Guides for the Watch Industry

FEDERAL TRADE COMMISSION

16 CFR Part 245

Guides for the Watch Industry

AGENCY: Federal Trade Commission.

ACTION: Rescission of the Guides for the Watch Industry.

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SUMMARY: On June 18, 1997, the Federal Trade Commission

(``Commission'') published a Federal Register Notice seeking public

comment on proposed changes to the Guides for the Watch Industry

(``Watch Guides'' or ``Guides'') and on the continuing need for the

Guides. The Commission has now completed its review and has decided to

rescind the Guides. The Commission has concluded that the Guides are no

longer needed to resolve uncertainty among businesses over what claims

are likely to be considered deceptive, and that in most instances,

international standards provide sufficient guidance to industry

regarding watch markings and claims.

EFFECTIVE DATE: June 9, 1999.

ADDRESSES: Requests for copies of this Federal Register document should

be sent to the Consumer Response Center, Room 130, Federal Trade

Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580. This

document also is available on the Internet at the Commission's website,

http://www.ftc.gov>.

FOR FURTHER INFORMATION CONTACT: Laura J. DeMartino, Attorney, Federal

Trade Commission, 600 Pennsylvania Ave., NW., Washington, DC 20580,

(202) 326-3030, e-mail [email protected]>.

SUPPLEMENTARY INFORMATION:

I. Introduction

The Commission announces that it is rescinding the Guides for the

Watch Industry, 16 CFR part 245. The Watch Guides address claims for

the advertising, marking, and sale of watches, watchcases, watch

accessories, and watch bands that are permanently attached to

watchcases. The Guides specifically address representations and

markings regarding a watch's metallic composition, protective and other

special features, movement, and country of origin.

In 1992, the Commission solicited public comment on the Watch

Guides and the then-Guides for the Jewelry Industry and Guides for the

Metallic Watch Band Industry.1 After review, the Commission

tentatively decided to make numerous changes to the Watch Guides that

were not discussed in the original Federal Register Notice. The

Commission, therefore, solicited further comment regarding these

proposed changes, as well as its proposal to delete 9 of the 16

sections in their entirety.2 The Commission also solicited

comment on whether there was a continuing need for the Watch Guides. In

particular, the Commission requested comment on whether international

standards provide sufficient guidance to industry and whether industry

self-regulation and ``market mechanisms,'' such as manufacturer

reputation or warranties, are sufficient to protect consumers from

misrepresentations about watches.3 The Commission requested

this information to determine whether the Watch Guides should be

revised and retained or whether they should be rescinded.

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\1\ 57 FR 24996 (June 12, 1992). The Commission revised the

Guides for the Jewelry Industry (renamed Guides for the Jewelry,

Precious Metals and Pewter Industries) and rescinded the Guides for

the Metallic Watch Band Industry. 61 FR 27178 and 27228 (May 30,

1996).

\2\ 62 FR 33316 (June 18, 1997). Comments submitted in response

to the earlier Notice stated that certain provisions of the Guides,

such as those dealing with gold-plated, water-resistant and shock-

resistant watches, were outdated or inconsistent with international

standards. Some comments also noted that the Guides failed to

address quartz watches. In addition to proposing changes to the

Guides, the Commission proposed deleting sections that were the

subject of broader, non-industry specific guidance (e.g., guidance

regarding use of the word ``free''), that were covered by other

parts of the Guides (e.g., admonishing against misrepresentations of

watch accessories), or that were no longer necessary (e.g., advising

the disclosure of foreign origin).

\3\ Id.

