[Federal Register Volume 63, Number 129 (Tuesday, July 7, 1998)]
[Rules and Regulations]
[Pages 36555-36560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17929]
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FEDERAL TRADE COMMISSION
16 CFR Part 304
Regulatory Review and Regulatory Flexibility Act Review of Rules
and Regulations Issued Under the Hobby Protection Act
AGENCY: Federal Trade Commission.
ACTION: Confirmation of rule.
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SUMMARY: The Federal Trade Commission (FTC or Commission) has completed
its regulatory review and Regulatory Flexibility Act (RFA) review of
the Rules and Regulations Issued Under the Hobby Protection Act. The
Rule regulates the marking of imitation political and numismatic items.
Pursuant to its regulatory review, the Commission concludes that the
Rule continues to be valuable both to consumers and firms. The
Commission also certifies, pursuant to the RFA, that the Rule has not
had a significant economic impact upon a substantial number of small or
other entities or otherwise merits revision.
DATES: This action is effective as of July 7, 1998.
FOR FURTHER INFORMATION CONTACT:
Robert E. Easton, Special Assistant, Division of Enforcement, Bureau of
Consumer Protection, FTC, Washington, DC 20580, (202) 326-3029.
SUPPLEMENTARY INFORMATION:
I. Introduction
The Commission has determined, as part of its oversight
responsibilities, to review its rules and guides periodically to seek
information about their costs and benefits and their regulatory and
economic impact. The information obtained assists the Commission in
identifying rules and guides that warrant modification or rescission.
Where appropriate, the Commission will, as it did in this review,
combine such periodic general reviews with reviews seeking information
about the economic impact of the rule on small business firms as
required by the Regulatory Flexibility Act.
II. Background
On November 29, 1973, Congress passed the Hobby Protection Act
(Act).\1\ The Act requires manufacturers and importers of ``imitation
political items'' \2\ to mark ``plainly and permanently'' such items
with the
[[Page 36556]]
``calendar year'' such items were manufactured. The Act also requires
manufacturers and importers of ``imitation numismatic items'' \3\ to
mark ``plainly and permanently'' such items with the word ``copy.'' \4\
The Act further provides that the Commission is to promulgate
regulations for determining the ``manner and form'' imitation political
items and imitation numismatic items are to be permanently marked with
the calendar year of manufacture or the word ``copy.'' \5\
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\1\ 15 U.S.C. 2101-2106.
\2\ An imitation political item is ``an item which purports to
be, but in fact is not, an original political item, or which is a
reproduction, copy, or counterfeit of an original political item.''
15 U.S.C. 2106(2).
\3\ An imitation numismatic item is ``an item which purports to
be, but in fact is not, an original numismatic item or which is a
reproduction, copy, or counterfeit of an original numismatic item.''
15 U.S.C. 2106(4).
\4\ 15 U.S.C. 2101(b).
\5\ 15 U.S.C. 2101(c).
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In response to that requirement, in 1975 the Commission issued
Rules and Regulations under the Hobby Protection Act (Rule).\6\ The
Rule tracks the definitions of terms used in the Act and implements the
Act's ``plain and permanent'' marking requirements by establishing the
sizes and dimensions of the letters and numerals to be used, the
location of the marking on the item, and how to mark incusable (i.e.,
those that can be impressed with a stamp) and nonincusable items. The
Commission amended the Rule in 1988 to provide additional guidance on
the minimum size of letters for the word ``copy'' as a proportion of
the diameter of coin reproductions.\7\
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\6\ 16 CFR Part 304.
\7\ 53 FR 38942 (1988). Prior to the amendment, if a coin were
too small to comply with the minimum letter size requirements, the
manufacturer or importer had to individually request from the
Commission a variance from those requirements. Because imitation
miniature coins were becoming more common, the Commission determined
that it was in the public interest to allow the placing of the word
``copy'' on miniature imitation coins in sizes that could be reduced
proportionately with the size of the item.
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As discussed below, the comments received in this review appear to
reflect a high level of compliance as to the two products covered by
the Act and Rule (i.e., imitation political and numismatic items). Many
comments also proposed that the Commission expand coverage of the Act
and Rule to address problems involving the selling (passing off) as
originals of reproductions of antiques and collectibles not covered by
the Act and Rule. The Commission does not propose amending the Rule as
requested because it does not have authority under the Act to expand
coverage of the Act or Rule. In addition, existing laws and
informational material currently available address many of the concerns
raised by these comments.
