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

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Federal Trade Commission.




The FTC seeks public comments on its proposal to extend through August 31, 2005 the current Paperwork Reduction Act (“PRA”) clearances for information collection requirements contained in four Commission rules and one category of administrative activities. Their clearances expire on August 31, 2002.


Comments must be filed by July 1, 2002.


Send written comments to Secretary, Federal Trade Commission, Room H-159, 600 Pennsylvania Ave., NW., Washington, DC 20580. Comments in electronic form should be sent to All comments should be identified as responding to this notice, as prescribed below.

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Requests for additional information or copies of the proposed information requirements should be sent to Gary Greenfield, Attorney, Office of the General Counsel, Federal Trade Commission, 600 Pennsylvania Ave., NW., H-576, Washington, DC 20580, (202) 326-2753.

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Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), 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 regulations noted herein.

The FTC invites comments on: (1) Whether the proposed collections of information are 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 estimates of the burden of the proposed collections 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.

If a comment contains nonpublic information, it must be filed in paper form, and the first page of the document must be clearly labeled “confidential.” Comments that do not contain any nonpublic information may instead be filed in electronic form (in ASCII format, WordPerfect, or Microsoft Word) as part of or as an attachment to email messages directed to the following email box: Such comments will be considered by the Commission and will be available for inspection and copying at its principal office in accordance with Section 4.9(b)(6)(ii) of Start Printed Page 21244the Commission's Rules of Practice, 16 CFR 4.9(b)(6)(ii)).

The relevant information collection requirements are as follows:

1. The Negative Option Rule, 16 CFR Part 425 (Control Number: 3084-0104)

The Negative Option Rule governs the operation of prenotification subscription plans. Under these plans, sellers ship merchandise such as books, compact discs or tapes automatically to their subscribers, and bill them for the merchandise if consumers do not expressly reject the merchandise within a prescribed time. The Rule protects consumers by: (a) Requiring that promotional materials disclose the terms of membership clearly and conspicuously; and (b) establishing procedures for the administration of such “negative option” plans.

Estimated annual hours burden: 14,000 total burden hours, rounded to the nearest thousand (all disclosure-related).

Staff estimates that approximately 179 existing clubs require annually about 75 hours each to comply with the Rule's disclosure requirements, for a total of 13,425 hours (179 clubs × 75 hours). These clubs should be familiar with the Rule, which has been in effect since 1974. Thus, the “burden” of compliance has declined over time. Moreover, comments provided to the FTC indicate that a substantial portion of the existing clubs likely would make these disclosures absent the Rule because they have helped foster long-term relationships with consumers.

Approximately 5 new clubs come into being each year. These clubs require approximately 120 hours to comply with the Rule, including start up-time. Thus, cumulative PRA burden for new clubs is about 600 hours. Combined with the estimated burden for established clubs, total burden is 14,025 hours or 14,000, rounded to the nearest thousand.

Estimated annual cost burden: $385,000, rounded to the nearest thousand (solely related to labor costs).

Based on recent Bureau of Labor Statistics, the average compensation for advertising managers is approximately $30 per hour. Compensation for clerical personnel is approximately $10 per hour. Assuming that managers perform the bulk of the work, while clerical personnel perform associated tasks (e.g., placing advertisements and responding to inquiries about offerings or prices), the total cost to the industry for the Rule's paperwork requirements would be approximately $384,700. [(65 hours managerial time × 179 existing negative option plans × $30 per hour) + (10 hours clerical time × 179 existing negative option plans × $10 per hour) + (115 hours managerial time × 5 new negative option plans × $30 per hour) + (10 hours clerical time × 5 new negative option plans × $10).]

Because the Rule has been in effect since 1974, the vast majority of the negative option clubs have no current start-up costs. For the few new clubs that enter the market each year, the costs associated with the Rule's disclosure requirements, beyond the additional labor costs discussed above, are de minimis. Negative option clubs already have access to the ordinary office equipment necessary to achieve compliance with the Rule. Similarly, the Rule imposes few, if any, printing and distribution costs. The required disclosures generally constitute only a small addition to the materials that a prospective subscriber sends to the seller to solicit enrollment in a negative option plan. Because printing and distribution expenditures are incurred regardless of the Rule to market the product, adding the required disclosures to them would result in marginal incremental expense.