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The Commission received eleven comments in response to this second

Federal Register Notice.4 The comments favored retaining the

Watch Guides, albeit with significant changes.5 After

carefully reviewing the comments and the Guides, however, the

Commission has concluded that there is no continuing need for the Watch

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

U.S.C. 45(a)(1), prohibits ``unfair or deceptive acts or practices in

or affecting commerce.'' The purpose of guides is to assist industry

members in complying with the Act. Guides are particularly useful if

they resolve uncertainty among businesses over what claims are likely

to be considered deceptive. The current Watch Guides, however, are in

many instances out of date, inconsistent with international standards,

or unnecessary. Rather than extensively redrafting the Guides, the

Commission has decided that international standards provide guidance to

sellers regarding certain acceptable claims and markings. For those

claims not addressed by international standards, there does not appear

to be any demonstrated uncertainty over what the Commission is likely

to consider deceptive. Thus, the Commission has determined to rescind

the Watch Guides. In the following sections of this Notice, the

Commission summarizes the key points raised by the

[[Page 30899]]

comments and discusses its decision to rescind the Guides.

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\4\ In the remainder of this Notice, the comments are cited to

by an abbreviation of the comment name, the comment number, and the

relevant pages of the comment. The following is a list of the

comment name, abbreviation and comment number used to identify each

commenter. Japan Clock & Watch Association (``JCWA'') #1; European

Union Delegation of the Permanent European Horological Committee

(``EU'') #2; United States Watch Council, Inc. (``USWC'') #3; Leon

M. Newhouse (``Newhouse'') #4; Federation of the Swiss Watch

Industry (``Swiss'') #5; Seiko Corporation of America (``Seiko'')

#6; Bell & Ross (``Bell'') #7; American Watch Association (``AWA'')

#8; U.S. Watch Producers in the US Virgin Islands (``USVI'') #9;

Kenneth E. Mapp, Lieutenant Governor, The United States Virgin

Islands (``Mapp'') #10; Timex Corporation (``Timex'') #11.

\5\ JCWA (1) p.3; EU (2) p.1; USWC (3) p.1; Swiss (5) pp.3-4;

Seiko (6) p.1; AWA (8) p.1; USVI (9) p.1; Timex (11) p.2. Although

Newhouse (4), Bell (7) and Mapp (10) did not expressly state that

they favored retention of the Guides, they recommended changes or

additions to the Guides and, therefore, also are considered to favor

retention. Timex (11) p.2, stated that there is a continuing need

for the Guides ``only if, to the extent the Guides set standards,

those standards will be enforced.''

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II. Summary of the Comments

A. Need for the Watch Guides

The comments favored retention of the Guides, stating that they

benefit both watch manufacturers and consumers. AWA stated that the

Guides ``have served a valuable purpose in assisting industry members

in understanding the standards for appropriate marking and labeling of

watch products and in avoiding practices that could confuse or deceive

consumers.'' 6 This sentiment was echoed in many

comments.7 In addition, the comments indicated that the

Guides are a useful source of information for consumers.8

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\6\ AWA (8) p.1.

\7\ See, e.g., JCWA (1) p.3 (providing guidance as to proper

markings serves the purpose of preventing unfair or deceptive

markings and benefits both manufacturers and consumers); Swiss (5)

pp.3, 5 (the Guides ``assist watch manufacturers in determining what

representations can be made concerning the performance and qualities

of watches'' and also ``supply a common technical benchmark upon

which consumers can rely''); USVI (9) p.1 (the Guides ``serve a

valuable purpose in assisting domestic as well as foreign producers

in understanding the applicable standards for marking and labeling

watches and in avoiding practices that could result in consumer

confusion or deception''); Timex (11) p.4 (``by specifying `safe

harbors' the Guides provide industry members with means to ensure

that they will not be charged with unfair or deceptive trade

practices as a result of making certain claims--a certainty that is

of value to those making such claims'').

\8\ EU (2) p.1 (stating that the Guides ``define terms and

technical features that are necessary for the consumer

understanding''); USWC (3) p.1 (stating that the Guides ``serve as a

consistent guide for comparison-shopping''); Swiss (5) p.5 (stating

that the Guides ``help consumers obtain the information they need to

make informed purchasing decisions'' and provide definite standards

that consumers can cite to when seeking redress for any

misrepresentations).

