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) has submitted to the Office

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

Paperwork Reduction Act information collection requirements associated

with five rules issued and enforced by the Commission. OMB had

provisionally extended the expiration for these clearances from

September 30, 1998 to March 31, 1999. The FTC proposes that OMB extend

its approval for the clearances an additional three years from the

prior expiration date of September 30, 1998.

DATES: Comments must be submitted on or before March 1, 1999.

ADDRESSES: Send written comments to Gary M. Greenfield, Attorney,

Office of the General Counsel, Federal Trade Commission, Washington,

D.C. 20580. All comments should be identified as responding to this

notice.

FOR FURTHER INFORMATION CONTACT: Requests for additional information

[[Page 4656]]

should be addressed to Gary M. Greenfield, Attorney, Office of the

General Counsel, Federal Trade Commission, Washington, D.C. 20580, 202-

326-2753.

SUPPLEMENTARY INFORMATION: The FTC has submitted a request to OMB to

extend the existing clearance to collect information associated with

the five rules described below. A Federal Register Notice with a 60-day

comment period soliciting comments on this collection of information

was published on November 16, 1998 (63 FR 63731). No comments were

received.

The relevant information collection requirements are as follows: 1.

The Funeral Rule, 16 C.F.R. Part 453 (OMB Control Number: 3084-0025),

ensures that consumers who are purchasing funeral goods and services

have accurate information about the terms and conditions (especially

prices) for such goods and services. The Rule requires that funeral

providers disclose this information to consumers and maintain records

to facilitate enforcement of the Rule.

Estimated annual hours burden: The estimated burden associated with

the collection of information required by the Rule is 22,300 hours for

recordkeeping and 57,900 hours for disclosures, for a total of 80,200

hours. This estimate is based on the number of funeral providers

(approximately 22,300), the number of funerals annually (approximately

2.3 million), and the time needed to fulfill the information collection

tasks required by the Rule.

Recordkeeping: The Rule requires that funeral providers retain

copies of price lists and statements of funeral goods and services

selected by consumers. Based on an average burden of one hour per

provider per year for this task, the total burden for the 22,300

providers is 22,300 hours. This estimate is unchanged from 1995.

Disclosure: The Rule requires that funeral providers (1) maintain

current price lists for funeral goods and services, (2) provide written

documentation of the funeral goods and services selected by consumers

making funeral arrangements, and (3) provide information about funeral

prices in response to telephone inquiries.

Maintaining current price lists requires that funeral providers

revise their price lists from time to time through the year to reflect

price changes. Based on an average burden of two hours per provider per

year for this task, the total burden for 22,300 providers is 44,600

hours. This estimate is unchanged from the FTC's previous estimate in

1995.

The original rulemaking record indicated that 87 percent of funeral

providers provided written documentation of funeral arrangements, even

in the absence of the Rule's requirements.\1\ Accordingly, the Rule

imposes a disclosure burden on 2,899 providers (13 percent of 22,300

providers). These providers are typically the smallest funeral homes.

The disclosure requirement can be satisfied through the use of a

standard form (an example of which is available to the industry in the

Compliance Guide to the Funeral Rule). Based on an estimation that

these smaller homes arrange, on average, approximately 20 funerals per

year, and that it would take each of them about 3 minutes to record

prices for each consumer on the standard form, FTC staff estimates that

the total burden associated with this disclosure requirement is one

hour per provider not already in compliance, for a total of 2,899

hours.

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\1\ The original version of the Funeral Rule required that

funeral providers retain a copy of and give each customer a separate

``Statement of Funeral Goods and Services Selected.'' The 1994

amendments to the Rule eliminated that requirement, allowing instead

for such disclosures to be incorporated into a written contract,

bill of sale, or other record of a transaction that providers use to

memorialize sales agreements with customers.

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The Funeral Rule also requires funeral providers to answer

telephone inquiries about the provider's offerings or prices. Industry

data indicate that only about nine percent of funeral purchasers make

telephone inquiries, with each call lasting an estimated three minutes.

Only about half of that additional time is attributable to disclosures

required solely by the Rule, since many providers would provide the

requested information even without the Rule. Thus, assuming that the

average purchaser makes two calls per funeral to compare prices, the

estimated burden is 10,350 hours [(\1/2\ x 3 minute call x 2 calls/

funeral) x 207,000 funerals (nine percent of 2,300,000 funerals/

year)]. This burden likely will decline over time as consumers

increasingly rely on the Internet for funeral price information.

