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Notice

Agency Information Collection Activities; Submission for OMB Review; Comment Request; Extension

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Information about this document as published in the Federal Register.

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This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

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AGENCY:

Federal Trade Commission (“Commission” or “FTC”).

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.

DATES:

Comments must be submitted on or before November 10, 2008.

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ADDRESSES:

Interested parties are invited to submit written comments electronically or in paper form. Comments should refer to “16 CFR Part 437: Paperwork Comment, FTC File No. P024404” to facilitate the organization of comments. Please note that comments will be placed on the public record of this proceeding—including on the publicly accessible FTC website, at (http://www.ftc.gov/​os/​publiccomments.shtm) — and therefore should not include any sensitive or confidential information. In particular, comments should not include any sensitive personal information, such as an individual’s Social Security Number; date of birth; driver’s license number or other state identification number, or foreign country equivalent; passport number; financial account number; or credit or debit card number. Comments also should not include any sensitive health information, such as medical records or other individually identifiable health information. In addition, comments should not include any “[t]rade secrets and commercial or financial information obtained from a person and privileged or confidential. . . .,” as provided in Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule 4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which confidential treatment is requested must be filed in paper form, must be clearly labeled “Confidential,” and must comply with FTC Rule 4.9(c).1

Because paper mail addressed to the FTC is subject to delay due to heightened security screening, please consider submitting your comments in electronic form. Comments filed in electronic form should be submitted by using the following weblink: (http://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 the weblink (http://secure.commentworks.com/​ftc-bizopPRA) If this Notice appears at (http://www.regulations.gov/​search/​index.jsp), you may also file an electronic comment through that website. The Commission will consider all comments that regulations.gov forwards to it. You may also visit the FTC website at http://www.ftc.gov to read the Notice and the news release describing it.

A comment filed in paper form should include the “16 CFR Part 437: Paperwork Comment, FTC File No. P024404” reference both in the text and on the envelope, and should be mailed or delivered to the following address: Federal Trade Commission, Office of the Secretary, Room H-135 (Annex J), 600 Pennsylvania Avenue, NW, Washington, DC 20580. The FTC 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 Commission is subject to delay due to heightened security precautions.

The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. The Commission will consider all timely and responsive public comments that it receives, whether filed in paper or electronic form. Comments received will be available to the public on the FTC website, to the extent practicable, at (http://www.ftc.gov/​os/​publiccomments.shtm). As a matter of discretion, the Commission 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).

All comments should additionally be submitted to: Office of Management and Budget, Attention: Desk Officer for the Federal Trade Commission. Comments should be submitted via facsimile to (202) 395-6974 because U.S. Postal Mail is subject to lengthy delays due to heightened security precautions.

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FOR FURTHER INFORMATION CONTACT:

Karen Hobbs, Attorney, Division of Marketing Practices, Bureau of Consumer Protection, (202) 326-3587, Federal Trade Commission, 600 Pennsylvania Avenue, N.W., Washington D.C. 20580.

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SUPPLEMENTARY INFORMATION:

On July 7, 2008, the FTC sought comment on the information collection requirements associated with the Business Opportunity Rule, 16 CFR Part 437 (Control Number: 3084-0142).2 No comments were received. Pursuant to the OMB regulations, 5 CFR Part 1320, that implement the PRA, 44 U.S.C. 3501-3521, the FTC is providing this second opportunity for public comment while seeking OMB approval to extend the existing paperwork clearance for the Rule. All comments should be filed as prescribed in the ADDRESSES section above, and must be received on or before November 10, 2008.

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.3 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, 2011.4

Estimated annual hours burden: 16,750 hours

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.Start Printed Page 59631

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, the cumulative estimated 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 might entail an additional hour of recordkeeping per year. Accordingly, staff estimates that business opportunity sellers will cumulatively incur approximately 2,500 hours of recordkeeping burden per 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

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 amounts to an estimated $32,500 of recordkeeping cost. 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

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).

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William Blumenthal

General Counsel

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Footnotes

1. FTC 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 FTC Rule 4.9(c), 16 CFR 4.9(c).

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2. 73 FR 38451 (July 7, 2008).

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3. 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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4. 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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[FR Doc. E8-24021 Filed 10-8-08: 8:45 am]

[BILLING CODE 6750-01-S