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B. Adequacy of Self-Regulation and International Standards

The comments stated that industry self-regulation and market

mechanisms, such as manufacturer reputation or warranties, were

insufficient to protect consumers from misrepresentations about

watches.9 Timex noted that ``it often will not be cost

effective for industry members to take action against others who make

false or misleading claims.'' 10

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\9\ See, e.g., AWA (8) p.1. Swiss also stated that without the

Guides, each manufacturer will ``interpret for itself what any given

attribute for a watch should mean.'' Swiss (5) p.8. Consumers will

not have the ability to distinguish between competing claims or

determine which claims are accurate. Id.

\10\ Timex (11) p.3.

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The comments also stated that international standards were not an

adequate substitute for the Guides. The international standards

applicable to watches are developed by the International Organization

for Standardization (``ISO''), ``a worldwide federation of national

standards bodies from some 130 countries.'' 11 ``The ISO

International Standards relating to clocks and watches are discussed

and determined by eight positive participant countries (i.e., Germany,

China, France, India, Japan, Mexico, Russia and Switzerland) and 20

observer countries including the U.S.A. These International Standards

are regularly reviewed every 5 years to prevent their becoming

obsolete.'' 12 ISO has issued standards relating to, among

other things, gold alloy coverings on watchcases and

accessories,13 antimagnetic watches,14 shock-

resistant watches,15 water-resistant watches,16

divers' watches,17 chronometers,18 and functional

jewels.19

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\11\ For information about ISO, see http://www.iso.ch/infoe/

intro.htm>. ISO standards are available from: American National

Standards Institute, Customer Service, 11 W. 42nd Street, 13th

Floor, New York, NY 10036-8002, Telephone (212) 642-4900; FAX (212)

302-1286.

\12\ JCWA (1) p.2.

\13\ ISO 3160-1:1998; ISO 3160-2:1992; and ISO 3160-3:1993.

\14\ ISO 764:1984.

\15\ ISO 1413:1984.

\16\ ISO 2281:1990.

\17\ ISO 6425:1996.

\18\ ISO 3159:1976.

\19\ ISO 1112:1974.

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The comments do not consider the ISO standards to be sufficient to

protect consumers primarily because the ISO standards are not

enforceable in the United States.20 ISO does not regulate

the international watch industry. Instead, each participating member

country enforces the ISO standards in accordance with their own

laws.21 Because the United States is not an adherent to the

ISO standards, the comments stated that ISO standards are not

enforceable in the United States.22

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\20\ EU (2) p.1 (``International Standards are a good reference

for the manufacturers, but as they are not compulsory, they

sometimes are not sufficient to protect the consumer''); Swiss (5)

pp.8, 9; AWA (8) p.1.

\21\ Swiss (5) p.9.

\22\ Id. at 4-5, 8, 9.

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Some comments also stated that the guidance provided in the Watch

Guides was preferable to the ISO standards. Swiss stated that the Watch

Guides are more comprehensive than the ISO standards because the Guides

provide definitions of products, and address, among other things,

misrepresentations in general, counterfeiting of trademarks, and

marking of watches that contain more than one metal.23 Swiss

also noted that the United States is not a participant in ISO, and

therefore, is not involved in the formulation of ISO watch

standards.24 In addition, Timex stated that the ISO

standards are sometimes inconsistent with existing U.S.

practice.25 For example, an ISO standard states that a watch

may be described as a chronometer if it is ``certified by a neutral,

official authority, which checks the watch, or if necessary the

movement, and issues an official certificate of compliance.''

26 Timex stated that there is no evidence that consumers

believe that chronometers are tested and certified and that current

U.S. practices ``do not mandate that only ``certified'' watches be

described as chronometers.'' 27 Thus, the comments argued

that the Commission should retain the Watch Guides.28

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\23\ Id. at 6-7.

\24\ Id. at 7; see also USWC (3) p.1 (stating that international

standards are ``written by the Swiss in their best interest,'' and

thus, do not provide adequate guidance).