In sum, the disclosure total is 57,849 hours (44,600 + 2,899 +

10,350), rounded to 57,900 hours. The total estimated hours burden

associated with the Rule for both recordkeeping and disclosure

requirements is 80,200 (Recordkeeping: 22,300 hours + Disclosure:

57,900 hours).

Estimated annual cost burden: $3,900,000, rounded ($3,560,000 in

labor costs and $340,300 in non-labor costs).

Labor costs: Labor costs are derived by applying appropriate hourly

cost figures to the burden hours described above. The hourly rates used

below are averages.

Clerical personnel, at an hourly rate of $10, can perform the

recordkeeping tasks required under the Rule. Based on the estimated

hour burden of 22,300 hours, the estimated cost burden for

recordkeeping is $223,000 ($10 x 22,300 hours).

The two hours required of each provider, on average, to update

price lists should consist of approximately 1.5 hours of managerial or

professional time, at $75 per hour, and .5 hours of clerical time, at

$10 per hour, for a total of $117.50 per provider. Thus, the estimated

total cost burden for maintaining price lists is $2,620,250 ($117.50

x 22,300 providers) (rounded to $2,620,000). The cost of providing

written documentation of the goods and services selected by the

consumer is 2,899 hours of managerial or professional time at

approximately $75 per hour, or $217,425 (rounded to $217,000). The cost

of responding to telephone inquiries about offerings or prices is

10,350 hours of managerial or professional time at $75, or $776,250

(rounded to $776,000).

The total labor cost of the three disclosure requirements imposed

by the Funeral Rule is $3,613,000 ($2,620,000 + $217,000 + $776,000).

The total labor cost for recordkeeping and disclosures is $3,836,000

($223,000 for recordkeeping + $3,613,000 for disclosures).

Capital or other non-labor costs: The Rule imposes minimal capital

costs and no current start-up costs. Most funeral homes already have

access, for other business purposes, to the ordinary office equipment

needed for compliance.

Compliance with the Rule however, does entail some expense to

funeral providers for printing and duplication of price lists. Based on

a rough estimate of 300 pages per year per provider for copies of the

various price lists, at 5 cents per page, and 22,300 providers, the

total cost burden associated with printing and copying is $334,500. In

addition, the estimated 2,899 providers not already providing written

documentation of funeral arrangements apart from the Rule will incur

additional printing and copying costs. Assuming that those providers

use the standard two-page form shown in the Compliance Guide, at 5

cents per page, at an average of 20 funerals per year, the added cost

burden would be $5,798, rounded to $5,800. Thus, estimated non-labor

costs are $340,300.

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The cost of training associated with Rule compliance is generally

included in continuing education requirements for licensing and

voluntary certification programs. Moreover, the FTC has provided its

Compliance Guide to all funeral providers at no cost, and additional

copies are available on the FTC web site or by mail. Accordingly, the

Rule imposes no additional training costs.

2. The Used Car Rule, 16 CFR Part 455 (OMB Control Number: 3084-

0108), facilitates informed purchasing decisions by consumers by

requiring used car dealers to disclose information about warranty

coverage, if any, and the mechanical condition of used cars they offer

for sale.

Estimated annual hours burden: The FTC is requesting approval for

an estimated burden of 1,925,000 hours relating solely to disclosure

requirements.\2\ This estimate is based on the number of used car

dealers (approximately 80,000, according to industry sources \3\), the

number of used cars sold by dealers annually (approximately 30,000,000,

according to industry data), and the time needed to fulfill the

information collection tasks required by the Rule.\4\ The current

estimated annual burden reflects a decrease from the prior estimate,

attributable to a more accurate estimate of the number of used cars

sold by dealers, and recent industry input to more accurately reflect

the time it takes used car dealers to enter data on Buyers Guides.

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\2\ The Used Car Rule does not impose any recordkeeping

requirement.

\3\ Source: 1997 Used Car Market Report (``ADT Market Report''),

published by ADT Automotive, 435 Metroplex Drive, Nashville,

Tennessee 37211.