2. The Amplifier Rule, 16 CFR Part 432 (Control Number: 3084-0105)

The Amplifier Rule assists consumers by standardizing the measurement and disclosure of power output and other performance characteristics of amplifiers in stereos and other home entertainment equipment. The Rule specifies the test conditions necessary to make the disclosures that the Rule requires.

Estimated annual hours burden: 600 hours (30 disclosure-related hours; 300 testing-related hours).

The annual burden is approximately 600 hours. The Rule's provisions require affected entities to test the power output of amplifiers in accordance with specified FTC protocol. Approximately 300 new amplifiers and receivers come on the market each year. Since high fidelity manufacturers routinely conduct performance tests as part of any new product development, the Rule imposes incremental costs only to the extent that the FTC protocol is more time-consuming than alternative testing procedures. Specifically, a warm up (“precondition”) period that the Rule requires before measurements are taken may add approximately one hour to the time testing entails. Thus, staff estimates that the Rule imposes approximately 300 hours (1 hour × 300 new products) of added testing burden annually.

The Rule requires disclosures if an advertisement makes a power output claim. Assuming that ten advertisements per magazine are placed each month in ten existing magazines featuring audio equipment advertisements, staff estimates that approximately 1,200 magazine advertisements annually would be required to carry the FTC disclosures. The cost of these disclosures is limited to the time needed to draft and review the language pertaining to power output specifications. Because this rule became effective in 1974, and because members of the industry are familiar with its requirements, compliance is less burdensome today. Accordingly, staff estimates the time involved for this task to be a maximum of 1/4 hour per advertisement, for a total burden of 300 hours.[1] The total annual burden impose by the Rule is therefore approximately 600 burden hours for disclosures and testing.

Estimated annual cost burden: $19,000, rounded to the nearest thousand (solely relating to labor costs).

Based on recent Bureau of Labor Statistics, the average hourly compensation for electronics engineers is about $32, and the average hourly compensation for marketing, advertising and public relations managers is about $30. Generally, electronics engineers perform the testing of amplifiers and receivers (300 hours × $32 = $9,600), and marketing, advertising or public relations managers prepare advertisements (including required disclosures) (300 hours × $30 = $9,000). Based on this information, staff estimates the cost to the industry per year for the Rule's paperwork requirements to be approximately $19,000 per year.

The Rule imposes no capital or other non labor costs because its requirements are incidental to testing and advertising done in the ordinary course of business.

3. The Franchise Rule, 16 CFR Part 436 (Control Number: 3084-0107)

The Franchise Rule requires franchisors and franchise brokers to furnish to prospective investors a disclosure document that provides information relating to the franchisor, the franchisor's business, and the nature of the proposed franchise relationship, as well as additional information about any claims concerning actual or potential sales, income, or profits for a prospective franchisee (“earnings claims”). Franchisors must also preserve Start Printed Page 21245the information that forms a reasonable basis for such claims. The Rule is designed to help potential investors from fraudulent claims.

The Rule's required disclosure document provides franchisees with information on twenty broad-ranging subjects that affect franchisors and the nature of the proposed franchise relationship. This includes not only generally available information, such as the official name and address and principal place of business of the franchisor, but also less commonly available information such as, among other things, the previous 5 years business experience of each of a franchisor's current directors and executive officers and whether any of these individuals has been convicted of a felony or embezzlement, or has filed in bankruptcy or been adjudged bankrupt during the previous 7 years. All information in the disclosure statement must be updated and revised according to the express time requirements set forth in the Rule.

Based on a review of the trade publications and information from state regulatory authorities, staff believes that, on average, from year to year, there are approximately 5,000 American franchise systems, consisting of 2,500 business format franchises and 2,500 business opportunity sellers, with perhaps about 10% of that total reflecting an equal amount of a new and departing business entrants.