\25\ Timex (11) p.3.

\26\ ISO 3159.

\27\ Timex (11) p.3. Timex notes, however, that chronometers are

defined as ``an instrument for measuring time . . . esp. one

intended to keep time with great accuracy.'' Timex (11) p.3, citing

Webster's Seventh New Collegiate Dictionary. Consumers, therefore,

may expect watches described as chronometers to have certain

features, such as accuracy. See Swiss (5) p.23. As is required for

all objective claims about products, sellers must have

substantiation for a claim that a watch is a ``chronometer.''

Although certification by a neutral, official authority, as required

by the ISO standard, may provide such substantiation, it is not

necessarily the only means of substantiating such a claim.

\28\ Swiss (5) p.4; AWA (8) p.1; Timex (11) p.3.

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C. Harmonization of the Watch Guides With International Standards

Although not necessarily viewed as a substitute for the Guides,

harmonizing the Watch Guides with the ISO standards was supported by

many comments.29 The comments contended that harmonization

with ISO standards was appropriate because the ISO standards were

adopted ``after extensive consideration by technical experts'' from the

major watch producing countries of the world.30 In addition,

JCWA added that the standards ``reflect the actual states and the

current technical level of watches . . . (and) fully take into

consideration the viewpoint of consumer protection.'' 31

Further, the comments noted that ISO standards are reviewed every five

years, ensuring that the standards do not become obsolete.32

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\29\ JCWA (1) pp.2, 4; EU (2) p.2; Swiss (5) pp.10-11; Seiko (6)

p.1; AWA (8) Letter, p.1. But see Timex (11) pp.3, 8 (stating that

the ISO standard for ``rolled gold'' claims allows watches to have a

significantly lesser thickness of gold than currently advised by the

Guides and noting the possible need to advise sellers to state the

thickness of the gold).

\30\ Swiss (5) p.11.

\31\ JCWA (1) p.3.

\32\ JCWA (1) p.2; Swiss (5) p.11.

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The comments further argued that differences between the Watch

Guides and the ISO standards would result in undue burdens and costs

for watch manufacturers. The cost of complying with two sets of

guidelines and producing watches separately for the United States would

be passed onto the U.S. consumer, resulting in higher watch

prices.33

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\33\ JCWA (1) pp.3-4; Swiss (5) pp.11, 15.

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In addition to favoring harmonization generally, some comments

recommended that the Guides actually incorporate ISO standards

verbatim.34 The comments noted the difficulty with this

suggestion because the ISO standards are reviewed every five years and

the Watch Guides would need to be revised if there were any ISO

standard changes. Some comments therefore recommended that the Guides

include a provision that stated that ``it shall not be considered

unfair or deceptive if a watch meets the requirements in International

Standard xxxx.'' 35

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\34\ Swiss (5) p.13, n.5.

\35\ JCWA (1) p.4; Swiss (5) p.13.

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In addition to these general matters, the comments also discussed

various Guide provisions and proposed changes to the provisions.

III. Reasons for Rescission

After careful consideration, the Commission has determined to

rescind the Watch Guides. Sellers must continue to comply with section

5 of the FTC Act, which prohibits unfair or deceptive acts or

practices. The Guides, however, are no longer necessary to resolve

demonstrated uncertainty regarding what claims are likely to be

deceptive. In many instances, ISO standards provide guidance to

industry members regarding watch claims. For topics beyond those

addressed by the ISO standards, the Guides do not provide substantial

guidance regarding deceptive claims, and in certain instances, are

outdated. Thus, the Watch Guides are no longer needed.

