[Federal Register Volume 60, Number 157 (Tuesday, August 15, 1995)]
[Rules and Regulations]
[Pages 42031-42034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19926]
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FEDERAL TRADE COMMISSION
16 CFR Part 14
Administrative Interpretations, General Policy Statements, and
Enforcement Policy Statements
agency: Federal Trade Commission.
action: Final amendments to interpretations and policy statements.
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summary: The Federal Trade Commission (``Commission'') is rescinding
certain unnecessary or superfluous interpretations and policy
statements in the Administrative Interpretations, General Policy
Statements, and Enforcement Policy Statements (``Interpretations and
Policy Statements'') and revising one policy statement to bring it up
to date.
effective date: August 15, 1995.
addresses: Requests for copies of this notice should be sent to the
Federal Trade Commission, Public Reference Branch, Room 130, Sixth
Street and Pennsylvania Avenue, NW., Washington, DC 20580.
for further information contact: Kent C. Howerton, Attorney, Federal
Trade Commission, Bureau of Consumer Protection, Division of
Enforcement, Room S-4302, Sixth Street and Pennsylvania Avenue NW.,
Washington, DC 20580, (202) 326-3013.
SUPPLEMENTARY INFORMATION:
I. Background
As a part of its ongoing program to review all of its mandatory
rules and voluntary guides, the Commission has determined to amend 16
CFR part 14, Administrative Interpretations, General Policy Statements,
and Enforcement Policy Statements (``Interpretations and Policy
Statements'').\1\ In this notice, the Commission announces its
determinations to repeal Secs. 14.2, 14.4, 14.7, 14.11 and 14.17, and
to revise Sec. 14.16.\2\ As explained below, the Commission is
rescinding certain interpretations, guidelines and policy statements
that are unnecessary, superfluous or obsolete and revising one policy
statement to reflect current law and policy. Sections 14.9, 14.12 and
14.15 remain in effect and are not
[[Page 42032]]
affected by the amendments described in this notice.
\1\ Part 14 of title 16 of the Code of Federal Regulations is
not a comprehensive record of all the Commission's formal
interpretations, guides, and policy statements. The Commission's
Office of General Counsel is currently working on a project to make
other such materials more readily available to the public.
\2\ This matter has been designated as file number P954215 in
the Commission's records.
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The Commission is not seeking public comment on these amendments to
repeal Secs. 14.2, 14.4, 14.7, 14.11 and 14.17, and to revise
Sec. 14.16. These interpretations, guidelines and policy statements are
not regulations, only interpretative guides and general statements of
policy. Therefore, the Commission does not need to seek public comment
before repealing or revising them.\3\ Further, because the Commission's
determinations to repeal or revise these interpretations, guidelines
and policy statements are based upon changes in the law and
regulations, the existence of other laws, regulations or legal
decisions, facts concerning current industry practices that do not
appear to be in controversy, or current Commission policy, public
comment is not likely to aid the Commission significantly in making
these determinations. The amendments become effective upon publication
in the Federal Register.
\3\ See section 553(b)(A) of the Administrative Procedure Act,
15 U.S.C. 553(b)(A).
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II. Sections Revised or Repealed
A. Section 14.2
Section 14.2 states that it is not the Commission's policy to
consider the use of the word ``tile'' in the designation of non-ceramic
products to be false and misleading, provided that either the true
composition of such products or the fact that they are not ceramic
products is plainly disclosed. The Commission issued this policy
statement in 1950 as guidance to industry and to amend certain
stipulations covering specific companies that the Commission published
between 1937 and 1945.
The Commission has no reason to believe that sellers of non-ceramic
tile products currently fail to disclose the composition of their
products or misrepresent their composition. In any event, the
Commission can prosecute misrepresentations of product composition, or
the failure to disclose, prior to sale, information that is material to
a consumer's purchasing decision, as unfair or deceptive acts or
practices under section 5 of the FTC Act, 15 U.S.C. 45.
For these reasons, the Commission has determined that Sec. 14.2 is
unnecessary and superfluous.