III. Regulatory Review and Regulatory Flexibility Questions and
Comments
The Commission received a total of 1,145 comments in response to
its March 25, 1997 Federal Register request for comments.\8\ Of that
number, nearly 1,000 comments were form letters that advocated
expanding coverage of the Act and Rules to all antiques and
collectibles.\9\ Of the other comments, four were from national
associations,\10\ four from hobby newspapers,\11\ one from a private
mint,\12\ one from the United States Mint,\13\ and the remaining were
from individual collectors,\14\ dealers,\15\ and local
associations.\16\
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\8\ 62 FR 14049 (1997). The comments have been filed on the
Commission's public record as Document Nos. B21938200001,
B21938200002, etc. The comments are cited in this notice by the name
of the commenter, a shortened version of the comment number, and the
relevant page(s) of the comment, e.g., Daugherty, 493, 1. All Rule
review comments are on the public record and are available for
public inspection in the Public Reference Room, Room 130, Federal
Trade Commission, 6th and Pennsylvania Ave., NW, Washington, DC,
from 8:30 a.m. to 5:00 p.m., Monday through Friday, except federal
holidays.
\9\ Seven hundred twenty-one comments were form letters cut out
or photo-copied from an Antique Week newspaper or based thereon
(e.g., Lubitz, 61, 1), 223 were form letters from collectors and
dealers of Nippon porcelain (e.g., Dersheimer, 59, 1), and 34
comments used or were based upon an Antiques Journal form letter
(e.g., Mercier, 4, 1).
\10\ American Numismatic Association (ANA), 94; American
Political Items Collectors (APIC), 515; Antique & Collectibles
Dealers Association, Inc., 495; and Appraisers Association of
America, Inc., 494 and 526.
\11\ Antique & Collectors Reproduction News, 497; Antique Week,
499 and 540; Antiques Journal, 4; and Coin World, 514.
\12\ Gallery Mint Museum (Gallery Mint), 398.
\13\ U.S. Mint, 511.
\14\ See, e.g., Barrie, 19.
\15\ See, e.g., Dilinger, 103.
\16\ See, e.g., Wayne County (PA) Antique Dealers Assoc., 517.
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The Commission discusses the comments in two section: In section A,
the Commission analyzes the comments relating to the products covered
by the Act and Rule (``covered products''); and, in section B, the
Commission discusses the comments relating to alleged problems with
products outside the coverage of the Act and Rule.
A. Comments Relating to Covered Products
1. Support for the Rule
As noted previously, the Act and Rule's scope are limited to
imitation political and numismatic items. The comments uniformly stated
that there is a continuing need for the Rule and that is has been
successful in protecting consumers from the passing off of
reproductions of the covered items.\17\ Indeed, two comments indicated
that the Rule's protective value may have increased over the years as
technological changes that have made it easier to make high quality
reproductions of political and numismatic items have also made it
easier to deceive consumers.\18\
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\17\ See, e.g., APIC, 7, 1; Mint, 511, 1; Prestwood, 512, 1; and
Peeling, 254, 1. For example, APIC stated that, ``We still have some
reproductions today, but the problem is not serious, thanks to the
Hobby Protection Act, and enforcement of the Act. Further, most
campaign items reproduced since the early 1970's are in compliance
with the Act, marked in accordance with the regulations.'' APIC, 7,
1. The United States Mint similarly favored continued coverage of
imitation numismatic items because, ``[t]he numismatic area is prone
to opportunism, and sanctions for objectionable behavior are hard to
impose. The Hobby Protection Act works as a preventive to counter
attempts to pass off reproductions as genuine coins.'' Mint, 511, 1.
Other comments similarly agree that the current Act protects the
political memorabilia and numismatic collecting areas and should be
continued. See, e.g., Lubitz, 61, 1.
\18\ APIC pointed out that the advent of color copying machines,
color computer technology, and digital image creation and
enhancement has increased the capability of individuals to ``create,
maintain, use, transfer, and reproduce high quality images.'' APIC,
515, 7. ANA stated that, ``[a]ny change in relevant technology would
only increase the ability to manufacture more deceiving replicas.''