A. ISO Standards Provide Guidance Regarding Watch Claims

The ISO standards may provide useful guidance to industry members

in making watch claims. They provide specifications for many watch

attributes, including gold alloy coverings and protective features. For

example, the ISO standards specify minimum thicknesses for gold-plated

watches and test methods for determining that a watch is ``water-

resistant,'' ``shock-resistant,'' and ``anti-magnetic.'' Although the

ISO standards are not enforceable in the United States, watch sellers

must comply with section 5 of the FTC Act. Thus, objective claims about

watches must be truthful and accurate, and substantiated by competent

and reliable evidence.

Some of the detailed standards referenced in the existing Guides

(such as minimum thicknesses for gold-plated watches and tests to

determine water-resistance) may be better established by the ISO or

other private standards-setting organizations with expertise in

technical issues and industry practices. These organizations also are

in a better position to change the standards as technology

evolves.36 As noted by the comments, the ISO standards are

developed by technical experts from the major watch producing companies

of the world and are reviewed every five years. Thus, it is likely that

the ISO standards reflect current technology and industry practice,

and, in considering whether marketers have adequately substantiated

their claims, the Commission will look to the ISO standards.

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\36\ Certain provisions of the Watch Guides have been

technologically outdated for some time. For example, section

245.3(f) advises that gold electroplated products contain a minimum

thickness of gold alloy of \3/4\ 1000ths of an inch (approximately

19 microns). Comments indicated that technology permits a thinner,

yet durable layer of gold to be deposited electrolytically and that

the specified minimum thickness was obsolete. (In its second Federal

Register Notice, the Commission proposed changing this provision.)

Due to the changes in technology, industry members by necessity have

referred to sources other than the Watch Guides for guidance on

making gold electroplate claims.

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As stated in the comments, the Commission recognizes the benefits

of harmonizing its guides with international standards and the burdens

that would result if the Watch Guides presented differing guidance. The

Commission, however, does not believe that it is useful to retain

guides that merely reference international standards. Depending on the

revision schedule of the ISO standards, the Watch Guides could become

quickly outdated and have an unintended effect of burdening technology

and watch manufacturers.

B. The Guides Are Not Needed to Address Topics Not Covered by ISO

Standards

For those topics not addressed by ISO standards, the Watch Guides

(1) provide only limited guidance, (2) do not resolve any demonstrated

uncertainty regarding what claims are likely to be deceptive, and (3)

provide, in certain instances, outdated, unnecessary guidance.

1. The Guides Provide Limited Guidance to Industry Members

Although Swiss stated that the Watch Guides discuss topics not

covered by ISO standards, the Guides provide only limited guidance. For

example, the definition of terms in section 245.1 is necessary for the

remainder of the Watch Guides, but does not provide essential

information to the industry that is not otherwise

available.37 Other sections of the Guides, such as 245.2 and

245.4, merely admonish industry members not to misrepresent various

watch features.38

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\37\ Industry members, for example, do not need to rely on the

Watch Guides for definitions of a watch (``a timepiece or time-

keeping device for measuring or indicating time which is designed to

be worn on or about the person'') or watchcase (``any metal case,

covering, or housing of any quality or description for a watch . .

.''). 16 CFR 245.1(a), 245.1(b).

\38\ Section 245.4, for example, advises industry members not to

misrepresent a watch's suitability for particular uses, and more

specifically, advises that terms such as ``skin divers,''

``navigators,'' or ``railroad'' should not be used to describe a

watch that does not possess the characteristics required of watches

used by persons engaged in such activities.

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The Commission does not believe that it is necessary to retain

guides that merely admonish sellers not to misrepresent various items,

especially when, as here, there appears to be no lack of understanding

that the law forbids such misrepresentations. Instead, guides should

assist industry where there is some difficulty in determining

compliance.