B. Section 14.4
Section 14.4 contains the Commission's interpretation of the
requirements of section 5 of the FTC Act concerning yarn and fabric
that contain metallically weighted silk fiber. The Commission issued
this interpretation in 1960 to supplement the fiber identification
requirements of the Textile Fiber Products Identification Act
(``Textile Act''), 15 U.S.C. 70, and the rules and regulations issued
under the Textile Act.\4\
\4\ See Rules and regulations under the Textile Fiber Products
Identification Act, 16 CFR part 303.
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Specifically Sec. 14.4 states that the fiber identification
required by the Textile Act shall be immediately accompanied by a clear
and non-deceptive disclosure that the silk fiber present is weighted,
along with the percentage of the total weight of the silk fiber content
in its finished state that the weighting represents. Section 14.4
further states that the disclosure shall appear on the same label that
contains the fiber identification required by the Textile Act, and the
rules and regulations issued under it, and in immediate conjunction
with any representation in advertisements, sales promotional
literature, or invoices that relates to fiber content.
During at least the past 15 years, the Commission has not been
aware of any problems concerning the sale of ``metallically weighted
silk'' yarn and fabric products. In any event, the Commission can
prosecute misrepresentations concerning ``metallically weighted silk''
products, or the failure to disclose, prior to sale, information that
is material to a consumer's purchasing decision, as unfair or deceptive
acts or practices under section 5 of the FTC Act.
For these reasons, the Commission has determined that Sec. 14.4 is
unnecessary and superfluous.
C. Section 14.7
Section 14.7 contains interpretations of legal requirements
concerning the payment by industry members of so-called ``push money.''
\5\ These interpretations, which the Commission issued in 1962,
prohibit industry members from providing anything of value to a
salesperson employed by a customer of the industry member as inducement
to obtain greater effort in promoting the resale of the industry
member's products when: (i) The agreement or payment is made ``without
the knowledge and consent of the salesperson's employer,'' (ii) the
benefit to the salesperson or customer is dependent on lottery; (iii)
``any provision of the agreement or understanding requires or
contemplates practices or a course of conduct unduly and intentionally
hampering the sales of products of competitors * * *;'' (iv) ``the
effect may be to substantially lessen competition or tend to create a
monopoly;'' or (v) ``similar payments are not accorded to salespersons
of competing customers on proportionally equal terms in compliance with
sections 2 (d) and (e) of the Clayton Act,'' 15 U.S.C. 13 (d) and (e).
\5\ Section 14.7 is, in all substantive respects, identical to
Sec. 248.8 of the Commission's Guides for the Beauty and Barber
Equipment and Supplies Industry (``Beauty/Barber Guides''), 16 CFR
part 248. For the same reasons the Commission has determined to
eliminate section 14.7, it has determined that Sec. 248.8 of the
Beauty/Barber Guides also should be eliminated. The Commission is
publishing its determination concerning Sec. 248.8 in a separate
notice.
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To the extent that the interpretations prohibit industry members
from surreptitiously compensating employees of their customers in
exchange for greater effort on the part of those employees, they
address commercial bribery, which may be prohibited under section 2(c)
of the Clayton Act, 15 U.S.C. 13(c), and is proscribed by many state
criminal statutes.\6\ To the extent that they prohibit bonus plans
dependent on lottery, they address business conduct which may be
proscribed by section 5 of the FTC Act and by state statutes relating
to lotteries and similar promotions.\7\ To the extent the
interpretations require payments to salespersons of competing customers
to be on proportionally equal terms, they restate general principles of
competition law that are set forth in section 2 of the Clayton Act and
the Guides for Advertising Allowances and Other Merchandising Payments
and Services (``Fred Meyer Guides''), 16 CFR part 240.
\6\ See e.g., Cal. Penal Code sec. 641.3 et seq. (Deering 1995);
Ill. Rev. Stat., Ch. 38, para. 29A-1 (1995); N.Y. Penal Law sec.
180.00 (McKinney 1976).
\7\ See e.g., Tex. Penal Code sec. 32.42 (West 1995); Cal. Bus.