Staff has calculated burden based on the above estimates and corollary assumption. Some franchisors, however, for various reasons, are not covered by the Rule in certain situations (e.g., when a franchisee buys bona fide inventory but pays no franchisor fees). Moreover, fifteen states have franchise disclosure laws similar to the Rule. These states use a disclosure document format known as the Uniform Franchise Offering Circular (“UFOC”). In order to ease compliance burdens on the franchisor, the Commission has authorized use of the UFOC in lieu of its own disclosure format to satisfy the Rule's disclosure requirements. Staff estimates that about 95 percent of all franchisors use the UFOC format. When that format is used, the franchisor is not required to prepare an additional federal disclosure document. The burden hours stated below reflects staff's estimate of the incremental burden that the Franchise Rule may impose beyond information requirements imposed by states and/or followed by franchisors who use the UFOC.

Estimated annual hours burden: 34,000 hours, rounded up to the next thousand (28,500 disclosure hours + 5,000 recordkeeping hours).

Staff estimates that the 500 or so new franchisors require approximately 30 hours each to develop a Rule-compliant disclosure document. Staff additionally estimates that the remaining 4,500 established franchisors require no more than approximately 3 hours each to update the disclosure document. The combined cumulative burden is 28,500 hours.

The franchisor may require additional recordkeeping of information pertaining to the sale of franchises in non-registration states. At most, franchisors would require an additional hour of recordkeeping per year. This yields a cumulative total of 5,000 hours per year for affected entities.

Estimated annual cost burden: $19,952,000 ($7,175,000 in labor costs; $12,777,000 in capital or other non-labor costs).

Labor costs are determined by applying applicable wage rates to associated burden hours. Staff assumes that an attorney likely would prepare or update the disclosure document. Accordingly, staff's estimate of the labor costs attributed to those tasks are as follow: (500 new franchisors × $250 per hour × 30 hours per franchisor) + (4,500 established franchisors × $250 per hour × 3 hours per franchisor) = &7,125,000.

Staff anticipates that recordkeeping would be performed by clerical staff at approximately $10 per hour. At 5,000 hours per year for all affected entities, this would amount to a total cost of $50,000. Thus, combined labor costs for recordkeeping and disclosure is approximately $7,175,000.

To comply specifically with the Rule, franchisors must 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 format and product franchisors print and mail 100 disclosure documents per year at a cost of $35 per document. Staff further estimates that another 2,500 business opportunity sellers print and mail 100 documents per year at a cost of $15 per document, for a total cost of $12,500,000.

The franchisor also must provide and disseminate an FTC cover sheet that identifies the franchisor, 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 5,000 francisors complete and disseminate 100 cover sheets per year at a cost of approximately $.55 per cover sheet, or a total cost of approximately $277,000.

4. R-value Rule, 16 CFR Part 460 (Control Number: 3084-0109)

The R-value Rule establishes uniform standards for the substantiation and disclosure of accurate, material product information about the thermal performance characteristics of home insulation products. The R-value of an insulation signifies the insulation's degree of resistance to the flow of heat. This information tells consumers how well a product is likely to perform as an insulator and allows consumers to determine whether the cost of the insulation is justified.

Estimated annual hours burden: 366,000 hours, rounded to the nearest thousand (366,095 disclosure hours and 305 hours for testing and recordkeeping).

The Rule's requirements include product testing, recordkeeping, and third-party disclosures on labels, fact sheet, advertisements, and other promotional materials. Based on information provided by members of the insulation industry, staff estimates that the Rule affects: (1) 150 insulation manufacturers and their testing laboratories; (2) 1,500 installers who sell home insulation; (3) 130,000 new home builders/sellers of site-built homes and approximately 7,000 dealers who sell manufactured housing; and (4) 25,000 retail sellers who sell home insulation for installation by consumers.

Under the Rule's testing requirements, manufacturers must test each insulation product for its R-value. The test takes approximately 2 hours. Approximately 15 of the 150 insulation manufacturers in existence introduce one new product each year. The total annual testing burden is therefore approximately 30 hours (15 manufacturers × 2 hours per test).

Staff further estimates that most manufacturers require an average of approximately 20 hours per year with regard to third-party disclosure requirements in advertising and other promotional materials. Only the five or six largest manufacturers require additional time, approximately 80 hours each. Thus, the annual third-party disclosure burden for manufacturers is approximately 3,360 hours. [(144 Start Printed Page 21246manufacturers × 20 hours) + (6 manufacturers × 80 hours)].