2. There is No Demonstrated Uncertainty Regarding Deceptive Claims

There do not currently appear to be any particular areas where

there is difficulty in determining what is likely to be considered to

be deceptive.39 For

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example, there does not appear to be any lack of understanding that a

watch described as having a jeweled movement should contain seven

jewels, each of which serves the purpose of protecting against wear

from friction by providing a mechanical contact with a moving part at a

point of wear. (16 CFR 245.6). In addition, sellers should know,

without the Watch Guides, that they may need to qualify a mark

indicating a watch's metallic composition, when that mark applies to

only certain parts of a watch (e.g., when a watch is made of different

metals, but is only marked with its precious metal content, and

consumers may be misled that the watch is composed entirely of the

precious metal). (16 CFR 245.3(k)). Thus, the Watch Guides do not

appear to clarify which representations would be considered deceptive

under section 5 of the FTC Act.

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\39\ One comment, however, asked the Commission to establish a

test and definition for ``waterproof'' watches. Bell (7) p.1. The

Watch Guides admonish against the use of the term ``waterproof,''

and the Commission solicited comment on whether that admonition was

justified. The comments generally supported the admonition against

the use of the term. JCWA (1) p.6; EU (2) p.2 (``The use of the

terms . . . ``waterproof'' must be prohibited because they can

disclose [sic] the consumer on the right performance of the

watch''); USWC (3) p.2 (the word ``proof'' is too strong a term);

Swiss (5) p.24 (``The word ``proof'' connotes a measure of absolute

protection that unfortunately does not exist with respect to

watches, especially over prolonged periods of time''); Timex (11)

p.12 (Timex is not aware of a watch where ``immersion in water

should have absolutely no effect on the watch whatsoever, regardless

of the depth or duration of immersion,'' and notes that consumers

are unfamiliar with such terms). The Commission does not possess

adequate information to formulate a definition or test for

``waterproof'' claims. Moreover, it is unclear how consumers would

interpret the term ``waterproof,'' which has not been used to

describe watches. Further, no evidence was submitted indicating

appropriate tests that could substantiate such a claim. However,

there may be technological advances that would comport with consumer

understanding of the term, and the Commission would not consider its

use deceptive so long as the watch in fact met consumer expectations

and the claim was substantiated by competent and reliable scientific

evidence.

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3. In Certain Instances, The Guides Contain Outdated, Unnecessary

Guidance

Two Watch Guide topics, in particular, are not addressed by ISO

standards. These two areas involve the marking of a non-precious metal

watch and the marking of foreign origin. As discussed below, these two

Guide provisions no longer reflect the Commission's interpretation of

the law. Therefore, it is unnecessary for the Commission to retain the

Watch Guides for these issues.

a. Non-Precious Metal Markings. The Watch Guides currently advise

manufacturers to mark all watches of metallic composition. Section

245.3(j) advises that when the watch does not contain precious metals,

it should be marked as ``Base Metal'' or the name of the metal of which

it is composed (e.g., ``stainless steel''). The Commission has

determined that it may not be necessary, to prevent deception, to

advise that all non-precious metal watches be affirmatively marked as

``base metal.'' 40

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\40\ In the previous Federal Register Notice, the Commission

solicited comment on its proposal to delete the guidance that

sellers mark base metal watches. Three comments stated that this

provision should be retained, because the ``base metal'' marking

provides the consumer information about the watch and reduces the

chances that the composition of the watch will be misrepresented. EU

(2) p.2; Seiko (6) p.2; AWA (8) p.3. Timex stated that the

requirement to mark watches should be eliminated for watches costing

less than $100 because it is not likely that consumers will believe

that watches in this price range contain precious metals ``absent

representations to the contrary.'' Timex (11) p.7. JCWA and Swiss

stated that the requirement should be eliminated. JCWA stated that

without any markings, ``consumers ought to guess there is no sales

point in the product.'' JCWA (1) p.5. In addition, Swiss stated that

the U.S. is the only country that requires marking of base metal

watches and that removing this requirement will reduce

manufacturers' burdens. Swiss (5) p.20.