ANA, 94, 3.
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The few comments addressing the issue of what costs the Rule
imposes on purchasers indicated that the costs are slight and
outweighed by the benefits. For example, one commenter wrote that,
``[a]ssuming that the costs of affixing the word `copy' or the date is
reflected in the selling price, it would appear that the increase per
item would be an insignificant amount that any purchaser would be
willing to pay by reason of the protection afforded by the rule.'' \19\
Another commenter stated that the process of stamping the word ``copy''
on coins ``has no significant bearing on the price of any individual
piece.'' \20\ One commenter noted that the Rule saves purchasers money
because it lessens that chance of purchasing a fake.\21\
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\19\ ANA, 94, 2.
\20\ Gallery Mint, 398, 2.
\21\ APIC, 515, 3.
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In addition, the comments indicated that the Rule does not impose
significant burdens or costs on firms subject to its requirements. The
comments addressing this issue uniformly stated that the Rule has not
imposed significant costs on subject firms \22\ and in fact has
benefitted them. \23\ No comment suggested any changes in the Rule to
reduce costs. \24\
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\22\ See e.g., APIC: ``The costs imposed, if any, have been de
minimis. The cost of adding a few more letters to a printing job * *
* when the job is going to be undertaken regardless is negligible.''
APIC, 515 6. See also ANA, 94, 2; Coin World, 514, 3; and Gallery
Mint, 398, 3.
\23\ APIC, 515 6; and ANA, 94, 2.
\24\ A few comments noted that the Rule technically overlaps
with certain federal counterfeiting laws (Gallery Mint, 398, 3; and
Ganz, 1, 1) and a consumer protection law in California (APIC, 515,
6). These comments, however, did not state that the Rule conflicted
with these laws or that overlaps caused additional costs or burdens
to small entities or other companies, or in any other way adversely
affected businesses or consumers. The Commission, therefore,
concludes that these minor overlaps do not warrant modification of
the Rule.
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[[Page 36557]]
Commenters that addressed the issue of whether the Rule imposes
significant costs on small businesses indicated that the Rule imposes
only de minimis costs on small firms \25\ and several commenters stated
there is no difference in the cost of compliance for small or large
firms, \26\ and that these costs are no different than a small business
would incur under standard and prudent business practices. \27\ For
this reason, no commenters believed changes to the Rule were needed to
reduce small business costs. \28\
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\25\ The Gallery Mint commented that while compliance with the
Rule involves more time in production or die set-up, this is ``just
the nature of the business'' and the requirements are ``very easy to
adhere to.'' Gallery Mint, 398, 4. See also APIC, 515, 7; and Coin
World, 514, 3.
\26\ See, e.g., ANA: ``The cost of affixing the word `copy' or
the date would be the same for large and small firms.'' ANA, 94, 3.
\27\ Coin World, 514, 3, and APIC, 515, 8.
\28\ See. e.g., APIC. 515, 8; ANA, 94, 3; and Coin World, 514,
3.
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Some comments indicated that the Rule is valuable to manufacturers
and firms. One commenter stated that, ``The rules * * * have benefitted
firms which intend to be good players. The rules have provided a
standard means of denoting lawful status as a `copy' which in turn has
been recognized and accepted in the hobby and consumer
marketplace.''\29\ Similarly, another commenter noted the addition of
the word ``copy'' or the date of manufacture may avoid litigation costs
resulting from the intentional or unintentional sale of unmarked items
as originals.\30\
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\29\ See. e.g., APIC, 515, 6.
\30\ ANA, 94, 2.
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2. Proposed amendments regarding covered products
a. Double-sided marking of ``copy'' on numismatic items.
One comment suggested amending the Rule to require that the word
``copy'' be marked on both sides of imitation numismatic items.\31\ The
Rule currently requires that the word ``copy'' be marked on either side
of the coin (i.e., either the obverse or the reverse side of the
item).\32\ The comment argued that marking ``copy'' on only one side
does not let potential buyers know that a replica on exhibit with only
one side displayed or in an advertisement is an imitation because
``copy'' may be on the side not displayed.
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\31\ Coin World, 514, 3.
\32\ 16 CFR 304.6(b)(2).