& Prof. Code sec. 17539.1 (Deering 1995); Cal. Penal Code sec. 319
et seq. (Deering 1995).
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For these reasons, the Commission has determined that Sec. 14.7 is
unnecessary and superfluous.
D. Section 14.11
Section 14.11, which the Commission issued in 1979, contains
guidelines designed to prevent deception and to advise manufacturers
and dealers of motor vehicles built for use upon public highways about
how they can avoid violating the FTC Act. These vehicles include truck
chassis and incomplete vehicles used in building motor homes. The
Commission issued the guidelines because it was concerned about
misleading practices some manufacturers had used to identify the model
years of heavy duty trucks and other vehicles whose features changed
little from year to year.
[[Page 42033]]
After it issued the guidelines, the Commission accepted consent
agreements with most of the manufacturers of those heavy duty trucks
and other vehicles.\8\ The consent agreements provide adequate guidance
for manufacturers of such vehicles and others concerning how to avoid
violating the FTC Act regarding a vehicle's model year.
\8\ See Mack Trucks, Inc., 94 F.T.C. 236 (1979); Chrysler Motors
Corp., 94 F.T.C. 245 (1979); Ford Motor Company, 94 F.T.C. 254
(1979); Paccar. Inc., 94 F.T.C. 263 (1979); White Motor Corp., 94
F.T.C. 272 (1979); and International Harvester 94 F.T.C. 281 (1979).
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For these reasons, the Commission has determined that Sec. 14.11 is
unnecessary and superfluous.
E. Section 14.16
Section 14.16 contains interpretations, published in 1982,
concerning the compliance responsibilities under the Truth-in-Lending
Simplification and Reform Act of 1980, Pub. L. 96-221, 94 Stat. 168,
and the revisions of Regulation Z, 12 CFR part 226, that were published
by the Federal Reserve Board in 1981, 46 FR 20848, for those creditors
and advertisers subject to final cease and desist orders issued by the
Commission prior to April 1, 1981 that require compliance with
provisions of the original Turth-In-Lending Act (``TILA''), 15 U.S.C.
1601 et seq., and prior Regulation Z. This section, therefore, applies
Congress' simplification of TILA to pre-existing orders issued by the
Commission that compel compliance with the TILA and Regulation Z.
The Commission believes that the current language in Sec. 14.16
might be interpreted to freeze orders enacted prior to April 1, 1981 to
the requirements of the TILA and Regulation Z as of April 1, 1981, and
not to allow or require parties subject to Commission orders to meet
the requirements of subsequent amendments to the TILA and Regulation Z.
It is not the Commission's intent that section 14.16 have this effect.
For this reason, the Commission has determined to revise Sec. 14.16 to
state clearly that the Commission will interpret TILA and Regulation Z
provisions of all orders consistent with the current requirements of
the TILA and Regulation Z, and with any subsequent amendments to the
TILA and Regulation Z.
Further, Secs. 1416(b)(1) and (b)(2) specify enforcement
responsibilities during a transition period in 1981 and 1982. Because
these sections no longer are relevant, the Commission has determined to
delete these provisions, and to renumber and revise the remainder of
Sec. 14.16(b).
F. Section 14.17
Section 14.17 contains an explanation of the Commission's policy
concerning questions that are relevant when the Commission decides
whether to initiate an enforcement action under the trade regulation
rule regarding Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures (``Franchise Rule''), 16
CFR part 436. The Commission, however, has investigated and filed in
court the vast bulk of its Franchise Rule enforcement actions since it
published this Franchise Rule enforcement protocol in 1984. Thus, the
protocol does not reflect, fully and accurately, the Commission's
present enforcement policy. Moreover, the Commission currently is
reviewing the Franchise Rule under its ongoing regulatory review
program.\9\
\9\ Request for comments, 60 FR 17656 (April 7, 1995).
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For these reasons, the Commission repeals Sec. 14.17. The
Commission will consider whether it is necessary to issue an updated
version of the protocol to reflect current law, fact and policy after
it completes its regulatory review of the Franchise Rule.