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Although a ``base metal'' mark may reduce the chance that a seller

may misrepresent the watch's metallic composition, the absence of such

a mark will not necessarily deceive consumers. A reasonable consumer is

unlikely to assume, in the absence of any representation about the

watch's metallic composition, that the watch was composed of a precious

metal. Instead, it seems likely that consumers would expect that

sellers would want to tout the precious metal content of a item and

would affirmatively place a quality mark on the piece. In fact, other

products made of metals, such as jewelry, are not required to bear a

mark indicating their metallic composition. Consumers, therefore, may

believe that an unmarked item is composed of non-precious metals.

Any benefits derived from advising the marking of base metal

watches do not necessarily outweigh the burdens on manufacturers who

need to mark such watches for sale in the United States. Thus, absent

specific evidence that consumers are misled that an unmarked watch

contains precious metals, the Commission does not believe that it is

necessary to advise sellers to mark non-precious metal watches as

``base metal.'' Of course, the Commission encourages manufacturers to

provide information to consumers about the products they sell and

admonishes sellers against any misrepresentations of a watch's metallic

composition that would violate the FTC Act.

b. Foreign Origin Markings. In addition, the Commission does not

believe that the current guidance regarding the marking of a watch's

country of origin is needed. Section 245.10(a) of the Watch Guides

advises that watches containing movements of foreign origin, or

movement parts of foreign origin, be marked with the country of origin

of the movement. Section 245.10 specifies that the country of origin of

the movement depends upon two factors: (1) Where the movement is

assembled, and (2) the origin of the parts used in assembling the

movement. Using these two factors, the Guides provide specific guidance

on how the country of origin is determined. See Sec. 245.10(b)(1)-(3).

The Commission proposed deleting this origin marking provision of

the Guides in its previous Federal Register Notice. The comments

received in response to this proposal generally favored deleting the

provision entirely, or harmonizing it to be identical to the U.S.

Customs Service marking requirements.41 The comments stated

that Customs already has established detailed foreign origin marking

requirements and that the Guides do not advise the disclosure of

material information beyond these requirements. The comments further

advised that in the interests of uniformity, the Watch Guides should

not provide for different or inconsistent standards than the Customs

requirements.42 In addition, the comments noted World Trade

Organization negotiations to harmonize foreign origin markings

internationally.43

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\41\ The Watch Guides advised the disclosure of more information

(i.e., the origin of movement parts) than the Customs regulations

require.

\42\ USWC (3) p.2; Swiss (5) pp.28-29; Seiko (6) p.1; AWA (8)

p.1; USVI (9) p.2; Timex (11) p.15.

\43\ EU (2); Swiss (5) pp.28-29; AWA (8) p.1.

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The Commission recognizes the benefits of harmonizing its guidance

with Customs regulations, to the extent possible, and acknowledges the

international efforts for harmonization of origin markings. In

addition, the Commission has determined that it is no longer necessary

to generally advise the marking of foreign origin for watches. The

Guides advise the disclosure of foreign origin, in part, because of a

presumption that consumers would believe that an unmarked product was

manufactured in the United States.44 However, it is not

certain that today a significant minority of consumers would believe

that a watch without a country of origin marking is of United States

origin. Absent specific evidence regarding consumer perception, the

Commission does not believe it is necessary to continue to advise

sellers to mark foreign country of origin on watches.45

Thus, the Watch Guides are not necessary to address these issues.

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\44\ In its review of Made in the USA claims, the Commission

determined to cease using the rebuttable presumption that goods not

labeled with any country of origin are understood by consumers to be

made in the United States. Instead, the Commission stated that it

would require disclosure of foreign origin on unmarked goods only if

there was some evidence that a significant minority of consumers

views country of origin as material and believes that the goods in

question, when unlabeled, are made in the United States. 62 FR

63756, 63763 and 63766 (Dec. 2, 1997).

\45\ The Commission notes, however, that any misrepresentation

of a watch's origin is a violation of section 5 of the FTC Act. Two

comments requested that the Commission allow watches produced

partially in the United States Virgin Islands to mark their watches

as Made in USA. USVI (9) pp.3-4; Mapp (10) p.1. The Commission's

Enforcement Policy Statement on Made in the USA claims is of general

applicability and should be used as guidance for watch

manufacturers. See 62 FR 63756 (Dec. 2, 1997).