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The Commission has concluded that a requirement that ``copy'' be
marked on both sides of an imitation coin is not warranted. The
comments indicate that the current requirement for marking coins on
only one side is highly successful. Regarding exhibited coins, the
potential buyer would normally have the opportunity to fully view and
physically handle the item, thus affording the opportunity to see the
``copy'' marking prior to purchase.
Regarding the concern that the word ``copy'' may not be displayed
in advertising,\33\ the Commission believes that coin depictions in
advertising are likely to be small, making any ``copy'' marking
proportionately even smaller. Double-sided marking of a coin is
therefore unlikely to result in a prominent disclosure of the word
``copy,'' and thus would not remedy the alleged problem raised in the
comment.
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\33\ The Act and Rule do not have requirements that address the
advertising of covered products. The requirements address only the
marking of the imitation numismatic or political item. Of course,
misrepresenting a copy as an original in advertising would
constitute a ``deceptive'' practice in violation of Sec. 5 of the
FTC Act. 15 U.S.C. 45.
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The Commission also believes that double-sided marking would not be
without costs. Although the costs of marking ``copy'' on an additional
side of the item might be slight, there would still be some cost to
manufacturers. In addition, double-sided marking might detract from the
esthetic appeal of the replica and could have adverse effects on the
market for imitation numismatic items.
b. Require that all political items be marked with year of
manufacture.
The Rule currently requires that imitation political items be
marked with the date of manufacture. One comment recommended broadening
the Rule to require that all political items, both original and
imitation, be permanently and prominently marked with the year that the
manufacturing process was completed.\34\ According to the comment,
requiring that the date of manufacture appear on all political items
would prevent the consumer confusion and deception that occurs with
certain types of political buttons. According to this comment,
manufacturers routinely print excess ``button papers'' so that if they
receive additional orders during the campaign they will not need to
print additional papers. These excess papers may not be manufactured
into finished political buttons, however, until years later. For
example, the comment described a situation in which paper sheets of
images created and printed in 1920 for the 1920 Cox-Roosevelt campaign
were not put on buttons until 1997.
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\34\ APIC, 515, 4.
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The Commission does not propose to expand the Rule to require the
marking of original political items. First, the Commission does not
have the authority to require such marking under the Act, which
requires the marking of only imitation items. Second, the problem
raised by the comment is already covered by the Act and Rule. The Act
and Rule define ``Original political item'' as including ``any
political button * * * produced for use in any political cause.'' \35\
Until button paper is incorporated into a political button, a political
button cannot have been ``produced'' for use in any political cause. A
subsequently produced political button therefore would not be an
``original political item'' as defined in the Act and Rule. The type of
button described by the comment would thus be an imitation political
item that, under the current Rule, must be marked with the year of
manufacture.
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\35\ 15 U.S.C. 2106; and 16 CFR 304.1.
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c. Replace minimum size requirements for required markings with a
performanced-based standard.
The Rule currently mandates the font style and minimum size for the
markings required by the Rule \36\ but allows the minimum marking size
for imitation numismatic items to be proportional to the size of the
item.\37\ The FRN asked whether the Commission should amend the Rule to
replace the mandated minimum sizes with a performance-based standard,
for example, with a clear and prominent disclosure requirement.\38\
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\36\ See 16 CFR 304.5(3) and (4) (imitation political items) and
304.6(3) and (4) (imitation numismatic items).
\37\ For example, the minimum total horizontal dimension of the
word ``copy'' should be six millimeters or ``not less than one-half
of the diameter of the reproduction.'' 16 CFR 304.6(3).
\38\ 62 FR 14049.
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Five commenters involved in the numismatic field addressed this
issue. Three of those five favored keeping the existing size standards
because they believe that the precise requirements of the current
standard provide clear guidance as to what is lawful. According to
these comments, a performance standard would introduce uncertainty that
could cause delay, additional costs, or lead to litigation.\39\ Two
comments appeared to favor a performance-based standard, although both
comments also noted the benefits of mandated size requirements.