Authority: 15 U.S.C. 41-58.
List of Subjects in 16 CFR Part 14
Advertising, motor vehicles, silk, textiles, trade practices,
truth-in-lending.
Text of Amendments
Accordingly, under the authority of 15 U.S.C. 41-58, the Commission
amends 16 CFR part 14 as follows:
PART 14--ADMINISTRATIVE INTERPRETATIONS, GENERAL POLICY STATEMENTS,
AND ENFORCEMENT POLICY STATEMENTS
1. Sections 14.2, 14.4, 14.7, 14.11 and 14.17 are removed.
2. Section 14.16 is revised to read as follows:
14.16 Interpretation of Truth-in-Lending Orders consistent with
amendments to the Truth-in-Lending Act and Regulation Z.
Introduction
The Federal Trade Commission (FTC) has determined that there is a
need to clarify the compliance responsibilities under the Truth-in-
Lending Act (TILA) (Title I, Consumer Credit Protection Act, 15 U.S.C.
1601 et seq.), as amended by the Truth-in-Lending Simplification and
Reform Act of 1980 (Pub. L. 96-221, 94 Stat. 168), and under revised
Regulation Z (12 CFR part 226, 46 FR 20848), and subsequent amendments
to the TILA and Regulation Z, of those creditors and advertisers who
are subject to final cease and desist orders that require compliance
with provisions of the Truth-in-Lending statute or Regulation Z.
Clarification is necessary because the Truth-in-Lending Simplification
and Reform Act and revised Regulation Z significantly relaxed prior
Truth-in-Lending requirements on which provisions of numerous
outstanding orders were based. The Policy Statement provides that the
Commission will interpret and enforce Truth-in-Lending provisions of
all orders so as to impose no greater or different disclosure
obligations on creditors and advertisers named in such orders than are
required generally of creditors and advertisers under the TILA and
Regulation Z, and subsequent amendments to the TILA and Regulation Z.
Policy Statement
(a) All cease and desist orders issued by the FTC that require
compliance with provisions of the Truth-in-Lending Act and Regulation Z
(12 CFR part 226) will be interpreted and enforced consistent with the
amendments to the TILA incorporated by the Truth-in-Lending
Simplification and Reform Act of 1980, and the revision of Regulation Z
implementing the same, promulgated on April 1, 1981 by the Board of
Governors of the Federal Reserve System (46 FR 20848), and by
subsequent amendments to the TILA and Regulation Z. Likewise, the
Federal Reserve Board staff commentary to revised Regulation Z (46 FR
50288, October 9, 1981), and subsequent revisions to the Federal
Reserve Board staff commentary to Regulation Z, will be considered in
interpreting the requirements of existing orders.
(b) After an amendment to Regulation Z becomes effective,
compliance with the revised credit disclosure requirements will be
considered compliance with the existing order, and:
(1) To the extent that revised Regulation Z deletes disclosure
requirements imposed by any Commission order, compliance with these
requirements will no longer be required; however,
(2) To the extent that revised Regulation Z imposes additional
disclosure or format requirements, a failure to comply with the added
requirements will be considered a violation of the TILA.
(c) A creditor or advertiser must continue to comply with all
provisions
[[Page 42034]]
of the order which do not relate to Truth-in-Lending Act requirements
or are unaffected by Regulation Z. These provisions are not affected by
this policy statement and will remain in full force and effect.
Staff Clarifications
The Commission intends that this Enforcement Policy Statement
obviate the need for any creditor or advertiser to file a petition to
reopen and modify any affected order under section 2.51 of the
Commission's rules of practice (16 CFR 2.51). However, the Commission
recognizes that the policy statement may not provide clear guidance to
every creditor or advertiser under order. The staff of the Division of
Enforcement, Bureau of Consumer Protection, will respond to written
requests for clarification of any order affected by this policy
statement.
By direction of the Commission.
Donald S. Clark,
Secretary.