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C. Other Guidance and Law Enforcement Tools

The rescission of the Watch Guides does not remove the consumer

protection laws relating to watch claims. The main reason that the

comments argued that the ISO standards were not an appropriate

substitute for the Watch Guides was that the ISO standards are not

enforceable in the United States. However, section 5 of the FTC Act,

prohibiting ``unfair or deceptive acts or practices,'' covers the

advertising, marking, and sale of watches.46 Thus, under the

FTC Act, the Commission may seek administrative or federal district

court orders against companies or individuals who engage in unfair or

deceptive practices, prohibiting future violations and, as appropriate,

providing other relief such as consumer redress or disgorgement of ill-

gotten gains. The rescission of the Guides does not signal an FTC

withdrawal from preventing deception in the advertising and marking of

watches. If, in the future, deceptive practices prove to be a problem

in this industry, FTC investigations and law enforcement actions may be

appropriate and necessary.

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\46\ In addition, industry members should note that the National

Gold and Stamping Act, 15 U.S.C. 291, et seq., regulates the marking

of gold or silver content on all products, including watches.

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The rescission of the Guides also does not leave the industry

without guidance as to how to comply with the law. The Commission

directs the industry's attention to the principles of law articulated

in the FTC's Policy Statement on Deception and pertinent Commission and

court decisions on deception, both of which are generally applicable to

all industries. As articulated in the Policy Statement on Deception,

the Commission ``will find deception if there is a representation,

omission, or practice that is likely to mislead the consumer acting

reasonably in the circumstances, to the consumer's detriment.''

47 In addition, sellers are required to possess

substantiation for objective claims made about products. That is,

advertisers must have a reasonable basis for claims before they are

disseminated.48

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\47\ FTC Policy Statement on Deception, appended to Cliffdale

Associates, Inc., 103 F.T.C. 110, 174 (1984).

\48\ See FTC Policy Statement Regarding Advertising

Substantiation, 48 FR 10471 (Mar. 11, 1983), appended to Thompson

Medical Co., 104 F.T.C. 648, 839 (1984).

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Therefore, sellers must have competent and reliable evidence to

substantiate objective claims about watches, such as claims that a

watch is water-resistant. In this respect, ISO standards may provide

sellers with useful guidance. Other tests, research, or information

(besides international standards) also might be used by sellers to

substantiate claims.49 Sellers bear the responsibility of

ensuring that such information constitutes competent and reliable

evidence in support of their claims. 50 The Commission will

evaluate the adequacy of substantiation on a case-by-case basis.

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\49\ Timex, for example, indicated that there may be other

equally valid tests, acceptable in the industry, besides those in

the ISO standards. Timex (11) p.11.

\50\ Sellers also need to ensure that the substantiation

supports consumers' interpretations of the claims they make about

their products. For example, consumers may have certain expectations

regarding a watch claimed to be ``gold-plated.'' If consumers

understand such a claim to mean that the gold coating on the watch

will last for a certain period of time, sellers would need to ensure

that the gold plate is of such thickness and surface coverage to

assure that it will be reasonably durable. Although international

standards may provide guidance regarding, among other things, the

minimum thicknesses of gold to be used, sellers should be sure to

take into account United States consumer expectations and

understandings of claims.

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For all of the foregoing reasons, the Commission has decided to

rescind the Watch Guides.

List of Subjects in 16 CFR Part 245

Advertising, Labeling, Trade practices, Watches, Watch bands, Watch

cases

PART 245--[REMOVED]

The Commission, under the authority of section 18 of the Federal

Trade Commission Act, 15 U.S.C. 57a, amends chapter I of title 16 in

the Code of Federal Regulations by removing part 245.

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 99-14551 Filed 6-8-99; 8:45 am]

BILLING CODE 6750-01-P