\4\ A relatively small number of dealers opt to contract with

outside companies to perform the various tasks associated with

complying with the Rule. Staff assumes that outside contractors

would require about the same amount of time and incur similar cost

as dealers to perform these tasks. Accordingly, the hours and cost

burden totals shown, while referring to ``dealers,'' incorporate the

time and cost borne by outside companies in performing the tasks

associated with the Rule.

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The Rule requires that used car dealers display a one-page, double-

sided Buyers Guide in the window of each used car they offer for

sale.The component tasks associated with this requirement include (1)

ordering and stocking Buyers Guide forms, (2) entering applicable data

on Buyers Guides, (3) posting the Buyers Guides on vehicles, and (4)

making any necessary revisions in Buyers Guides.

Dealers should need no more than an average of one hour per year to

obtain Buyers Guide forms, which are readily available from many

commercial printers or could be produced by an office word-processing

or desk-top publishing system. Based on a universe of 80,000 dealers,

the annual hours burden for producing or obtaining and stocking Buyers

Guides is 80,000 hours.

For used cars sold ``as is,'' copying vehicle-specific data from

dealer inventories to the Buyers Guide forms and checking off the ``no

warranty'' box may take up to two minutes per vehicle if done by hand,

and only seconds for those dealers who have automated the process.

Staff conservatively assumes that this task, on average, will require

1.5 minutes. For used cars sold under warranty, checking off the

warranty box and adding warranty information may take an additional one

minute, i.e., 2.5 minutes, Based on input from industry sources, staff

estimates that approximately 60% of used cars sold by dealers are sold

``as is,'' with the remainder sold under warranty. Thus, staff

estimates the time required to enter data for used cars sold without

warranty is 450,000 hours (30,000,000 x 60% x 1.5 minutes

60 minutes/hour) and 500,000 hours for used cars sold under warranty

(30,000,000 x 40% x 2.5 minutes 60 minutes/hour), for an

overall total of 950,000 hours.

Although there will be substantial variance in the time required to

post the Buyers Guides on each used car, FTC staff estimates that, on

average, dealers will spend 1.75 minutes per vehicle to match the

correct Buyers Guide to the vehicle and place it in or on the vehicle.

For the 30,000,000 vehicles sold, the burden associated with this task

is 875,000 hours. To the extent dealers are able to integrate this

process into other activities performed in their ordinary course of

business, this estimate likely overstates the actual burden.

If negotiations between buyer and seller over warranty coverage

produce a sale on terms other than those originally entered on the

Buyers Guide, the dealer must revise the Guide to reflect the actual

terms of sale. According to the rulemaking record, bargaining over

warranty coverage rarely occurs. Allowing for revision in 2% of sales,

at two minutes per revision, staff estimates that dealers will spend

20,000 hours annually revising Buyers Guides.

Estimated annual cost burden: $28,250,000, consisting of

$19,250,000 in labor costs and $9,000,000 in non-labor costs.

Labor costs: Labor costs are derived by applying appropriate hourly

cost figures to the burden hours described above. Staff has determined

that all of the tasks associated with ordering forms, entering data on

Buyers Guides, posting Buyers Guides on vehicles, and revising them as

needed are typically done by clerical or low-level administrative

personnel. Using a clerical cost rate of $10 per hour and an estimate

of 1,925,000 burden hours for disclosure requirements, the total labor

cost burden would be approximately $19,250,000.

Capital or other non-labor costs: The cost of the Buyers Guide form

itself is estimated to be 30 cents per form, so that forms for 30

million vehicles would cost dealers $9,000,000. In making this

estimate, staff conservatively assumes that all dealers will purchase

preprinted forms instead of producing them internally, although dealers

may produce them at minimal expense using currently office automation

technology. Capital and start-up costs associated with the Rule are de

minimis.

3. The Consumer Product Warranty Rule, 16 CFR Part 701 (OMB Control

Number: 3084-0111), prevents deception by providing consumers with

information to assess written warranty terms. The Rule requires that

written warranties disclose certain material facts regarding their

terms and conditions.

Estimated annual hours burden: In 1995, FTC staff estimated that

the required disclosures imposed an average annual burden of 8 hours on

each of approximately 4,241 warrantors of products. Because there have

been no changes to the Rule's requirements, staff has no reason to

believe that this estimate requires revision. Based on this assumption,

the total compliance burden relating to disclosures is approximately

34,000 hours (rounded from 33,928).5 Nonetheless, this

estimate likely overstates substantially the actual burden because most

warrantors would disclose the terms and conditions of their warranties

even in the absence of the Rule.