While the Rule imposes recordkeeping requirements, most manufacturers and their testing laboratories keep their testing-related records in the ordinary course of business. Staff estimates that no more than one additional hour per year per manufacturer is necessary top comply with this requirement, for an annual recordkeeping burden of approximately 150 hours (150 manufacturers × 1 hour).

Installers are required to show the manufacturer's insulation fact sheet to retail consumers before purchase. They must also disclose information in contracts or receipts concerning the R-value and the amount of insulation to install. Staff estimates that two minutes per sales transaction is sufficient to comply with these requirements. Approximately 835,000 retrofit insulations are installed by approximately 1,500 installers per year and, thus, the related annual burden total is approximately 27,833 hours (835,000 sales transactions × 2 minutes). Staff anticipates that one hour per year per installer is sufficient to cover required disclosures in advertisements and other promotional materials. Thus, the burden for this requirement is approximately 1,500 hours per year (1,500 installers × 1 hour). In addition, installers must keep records that indicate the substantiation relied upon for savings claims. The additional time to comply with this requirement is minimal—approximately 5 minutes per year per installer—for a total of approximately 125 hours (1,500 installers × 5 minutes).

New home sellers must make contract disclosures concerning the type, thickness, and R-value of the insulation they install in each part of a new home. Staff estimates that no more than one minute per sales transaction is required to comply with this requirement, for a total annual burden of approximately 283,333 hours (1.7 million new home sales × 1 minute). New Home sellers who make energy savings claims must also keep records regarding the substantiation relied upon for those claims. Because few new home sellers make these claims, and the ones that do would likely keep these records regardless of the R-value Rule, staff believes that the one minute covering disclosures would also encompass this recordkeeping element.

The Rule requires that the approximately 25,000 retailers who sell home insulation make fact sheets available to consumers before purchase. This can be accomplished by, for example, placing copies in a display rack or keeping copies in a binder on a service desk with an appropriate notice. Replenishing or replacing fact sheets should require no more than approximately one hour per year per retailer, for a total of 25,000 annual hours, industry-wide.

The Rule also requires specific disclosures in advertisements or other promotional materials to ensure that the claims are fair and not deceptive. This burden is very minimal because retailers typically use advertising copy provided by the insulation manufacturer, and even when retailers prepare their own advertising copy, the Rule provides some of the language to be used. Accordingly, approximately one hour per year per retailer should suffice to meet this requirement, for a total annual burden of approximately 25,000 hours.

Retailers who make energy savings claims in advertisements or other promotional materials must keep records that indicate the substantiation they are relying upon. Because few retailers make these types of promotional claims, and because the Rule permits retailers to rely on the insulation manufacturer's substantiation data for any claims that are made, the additional recordkeeping burden is de minimis. The time calculated for disclosures, above, would be more than adequate to cover any burden imposed by this recordkeeping requirement.

To summarize, staff estimates that the Rule imposes a total of 366,331 burden hours, as follows: 150 recordkeeping and 3,390 testing and disclosure hours for manufacturer; 125 recordkeeping and 29,333 disclosure hours for installers; 283,333 disclosure hours for new home sellers; and 50,000 disclosure hours for retailers. Rounded to the nearest thousand, the total burden is 366,000 burden hours.

Estimated annual cost burden: $7,290,030 (solely related to labor costs).

The total annual labor costs for the Rule's information collection requirements is $7,290,030, derived as follows: $600 for testing, based on 30 hours for manufacturers (30 hours × $20 per hour for skilled technical personnel); $2,750 for complying with the recordkeeping requirements of the rule, based on 275 hours (275 hours × $10 per hour for clerical personnel); $33,360 for manufacturers' compliance with third-party disclosure requirements, based on 3,360 hours (3,360 hours × $10 per hour for clerical personnel); and $7,253,320 for compliance by installers, new home (362,666 hours × $20 per hour for sales persons).

There are no significant current capital or other non-labor costs associated with this Rule. Because the Rule has been in effect since 1980, members of the industry are familiar with its requirements and already have in place the equipment for conducting tests and storing records. New products are introduced infrequently. because the required disclosures are placed on packaging or on the product itself, the Rule's additional disclosure requirements do not cause industry members to incur any significant additional non-labor associated costs.

