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Notice

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

Action

Notice.

Summary

The information collection requirements described below will be submitted to the Office of Management and Budget (“OMB”) for review, as required by the Paperwork Reduction Act (“PRA”). The FTC is seeking public comments on its proposal to extend through October 31, 2011, the current PRA clearance for information collection requirements contained in the Commission’s Business Opportunity Rule (“Rule”). The current clearance expires on October 31, 2008.

 

Table of Contents Back to Top

DATES: Back to Top

Comments must be submitted on or before September 5, 2008.

ADDRESSES: Back to Top

Interested parties are invited to submit written comments. Comments should refer to “16 CFR Part 437: Paperwork Comment, FTC File No. R511993” to facilitate the organization of comments. A comment filed in paper form should include this reference both in the text and on the envelope and should be mailed or delivered to the following address: Federal Trade Commission, Room H-135 (Annex J), 600 Pennsylvania Ave., N.W., Washington, D.C. 20580. The Commission is requesting that any comment filed in paper form be sent by courier or overnight service, if possible because U.S. postal mail in the Washington area and at the FTC is subject to delay due to heightened security precautions. Moreover, because paper mail in the Washington area and at the FTC is subject to delay, please consider submitting your comments in electronic form, as prescribed below. If, however, the comment contains any material for which confidential treatment is requested, it must be filed in paper form, and the first page of the document must be clearly labeled “Confidential.” [1]

Comments filed in electronic form should be submitted by following the instructions on the web-based form at (https://secure.commentworks.com/ftc-bizopPRA) and following the instructions on the web-based form. To ensure that the Commission considers an electronic comment, you must file it on the web-based form at: (https://secure.commentworks.com/ftc-bizopPRA). If this notice appears at www.regulations.gov, you may also file an electronic comment through that website. The Commission will consider all comments that www.regulations.gov forwards to it.

The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. All timely and responsive public comments will be considered by the Commission and will be available to the public on the FTC website, to the extent practicable, at www.ftc.gov. As a matter of discretion, the FTC makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC website. More information, including routine uses permitted by the Privacy Act, may be found in the FTC's privacy policy at (http://www.ftc.gov/ftc/privacy.shtm).

FOR FURTHER INFORMATION CONTACT: Back to Top

Monica Vaca, Attorney, Division of Marketing Practices, Bureau of Consumer Protection, (202) 326-2245, Federal Trade Commission, 600 Pennsylvania Avenue, N.W., Washington D.C. 20580.

SUPPLEMENTARY INFORMATION: Back to Top

Under the PRA, 44 U.S.C. 3501-3521, federal agencies must obtain approval from OMB for each collection of information they conduct or sponsor. “Collection of information” means agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. 44 U.S.C. 3502(3), 5 CFR 1320.3(c). 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 Business Opportunity Rule, 16 CFR Part 437 (OMB Control Number 3084-0142).

The FTC invites comments on: (1) whether the proposed collection of information required by the Rule is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) 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) 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 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 Rule is designed to ensure that prospective purchasers of a business opportunity receive information that will help them evaluate the opportunity that is presented to them. Part 437 was promulgated in March of 2007, concurrently with the amendment of the Franchise Rule, Part 436. Part 437 mirrors the requirements and prohibitions of the original Franchise Rule, and imposes no additional disclosure or recordkeeping obligations or prohibitions. [2] The Rule requires business opportunity sellers to furnish to prospective purchasers a disclosure document that provides information relating to the seller, the seller’s business, the nature of the proposed business opportunity, as well as additional information regarding any claims about actual or potential sales, income, or profits for a prospective business opportunity purchaser. The seller must also preserve information that forms a reasonable basis for such claims. These requirements are subject to the PRA. The FTC is seeking to extend the current PRA clearance to October 31, 2011. [3]

Estimated annual hours burden: 16,750 hours Back to Top

Based on a review of trade publications and information from state regulatory authorities, staff believes that, on average, from year to year, there are approximately 2,500 business opportunity sellers, with perhaps about 10% of that total reflecting an equal amount of new and departing business entrants.