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\5\ The Consumer Product Warranty Rule imposes no recordkeeping

requirement.

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Estimated annual cost burden: $340,000, consisting solely of labor

costs.

Labor costs: The work required to comply with the Rule is

predominantly clerical. Based on an average hourly rate of $10 for

clerical employees and the total hours burden of 34,000 hours, the

annual labor cost is approximately $340,000.

Capital or other non-labor costs: The Rule imposes no appreciable

current capital or start-up costs. The vast majority of warrantors have

already modified their warranties to include the information required

by the Rule. Rule compliance does not require the use of any capital

goods other than ordinary

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office equipment, which providers would already have available for

general business use.

4. The Pre-Sale Availability Rule, 16 C.F.R. Part 702 (OMB Control

Number: 3084-0112), ensures that consumers can make informed purchasing

decisions by requiring that the terms of written warranties for

consumer products be made available to consumers prior to purchase. The

Rule requires retailers to make warranty information available to

consumers and requires warrantors (i.e., manufacturers) to provide

retailers with the materials necessary to do so. The Rule also requires

catalog and door-to-door sellers to make warranty information

available.

Estimated annual hours burden: The FTC is seeking approval for an

estimated disclosure burden of 2,760,000 hours.\6\ This estimate is

based on the number of large and small retailers and manufacturers,

according to census data, and the estimated scope of the compliance

burden for businesses by type. FTC staff first calculated burden

estimates by type of business in the early 1980s. Staff believes that

estimates remain valid for manufacturers, and that subsequent

amendments to the Rule to allow more flexibility have reduced the

burden on retailers by approximately 50 percent.\7\ Approximately 6,552

large retailers and 422,100 small retailers spend an annual average of

26 hours and 6 hours, respectively, to comply with the Rule, for a

cumulative combined total of 2,702,952 hours for retailers.

Approximately 146 large manufacturers and 4,095 small manufacturers

spend an annual average of 52 hours and 12 hours, respectively, for a

cumulative total of 56,732 hours for manufacturers. Thus, the combined

cumulative total for retailers and manufacturers is 2,759,684 hours,

rounded to 2,760,000 hours.

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\6\ The Pre-Sale Availability Rule does not impose any

recordkeeping requirement.

\7\ To comply with Rule 702, sellers need only maintain specimen

copies of the warranties provided to them by manufacturers. The Rule

allows sellers substantial flexibility in how to maintain those

copies, since the Rule states only that the warranty must be made

readily available upon request. If the warrantor prints the warranty

on the product's package, for example, the retailer has no further

obligation since consumers can readily review the warranty by

looking at the package.

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Estimated annual cost burden: $27,600,000, consisting sole of labor

costs.

Labor costs: Most of Rule 702's disclosure requirements involve

simple clerical functions such as maintaining copies of the warranties

at the retail level and, at the manufacturer level, ensuring that

copies of warranties are provided to retailers. Assuming a clerical

labor cost rate of $10/hour and an estimate of 2,760,000 burden hours

for disclosures, the total annual labor cost burden is approximately

$27,600,000.

Capital or other non-labor costs: The capital or start-up costs

imposed by the Rule are de minimis. The vast majority of retailers and

warrantors already have developed systems to provide the information

the Rule requires. Compliance by retailers typically entails simply

filing warranties in binders and posting an inexpensive sign indicating

warranty availability.\8\ Manufacturer compliance entails providing

retailers with a copy of the warranties included with their products.

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\8\ Although some retailers may choose to display a more

elaborate or expensive sign, that is not required by the Rule.

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5. The Informal Dispute Settlement Procedure Rule, 16 C.F.R. Part

703 (OMB Control Number: 3084-0113), helps to ensure that consumers are

fully informed regarding informal dispute settlement procedures in

product warranties. The Rule imposes certain requirements when a

warrantor requires, as part of a written warranty, that consumers first

use an informal dispute settlement mechanism (IDSM) to seek resolution

of a warranty dispute before pursuing remedies in court. The Rule

requires that affected warrantors disclose certain information to

consumers. It also requires that warrantors, through IDSMs, retain (1)

individual records for each dispute, (2) indexes that categorize

disputes by product model and show the extent to which the warrantor

has abided by decisions of the resolution process, and (3) statistical

summaries that classify disputes according to various status and final

disposition categories. Affected entities must conduct an annual audit

of their dispute resolution procedures and report to the FTC.