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Although one comment noted that in general mandated disclaimers are
often so small as to render them worthless,\40\ this comment also
stated that the current Rule, with its mandated size standard, has
materially lessened the amount of counterfeit political items in the
marketplace.\41\ This comment voiced support for modification of the
current standard to a performance-based standard coupled with a
``though not smaller than'' requirement, with the caveat that ``the
result must be at least as effective as the status quo.'' \42\ Another
comment supported adoption of a performance-based standard,
specifically a clear and prominent standard, while at the same time
expressing concern that ``there is too much room for individual
translation'' without specific size requirements.\43\
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\39\ ANA, 94, 3; Coin World, 514, 3; and, Ganz, 1, 1.
\40\ APIC, 515, 10.
\41\ Id. at 2.
\42\ Id. at 10.
\43\ Gallery Mint, 398, 5.
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The Commission has determined to keep the present minimum size
standard. As noted previously, the comments indicated generally that
the current standard is working well and does not impose significant
costs on small entities or others. Second, several comments indicated
that the certainty provided by the current standard allows them to plan
and anticipate costs, and that a performance-based standard would
eliminate these benefits and could cause confusion. Finally, the
current standard already addresses a concern of those suggesting that
the Commission consider a performance-based standard by allowing a
minimum size for the word ``copy'' that is proportional to the size of
the imitation numismatic item.
B. Comments Relating to Expanding Coverage of the Act and Rule to
Antiques and Collectibles in General
As previously noted, the scope of the Act and Rule is limited to
imitation political and numismatic items. This section discusses the
numerous comments that related to products not presently covered by the
Act and Rule.\44\ In essence, these comments state that reproductions
of many types of antiques and collectibles are being passed off as
originals, causing economic harm to collectors and dealers. Because of
improvements in technology, the comments alleged, even knowledgeable
persons have difficulty differentiating the reproductions from the
originals. The comments suggested two amendments to the Rules to
address these problems. First, some comments proposed that the coverage
of the Act and Rule be expanded to all reproductions of antiques and
collectibles. Second, many comments also recommended that the
Commission require permanent country-of-origin labeling for all
reproductions of antiques and collectibles.
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\44\ As described above, the Commission received over 1,000
letters advocating that the Act or Rule be expanded to cover all
antiques and collectibles. E.g., Sprowls, 276, 1; Bucher, 244, 1;
Anderson, 58, 2; and Whitehouse, 20, 1. Many comments also described
specific examples of individual instances involving the passing off
of a reproduction as an original.
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After carefully considering these proposals, the Commission has
determined not to amend the Rule as suggested. First, as discussed
above, the Hobby Protection Act applies only to imitation political and
numismatic items. The Act does not provide the commission with
authority to expand the Rule beyond the Congressionally mandated scope
of the Act to cover all reproductions. The Commission also notes that
existing laws and other resources address many of the problems
discussed in the comments. In particular, country-of-origin marking for
imports is under the jurisdiction of the U.S. Customs Service. Because
many comments indicated that foreign-made reproductions pose the
greatest problems, the Commission has brought the issues raised in this
proceeding to the attention of the Customs Service, which has authority
to take action where goods fail to bear a required country-of-origin
marking.
1. The Scope and Source of the Passing-Off Problem
The comments suggested that there are many categories of
collectibles subject to being passed off,\45\ and that the volume of
reproductions being offered for sale as originals may be large.\46\ The
comments provided several explanations for the passing-off problems.
First, the comments uniformly stated that the quality of reproductions
has greatly improved to the point that reproductions can be virtually
indistinguishable from the originals.\47\ Several comments noted that
even experts may not be able to distinguish originals from
reproductions.\48\
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\45\ As one comment stated, ``Fake and Repros exist in almost
every sector of the collecting hobby.'' Donaldson, 11,1. The
comments cite the passing off of the following products, among
others: Nippon porcelain (Puckett, 45 1 and 223 form letter
comments); Cambridge glassware (Upton, 505, 1); Griswold cast iron
cookware (Smith, 498, 1); Coca Cola memorabilia and postcards
(Wildman, 40, 1; Rutledge, 43, 1); antique quilts, transferware,
majolica, and ironstone (Nickel, 18, 1); Tiffany lamps (Curry, 575,
1); calendars, calendar plates, almanacs and calendar art (Moses,
74, 1); Parrish and Nutting prints, powder horns and scrimshaw,
Shaker items, Sterling Victorian match safes and lockets, Brilliant
period cut glass patterns, Galle art glass, and perfume and scent
bottles (Donaldson, 11, 1); and confederate veteran reunion badges
and medals (Finlayson, 240, 1).
