of the collection of information and proposed use: The

Commission is directed to prevent ``unfair methods of competition''

under Section 5 of the Federal Trade Commission Act (``FTC Act''), 15

U.S.C. 45, and is authorized to enforce the Clayton Act's proscriptions

against anticompetitive mergers. 15 U.S.C. 18, 21. Under these general

authorities, the Commission examines transactions to determine whether

anticompetitive effects are likely and then fashions remedies that it

believes are necessary to alleviate the likely anticompetivie effects.

In 1978, the Commission began a divestiture remedy similar to what

appears in current orders. Generally, respondents are asked to divest a

package of assets (deemed to be commercially viable based on the

investigative staff's knowledge of the relevant market) within a

specified time to a buyer to be approved by the Commission.

In 1995, the FTC's Bureau of Competition and Bureau of Economics

undertook a pilot study to determine whether a more comprehensive study

of Commission divestiture orders would be feasible and productive. The

staff concluded that further study is necessary to draw more general

conclusions about the effectiveness of the Commission's divestiture

process as the circumstances surrounding the orders vary widely. OMB

subsequently granted clearance for such an expanded study. Pursuant to

that authority, FTC staff have interviewed numerous buyers of assets or

businesses and respondents in the study. As with the pilot study, the

information that staff have obtained continues to offer important

insights into the effectiveness of the divestiture process.

Accordingly, the Commission's Bureau of Competition and Bureau of

Economics staff will continue to conduct interviews with buyers and

respondents in order to complete its review of the 36 sample orders

comprising its study. Thereafter, staff will interview third-parties

and solicit sales data from buyers and respondents. The objectives of

the study continue to be to determine: (1) The effectiveness of

Commission orders that seek to preserve or reestablish competition

where the Commission has permitted a merger but required divestiture of

certain assets; (2) The influence of certain provisions in Commission

orders (e.g., length of time permitted for divestiture of ``crown

jewel'' provisions) on the timeliness of divestitures and on the

success of the business or assets divested; (3) The influence of

divestiture procedures used by respondent to find a buyer on the

timeliness of the divestitures and on the success of the business or

assets divested; (4) The influence of the divestiture contract on the

success of the divested business or assets; (5) The influence of the

type of assets divested on the success of the divested business; (6)

The influence of the type of buyer on the success of the divested

business; and (7) Whether respondents have fully complied with the

requirements under the order.

Securing information about the success of divested businesses (or

businesses that have acquired divested assets) would provide a better

understanding of the kind of order provisions most likely to lead to

successful divestitures. The survey is designed to expand the

Commission's knowledge by eliciting, across a broad spectrum of

industries, information to evaluate the success of divestitures. Such

information is likely to enhance the Commission's law enforcement

mission.

Estimate of information collection annual hourly burden: 1,000

hours (rounded). The information to be collected will be obtained by

telephone interviews, document requests, and a questionnaire. Staff

will conduct telephone interviews with respondents, buyers of divested

assets or businesses, and third parties (such as competitors,

customers, and suppliers). The divestiture study includes a total of 51

divestitures arising out of 36 orders. Staff have already interviewed

32 buyers and 6 respondents; thus it will contact another 19 buyers and

30 respondents. It will also contact 153 third-parties (on average,

three per divestiture) for a total of 202 remaining telephone

interviews. All of the remaining interviews, like those already

conducted, should take about 1.5 hours to complete, for a total burden

estimate of approximately 303 hours.

[[Page 26610]]

After interviewing buyers and respondents, staff will ask them to

submit financial documents for a five-year period beginning the year

before the divestiture occurred. To the extent that no such financial

documents exist, staff will not request that such documents be

prepared. Because only documents already in existence will be

requested, the anticipated burden of producing these documents will be

minimal, approximately two hours per participant, for a total of 174

hours (51 buyers + 36 respondents=87, 87 x 2=174).

Staff is also asking respondents and buyers to complete a two-

question chart that requests sales in dollars and units of the product

that was the subject of the Commission's concern in the case over a

five-year period beginning the year before the divestiture. Staff

estimates that the burden on each participant to provide this

information will be 4 hours, for a total of 348 hours (51 buyers + 36

respondents =87, 87 x 4=348). The total cumulative burden of the

document production will be 522 hours (174+348). The estimated total

burden for the entire study is therefore calculated to be 825 hours

(303+522), which has been rounded to 1,000 hours to allow for small

additions such as subsequent buyers of divested assets.

Estimate of Information Collection Annual Cost Burden: none.

Capital equipment/start-up/operation and maintenance/other non-

labor costs: Not applicable. The date for the study are being collected

in two principal ways. Staff is conducting telephone interviews and

asking respondents to respond to a brief questionnaire. Neither the

telephone interviews nor respondents' responses to questionnaires

require any capital expenditure by respondents. Interviews solely

involve respondents making available one or more company officials for

approximately 1\1/2\ hours. The questionnaires ask respondents to

provide only information that they maintain within the ordinary and

usual course of their business. No additional cost burden is imposed on

respondents.

Debra A. Valentine,

General Counsel.

[FR Doc. 98-12661 Filed 5-12-98; 8:45 am]

BILLING CODE 6750-01-M