Estimated annual hours burden: The FTC is requesting approval for

an estimated burden of 4,333 recordkeeping hours and 1,625 disclosure

hours, for a total burden estimate of approximately 6,000 hours. This

estimate is based on the number of warranty disputes handled by IDSMs

and the average time needed to fulfill the information collection tasks

required by the Rule.

Recordkeeping: Since maintenance of individual case records is

necessary in the ordinary course of business, the Rule imposes little

additional recordkeeping burden. FTC staff estimates that retaining

additional information that would not otherwise be kept adds a burden

of 30 minutes per case. Staff also estimates that IDSMs require an

additional 10 minutes per case for compilation of the indexes,

statistical summaries, and the annual audit required by the Rule,

resulting in a total recordkeeping requirement of 40 minutes per case.

Finally, staff estimates that the two IDSMs affected by the Rule

handle, combined, about 6,500 covered disputes annually. Thus, the

total recordkeeping burden associated with the Rule is approximately

4,333 hours.

Disclosure: The Rule requires that affected warrantors disclose

information about the dispute settlement mechanism in the written

warranty, and that IDSMs disclose certain information upon request. The

incremental cost of a warrantor's required disclosure is negligible.

IDSMs must provide certain information, such as their annual audits, to

anyone who requests it. In addition, on request, IDSMs must also

provide consumers who have a dispute before them with a copy of records

relating to their disputes. FTC staff estimates that the average hour

burden of copying and producing this information is approximately 15

minutes for each dispute handled by an IDSM. Based on an estimate of

6,500 disputes annually, the hour burden associated with copying and

providing these disclosures is 1,625 hours.

Estimateed annul cost burden: $281,000, consisting of $81,000 in

labor costs and $200,000 in non-labor costs.

Labor costs: Assuming that IDSMs would use skilled clerical

personnel or technical support staff, at an hourly rate of $15, to

compile and maintain the records required by the Rule the labor cost of

the 4,333 recordkeeping burden hours is approximately $64,995. Assuming

that IDSMs would use less-skilled labor, at an hourly rate of $10, to

reproduce records, the labor costs of the 1,625 hours disclosure burden

hours is approximately $16,250. The combined total labor cost for

recordkeeping and disclosures is $81,245, rounded to $81,000.

Capital or other non-labor costs: The Rule imposes no appreciable

current capital or start-up costs. The vast majority of warrantors have

already developed systems to retain the records and provide the

disclosures required by the Rule. Rule compliance does not require the

use of any capital goods other than ordinary office equipment, to which

providers would already have access.

The only additional cost imposed on IDSMs operating under the Rule

that would not be incurred for other IDSMs is the annual audit

requirement. One of the two IDSMs currently operating

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under the Rule estimates the total annual costs of this requirement to

be less than $100,000. Since there are two IDSMs operating under the

Rule, the total cost imposed by them is an estimated $200,000.\9\ This

total includes copying costs of roughly $20,000, which is based on

estimated copying costs of 5 cents per page and several conservative

assumptions or estimates. Staff estimates that the ``average'' dispute-

related file is about 25 pages long and that a typical annual audit

file is about 200 pages in length. For purposes of estimating copying

costs, staff conservatively assumes that every consumer complainant

requests a copy of the file relating to his or her dispute. Staff also

assumes that, for 1,000 of the estimated 6,500 disputes each year,

consumers request copies of warrantors' annual audit reports (although,

based on requests for audit reports made directly to the FTC, the

indications are that considerably less requests are actually made).

Thus, the estimated total annual copying costs for average-sized files

would be approximately $8,125 (25 pages/file x .05 x 6,500

requests) and $10,000 for copies of annual audits (200 pages/audit

report x .05 x 1,000 requests), rounded to a total of $20,000.

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\9\ The commenter did not break down this estimate by cost item.

Staff conservatively included the entire $100,000 in its estimate of

capital and other non-labor costs, even though some of this burden

is likely already accounted for as labor costs.

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Combined with estimated annual labor cost of $81,000, total

estimated annual cost burden is $281,000 ($200,000+$81,000).

John D. Graubert,

Acting General Counsel.

[FR Doc. 99-2174 Filed 1-28-99; 8:45 am]

BILLING CODE 6750-01-M