\46\ See, e.g., Berndt, 52, 1; and LaBatt, 366, 1. These
comments state that the commenter has visited many venues that
allegedly sell reproductions as originals.
\47\ See, e.g., Chervenka, 497, 2; ``Now, antique reproduction
importers are manufacturing goods that are virtually identical
copies of old originals including factory names, artist signatures
and trademarks. Many of these new pieces * * * are cast in molds
taken directly from old originals. This means new pieces do not just
loosely resemble the original, they are an exact clone of the
original.''
\48\ Thoe, 540, 2; and Skeim, 225, 1.
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The comments appeared to agree that the quality of reproductions
has improved, but were not in agreement regarding how these
reproductions come to be passed off as originals. According to one
commenter, the problem is not with reproductions being made for
decorative purposes and sold in retail stores, where it is likely that
purchasers are aware that they are buying reproductions. The problem
begins when a reproduction subsequently enters the secondary market and
may be passed off as an original.\49\ Other commenters, however, argued
that reproductions are intentionally sold as originals.\50\
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\49\ Billings, 22, 1.
\50\ See, e.g., Tucker, 495, 1, who states that reproductions
are made overseas, shipped to the United States with country-of-
origin labels attached which then are removed somewhere in the
distribution system and sold as originals. According to the
commenter ``[t]his is fraud and * * * [t]he manufacturers of these
items are well aware of what happens.'' Another commenter claims
that, ``[m]ost of these items [reproductions] are expressly made to
fool the general public as to authenticity.'' Porta, 572, 1.
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The comments indicated that reproductions are made both overseas
and domestically.\51\ Although the comments do not present quantitative
data that establishes the number of foreign-made reproductions being
sold as originals in the United States, the majority of the commenters
indicated that they believe the problems lie chiefly in overseas
production.\52\
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\51\ One comment noted that both domestic and overseas companies
have mastered techniques for making pottery, wood, metals, and glass
appear to be hundreds of years old. Thoe, 540, 1.
\52\ See, e.g., Tucker, 495, 1. The comments state that a
variety of countries are the sources of reproductions. For example,
one comment states that Brazil, France, Italy, and several Far East
countries export all types of reproductions of antiques and
collectibles while the Philippines manufactures ``antique'' oak
furniture which is imported into the United States and sold as
authentic antiques. Sprowls, 276, 1. Another comment alleges that
Galle glassware reproductions are ``being mass produced'' in
Romania, China, and Japan while Roseville pottery is being produced
in China. Chervenka, 497, 2.
Several comments also cite the domestic production of replicas
that are passed off as originals. See, e.g., Finlayson, 240, 1.
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[[Page 36559]]
The comments present numerous anecdotes regarding the harm caused
by passing off. Although these anecdotes do not present information
sufficient to quantify or determine the amount of economic and other
harm caused, the following is a summary of the adverse effects noted in
the comments: That the individual buyer pays considerably more than the
product is worth;\53\ that owners of original antiques or collectibles
which are heavily reproduced lose the value of their investment;\54\
that the uncertainty regarding the genuineness of antiques and
collectibles dissuade persons from purchasing originals or from
becoming collectors, which also adversely affects businesses that deal
in originals.\55\
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\53\ See, e.g., Chervenka, 497, 2, describing circumstances in
which buyers mistook new Galle glassware for old and paid $10,000
for a reproduction which cost about $500 wholesale and paid $3,500
for a different reproduction which cost $450 wholesale. Another
example mentioned was a buyer allegedly spending ``tens of
thousands'' of dollars for a Tiffany lamp at ``one of the better
known auction houses that employed in-house experts'' only to find
out later that it was not genuine and worth less. Craig, 575, 1.
\54\ Due to the glut of reproductions, ``[m]any older people who
wish to sell their antiques and collectible are not getting the full
value'' (Dillinger, 103, 1) while some collections ``will never
recover their value because of the flood of * * * reproductions.''
Nickel, 18, 1.
\55\ The comments allege that uncertainties of investment value
caused by reproductions ``scare off novices who might otherwise
collect these items [original antiques and collectibles]''
(Billings, 22, 1) and make collectors not buy ``for fear of
reproductions.'' Skeim, 225, 1. Dealers have commented that
customers' fear of buying reproductions have adversely affected
their business. Vierling, 532, 1; and Craven, 508, 1.