Statement of Commissioner Mary L. Azcuenaga Concurring in 16 CFR Part
14, Matter No. P954215; Repeal of Mail Order Insurance Guides, Matter
No. P954903; Repeal of Guides Re: Debt Collection, Matter No. P954809;
and Free Film Guide Review, Matter No. P959101
In a flurry of deregulation, the Commission today repeals or
substantially revises several Commission guides and other
interpretive rules.\1\ The Commission does so without seeking public
comment. I have long supported the general goal of repealing or
revising unnecessary, outdated, or unduly burdensome legislative and
interpretive rules, and I agree that the repeal or revision of these
particular guides and interpretive rules appears reasonable.
Nevertheless, I cannot agree with the Commission's decision not to
seek public comment before making these changes.
\1\ Administrative Interpretations, General Policy Statements,
and Enforcement Policy Statements, 16 CFR part 14; Guides for the
Mail Order Insurance Industry, 16 CFR part 234; Guides Against Debt
Collection Deception, 16 CFR part 237; and Guide Against Deceptive
Use of the Word ``Free'' in Connection With the Sale of Photographic
Film and Film Processing Services, 16 CFR part 242.
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Although it is not required to do so under the Administrative
Procedure Act, 5 U.S.C. 553(b)(A), the Commission traditionally has
sought public comment before issuing, revising, or repealing its
guides and other interpretive rules. More specifically, the
Commission adopted a policy in 1992 of reviewing each of its guides
at least once every ten years and issuing a request for public
comment as part of this review. See FTC Operating Manual ch. 8.3.8.
The Commission decided to seek public comment on issues such as: (1)
The economic impact of and continuing need for the guide; (2)
changes that should be made in the guide to minimize any adverse
economic effect; (3) any possible conflict between the guide and any
federal, state, or local laws; and (4) the effect on the guide of
technological, economic, or other industry changes, if any, since
the guide was promulgated.
Id. The Commission has sought public comment and has posed these
questions concerning a number of guides since adopting its
procedures for regulatory review in 1992.\2\
\2\ See, e.g., Requests for Comments Concerning Guides for the
Hosiery Industry, 59 FR 18004 (Apr. 15, 1994); Request for Comment
Concerning Guides for the Feather and Down Products Industry, 59 FR
18006 (Apr. 15, 1994).
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Notwithstanding its long-standing, general practice of seeking
public comment and its specific policy of seeking public comment as
part of its regulatory review process, the Commission has chosen not
to seek public comment before repealing or revising these guides and
interpretive rules. Why not? Has the Commission changed its view
about the potential value of public comment? Perhaps the Commission
knows all the answers, but then again, perhaps not. Although
reasonable arguments can be made for repeal or revision of these
guides and interpretive rules, public comment still might prove to
be beneficial.
In addition, the relatively short period of time that would be
required for public comment should not be problematic. The
Commission has not addressed any of these guides or interpretive
rules in the last ten years. Indeed, it has not addressed some of
them for thirty years or more. For example, the Commission
apparently has not addressed the interpretive rule concerning the
use of the word ``tile'' in designation of non-ceramic products
since it was issued in 1950.\3\ The continued existence of these
guides and interpretive rules during a brief public comment period
surely would cause no harm because they are not binding and because,
arguably, they are obsolete. I seriously question the need to act so
precipitously as to preclude the opportunity for public comment.\4\
\3\ 16 CFR 14.2.
\4\ Unfortunately, seeking public comment would not permit the
Commission to count the repeal and revision of these guides and
interpretive rules in its tally of completed actions in the
Regulatory Reinvention Initiative Report that will be sent to the
President on August 1, 1995, but perhaps that harm could be
mitigated by reporting to the President that the Commission is
seeking public comment concerning repeal or revision.
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In 1992, the Commission announced a careful, measured approach
for reviewing its guides and interpretive rules, and public comment
has been an important part of that process. Incorporating public
comment into the review is appropriate and sensible. Although I have
voted in favor of repealing or revising these guides and
interpretive rules, I strongly would have preferred that the
Commission seek public comment before doing so.
[FR Doc. 95-19926 Filed 8-14-95; 8:45 am]
BILLING CODE 6750-01-M