5. FTC Administrative Activities (Control Number: 3084-0047)

This category consists of: (a) applications to the Commission, including applications and notices contained in the Commission's Rules of Practice (primarily parts I, II, and IV); and (b) the FTC's Consumer Response Center.

Estimated annual hours burden: 78,000 hours, rounded to the nearest thousand.

Most applications to the Commission generally fall within the “law enforcement exception” to the PRA [2] ; any burden associated with those that do not is de minimis. For example, over the last decade, the Commission has received only one application for an exemption under the Fair Debt Collection Practices Act provisions. Staff has estimated that such a submission can be completed well within 50 hours. Applications and notices to the Commission contained in other rules (generally in Parts I, II, and IV of the Commission's Rule of Practice) are also infrequent and difficult to quantify. Nonetheless, in order to cover any potential “collections of information” for which separate clearance has not been sought, staff is projecting 125 hours as its estimate of the time needed to submit any applicable responses.[3]

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The FTC's Bureau of Consumer Protection (“BCP”) uses various telephone complaint hotlines and, alternatively, three different consumer complaint forms to handle consumer grievances: (1) The general complaint form (for other than identify theft complaints); (2) the “Know Fraud” complaint form (essentially another way to access complaint form #1); and (3) the “Identity Theft On-Line Complaint Form.” [4] The forms' completion is wholly voluntary.

Burden estimates for these BCP programs is as follows:

Annual hours burden:

ActivityNo. of respondentsNo. of minutes/activityTotal hours
Miscell. and fraud-related consumer complaints (phone)*325,0004.524,375
Miscell. and fraud-related consumer complaints (online)**105,0005.08,750
IDT complaints (phone)*300,000840,000
IDT complaints (online)**32,0007.54,000
Customer Satisfaction Questionnaire9,0004.0600
*Number of consumer calls calculated by projecting over the 3-year clearance period sought 5% annual growth and a telephone contractor response rate of 95% (contracted level of service) with regard to consumers who call the toll free lines and opt to talk to a counselor.
**Number of online collections projected from consumers who use the FTC's online complaint forms noted in the text above and in footnote 3. These figures also assume 5% annual growth over the 3-year clearance period requested.

Annual cost burden: The cost per respondent should be negligible. Participation is voluntary, and will not require any labor expenditures by respondents. There are no capital, start-up operation, maintenance, or other similar costs to the respondents.

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William E. Kovacic,

General Counsel.

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1.  Staff has reduced this amount from prior PRA estimates to reflect recent amendments to the Rule (Dec. 22, 2000, 65 FR 81232). The amendments eliminated 3 of 4 disclosures that were required in media advertising (eliminated were disclosures of total rated harmonic distortion and the associated power bandwidth and impedance ratings).

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2.  The “law enforcement” exception to the PRA excludes most items in this subcategory because they involve collecting information during the conduct of a Federal investigation, civil action, administrative action, investigation, or audit with respect to a specific party, or subsequent adjudicative or judicial proceedings designed to determine fines or other penalties. See 44 U.S.C. 3518(c)(1); 5 CFR 1320.4(a)(1)-(3).

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3.  This includes Rule 4.11(e), 16 CFR 4.11(e), which establishes procedures for agency review of outside requests for Commission employee testimony, through compulsory process or otherwise, in cases or matters to which the agency is not a party. The rule requires that a person who seeks testimony submit a statement in support of the request. Staff estimates that agency personnel receive roughly 2 such requests per month or 24 per year, and conservatively estimates that it would require up to 2 hours to prepare the statement, for a cumulative total of 24 hours.

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4.  The burden calculations for these online options also include related variations, which comprise the same basic “collection of information”: (1) Spanish language versions also available at, (2) the complaints form, but only with regard to complaints from U.S. or foreign consumers regarding U.S. companies, and (3) the FTC's planned link for consumer complaints from U.S. military personnel as part of a joint initiative with the Department of Defense.

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[FR Doc. 02-10576 Filed 4-29-02; 8:45 am]