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2. Proposals To Expand Coverage of the Rule to Non-Covered Products
Many comments propose that the coverage of the Act be expanded to
all antiques and collectibles.\56\ A number of comments suggest, as an
alternative to expanding the coverage of the Act or in addition to such
expansion, that both foreign and domestic reproductions be marked
permanently with the country-of-origin. The comments generally
suggested that foreign reproductions with country-of-origin labels that
are non-permanent are the primary source of the passing-off
problem.\57\ For several reasons, however, the Commission does not
propose to adopt the remedies suggested by the comments.
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\56\ The 721 comments generated from the Antique Week form
comment stated that the Act should be expanded to all antiques and
collectibles and that the Commission recommend such expansion to
Congress. E.g., Lubitz, 61, 1. The 223 comments using or based on
the Nippon Collector's Club form letter as well as the 34 comments
using or based upon the Antiques Journal form letter urged the
extension of the regulatory powers of the Act to require permanent,
non-removable marking for collectibles other than those currently
covered. E.g., Dersheimer, 59, 1; and Mercier, 4, 1. Additionally,
numerous non-form comments suggested the expansion of coverage of
the Act to other antiques and collectibles. E.g., Gregory, 5, 1;
Ritchie, 9, 1; Nickel, 18, 1; SeGall, 26, 1; Castle, 295, 1; James,
381, 1; Reid, 415, 1; Fendelman, 494, 1; and Curry, 575, 1.
Presumably, these comments intend that all antiques and collectibles
would be marked with the word ``copy'' or the date of manufacture.
\57\ See, e.g., Brady, 47, 1. See also Reynolds, 169, 1; Barrie,
19, 2; Cotton, 21, 1; Berndt, 52, 1; and Carner, 213, 1.
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First, the Act does not provide the Commission with legal authority
to expand the coverage of the Act to all antiques and collectibles. The
plain language of the Act encompasses only numismatic and political
items and directs the Commission to promulgate rules regarding the
marking of only these covered products. For this reason, the Commission
cannot amend the Rule to include products not itemized in the Act to
require the marking of items not covered by the Act.
Second, the Commission believes that existing federal and state
laws adequately address the key issues raised in the comments. For
example, the majority of comments cited imported reproduction as the
most significant source of passed-off goods. Well-established laws and
regulations already in existence address country-of-origin markings for
goods imported into the United States. Specifically, country-of-origin
marking for imports is under the jurisdiction of the U.S. Customs
Service, which enforces the Tariff Act.\58\ Under the Tariff Act, every
article of foreign origin must be legible, indelibly, and permanently
marked in a conspicuous place to indicate the country of origin. The
Act also allows the container of an imported good to bear the origin
marking rather than the good itself, as long as the good reaches the
ultimate purchaser in the container. Under the Tariff Act, then, a
permanent marking is a marking that will remain on the article or
container until it reaches the ultimate purchaser, although the marking
may be removed by the ultimate purchaser and need not be of a
permanence to remain affixed once in his or her possession. This
marking may not be removed prior to delivery to the ultimate purchaser,
however, and anyone who removes this marking prior to such delivery
could be subject to prosecution and criminal penalties.
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\58\ 19 U.S.C. 1304. The Tariff Act of 1930, as amended, and
implementing regulations (19 CFR 134) are available at Customs
Website: ``www.customs.ustreas.gov''.
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Commission staff has brought the concerns regarding foreign origin
marking raised in this proceeding to the attention of the Customs
Service because Customs regulations have an impact on several of the
problems discussed in the comments. For example, several comments
indicated their belief that country-of-origin labels are deliberately
removed.\59\ The Customs Service urges persons with information
regarding the violative removal of required country-of-origin markings
to write to: Office of Field Operations, ATTN: Commercial Enforcement
Branch, U.S. Customs Service, 1300 Pennsylvania Ave., NW, Washington,
DC 20229 or to call Customs' toll free Commercial Fraud Hotline, 1-800-
ITS-FAKE.
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\59\ See note 50 supra.