The burden estimates for compliance will vary depending on the particular business opportunity seller’s prior experience with the original Franchise Rule. Staff estimates that 250 or so new business opportunity sellers will enter the market each year, requiring approximately 30 hours each to develop a Rule-compliant disclosure document. Thus, staff estimates that the cumulative annual disclosure burden for new business opportunity sellers will be approximately 7,500 hours. Staff further estimates that the remaining 2,250 established business opportunity sellers will require no more than approximately 3 hours each to update their disclosure document. Accordingly, staff estimates that the cumulative annual disclosure burden for established business opportunity sellers will be approximately 6,750 hours.

Business opportunity sellers may need to maintain additional documentation for the sale of business opportunities in states not currently requiring these records as part of their regulation of business opportunity sellers. This could take up to an additional hour of recordkeeping per year. Accordingly, staff estimates that business opportunity sellers will cumulatively incur approximately 2,500 hours of recordkeeping burden each year (2,500 business opportunity sellers x 1 hour).

Thus, the total burden for business opportunity sellers is approximately 16,750 hours (7,500 hours of disclosure burden for new business opportunity sellers + 6,750 hours of disclosure burden for established business opportunity sellers + 2,500 of recordkeeping burden for all business opportunity sellers).

Estimated annual labor cost: $3,595,000 Back to Top

Labor costs are determined by applying applicable wage rates to associated burden hours. Staff presumes an attorney will prepare or update the disclosure document at an estimated $250 per hour. As applied, this would yield approximately $3,562,500 in labor costs attributable to compliance with the Rule’s disclosure requirements ((250 new business opportunity sellers x $250 per hour x 30 hours per seller) + (2,250 established business opportunity sellers x $250 per hour x 3 hours per seller)).

Staff anticipates that recordkeeping would be performed by clerical staff at approximately $13 per hour. At 2,500 hours per year for all affected business opportunity sellers (see above), this would amount to a total cost of $32,500. Thus, the combined labor costs for recordkeeping and disclosure for business opportunity sellers is approximately $3,595,000.

Estimated non-labor cost: $3,887,500 Back to Top

Business opportunity sellers must also incur costs to print and distribute the disclosure document. These costs vary based upon the length of the disclosures and the number of copies produced to meet the expected demand. Staff estimates that 2,500 business opportunity sellers print and mail 100 documents per year at a cost of $15 per document, for a total cost of $3,750,000 (2,500 business opportunity sellers x 100 documents per year x $15 per document).

Business opportunity sellers must also complete and disseminate an FTC-required cover sheet that identifies the business opportunity seller, the date the document is issued, a table of contents, and a notice that tracks the language specifically provided in the Rule. Although some of the language in the cover sheet is supplied by the government for the purpose of disclosure to the public, and is thus excluded from the definition of “collection of information” under the PRA, see 5 CFR 1320.3(c)(2), there are residual costs to print and mail these cover sheets, including within them the presentation of related information beyond the supplied text. Staff estimates that 2,500 business opportunity sellers complete and disseminate 100 cover sheets per year at a cost of approximately $0.55 per cover sheet, or a total cost of approximately $137,500 (2,500 business opportunity sellers x 100 cover sheets per year x $0.55 per cover sheet).

Accordingly, the cumulative non-labor cost incurred by business opportunity sellers each year attributable to compliance will be approximately $3,887,500 ($3,750,000 for printing and mailing documents + $137,500 for completing and mailing cover sheets).

William Blumenthal,

General Counsel.

[FR Doc. E8-15143 Filed 7-3-08: 8:45 am]

BILLING CODE 6750-01-S

Footnotes Back to Top

1. Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be accompanied by an explicit request for confidential treatment, including the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. The request will be granted or denied by the Commission's General Counsel, consistent with applicable law and the public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).

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2. In March of 2008, the Commission published the Business Opportunity Rule Revised Notice of Proposed Rulemaking, 73 FR 16110 (March 26, 2008) (“Notice”). The Notice proposed amending the Business Opportunity Rule substantially, and would, among other things, reduce the number of required disclosures by sellers of business opportunities to prospective purchasers. Conversely, the Notice proposed amending the rule to expand the coverage of entities required to make disclosures to include a broader array of business opportunities than those covered by the original Franchise Rule. For now, however, only those businesses opportunities covered by the original Franchise Rule — such as vending machine and rack display opportunities — remain covered under part 437.

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3. The current clearance under recently assigned OMB Control Number 3084-0142 covers the terms of the original Franchise Rule as applied to business opportunity sellers. The portion of clearance applicable to franchisors under Part 436 is separately assigned to pre-existing OMB Control Number 3084-0107.

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