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In addition to the deliberate removal of country-of-origin labels,
many comments suggested that the lack of truly permanent country-of-
origin labels on reproductions results in these reproductions being
passed off as originals in the secondary market.
The Commission declines to prohibit the legal removal or loss of
country-of-origin labels and does not have authority under the Act to
require the origin marking of domestic reproductions. Other legal
remedies are available, however. For example, passing off can be
prosecuted as criminal fraud \60\ or as civil fraud in a lawsuit by the
buyer.\61\ Additionally, if the passing off involves illegal trademark
infringement, it may be actionable in a private lawsuit under the
Lanham Act.\62\ Further, a pattern or practice of significant
affirmative misrepresentations or failures to disclose material
information relating to reproductions passed off as originals may
violate Section 5 of the Federal Trade Commission Act.\63\
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\60\ E.g., Castle, 295, Attachment 1 (describing a criminal law
enforcement inquiry regarding reproduction ``acid cutback'' lamps
and vases and bronze statues being sold as antiques).
\61\ Section 2-721 of the Uniform Commercial Code provides civil
remedies for material misrepresentation and fraud in sales
transactions;
\62\ 15 U.S.C. 1125. See also Goshe, 528, 1 (describing
collector's club successful law suit against manufacturer of
reproductions that had illegally obtained logo trademark).
\63\ Section 5 of the Federal Trade Commission Act prohibits
deceptive acts or practices in commerce. 15 U.S.C. 45. A deceptive
act or practice is one that is likely to mislead consumers acting
reasonably under the circumstances. See Cliffdale Associates, Inc.,
103 F.T.C. 110 (1984). As a matter of policy, however, the
Commission does not generally intervene in individual disputes.
Generally, the instances of passing off described in the comments
reflect specific individual transactions, rather than a pattern or
practice of passing off. Where the Commission obtains evidence of
such a pattern or practice, however, it can take action. For
example, the Commission recently sued a company that had
telemarketed purportedly rare ``error'' postage stamps to consumers
as valuable, safe, and liquid investments, at highly inflated
prices. FTC v. Equifin International, Inc., Financial Frontiers, and
F. Jerold Hildreth, No. CV-97-4526-DT (CWx) (C.D. Cal. Dec. 11,
1997).
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[[Page 36560]]
In addition to legal remedies, the record indicates that there are
non-legal resources available to educate consumers about antiques and
collectibles and thus reduce consumers' susceptibility to the practice
of passing off. For example, several newsletters and hobby newspapers
regularly warn and advise buyers of antiques and collectibles about
reproductions of specific items and classes of items \64\ Many comments
also indicate that there are collector clubs for many categories of
collectibles that provide members with similar information. Commission
staff will explore whether there is a role for the Commission in these
efforts to increase consumer awareness.
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\64\ See Chervenka, 497, 3 (publisher of Antique & Collectors
Reproduction News) and Antique Week, 499, attachments.
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IV. Conclusion
The comments uniformly favor retention of the Rule and state that
there is a continuing need for the Rule with regard to currently
covered products, i.e., imitation numismatic and political items; that
the Rule provides benefits to consumers and industry; that the Rule
does not impose substantial economic burdens; and that the benefits of
the Rule outweigh the minimal costs it imposes. Although the comments
addressing the impact of the Rule on small entities were minimal, these
comments, including comments from major national associations in the
numismatic and political items trade, indicate that the Rule does not
place significant burdens on small entities. Accordingly, the
Commission certifies that the Rule has not had a significant impact on
a substantial number of small entities.
Although many comments recommended that the Act and Rule be
expanded to cover all antiques and collectibles, the Commission does
not have the authority under the Act to expand the Rule in this manner.
In addition, there are a variety of legal and non-legal resources that
address many of the issues raised by the commenters favoring expansion
of the Act's coverage. Accordingly, the Commission has determined to
retain the current Rule and is terminating this review.
List of Subjects in 16 CFR Part 304
Hobbies, Labeling, Trade practices.
Authority: The Federal Trade Commission Act, 15 U.S.C. 41-58 and
the Regulatory Flexibility Act, 5 U.S.C. 601.
By direction of the Commission.
Benjamin I. Berman,
Acting Secretary.
[FR Doc. 98-17929 Filed 7-6-98; 8:45 am]
BILLING CODE 6750-01-M
