81_FR_32780 81 FR 32680 - Rule Governing Disclosure of Written Consumer Product Warranty Terms and Conditions; Rule Governing Pre-Sale Availability of Written Warranty Terms

81 FR 32680 - Rule Governing Disclosure of Written Consumer Product Warranty Terms and Conditions; Rule Governing Pre-Sale Availability of Written Warranty Terms

FEDERAL TRADE COMMISSION

Federal Register Volume 81, Issue 100 (May 24, 2016)

Page Range32680-32686
FR Document2016-12030

The Federal Trade Commission (FTC or Commission) proposes to amend the rules on Disclosure of Written Consumer Product Warranty Terms and Conditions (Disclosure Rule) and Pre-Sale Availability of Written Warranty Terms (Pre-Sale Availability Rule) to give effect to the E-Warranty Act, which allows for the use of Internet Web sites to disseminate warranty terms to consumers in some circumstances.

Federal Register, Volume 81 Issue 100 (Tuesday, May 24, 2016)
[Federal Register Volume 81, Number 100 (Tuesday, May 24, 2016)]
[Proposed Rules]
[Pages 32680-32686]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-12030]


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FEDERAL TRADE COMMISSION

16 CFR Parts 701 and 702

RIN 3084-AB24 and AB25


Rule Governing Disclosure of Written Consumer Product Warranty 
Terms and Conditions; Rule Governing Pre-Sale Availability of Written 
Warranty Terms

ACTION: Notice of proposed rulemaking; request for public comment.

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SUMMARY: The Federal Trade Commission (FTC or Commission) proposes to 
amend the rules on Disclosure of Written Consumer Product Warranty 
Terms and Conditions (Disclosure Rule) and Pre-Sale Availability of 
Written Warranty Terms (Pre-Sale Availability Rule) to give effect to 
the E-Warranty Act, which allows for the use of Internet Web sites to 
disseminate warranty terms to consumers in some circumstances.

DATES: Comments must be received on or before June 17, 2016.

ADDRESSES: Interested parties may file a comment online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Amending Warranty 
Rules Pursuant to the E-Warranty Act, Matter No. P044403'' on your 
comment, and file your comment online at https://ftcpublic.commentworks.com/ftc//E-WarrantyAmendments, by following the 
instructions on the web-based form. If you prefer to file your comment 
on paper, write ``Amending Warranty Rules Pursuant to the E-Warranty 
Act, Matter No. P044403'' on your comment and on the envelope, and mail 
your comment to the following address: Federal Trade Commission, Office 
of the Secretary, 600 Pennsylvania Avenue NW., Suite CC-5610 (Annex E), 
Washington, DC 20580, or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW., 5th Floor, Suite 5610 (Annex E), Washington, DC 
20024.

FOR FURTHER INFORMATION CONTACT: Gary Ivens, (202) 326-2330, Attorney, 
Division of Marketing Practices, Federal Trade Commission, 600 
Pennsylvania Ave. NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION: 

I. Summary of the Proposed Rules

A. The Disclosure Rule

    The Disclosure Rule \1\ establishes disclosure requirements for 
written warranties on consumer products that cost more than $15.00.\2\ 
In 1975, the Commission issued the Disclosure Rule as authorized by 
Congress in the Magnuson-Moss Warranty Act \3\ (MMWA).
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    \1\ 16 CFR part 701.
    \2\ 40 FR 60171-60172 (Dec. 31, 1975).
    \3\ 15 U.S.C. 2302.
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    The Disclosure Rule also specifies the aspects of warranty coverage 
that must be disclosed in written warranties, as well as the exact 
language that must be used for certain disclosures with respect to 
state law regarding the duration of implied warranties and the 
availability of consequential or incidental damages. Under the 
Disclosure Rule, warranty information must be disclosed in simple, 
easily understandable, and concise language in a single document. 
Similarly, the warrantor must disclose any limitations on the duration 
of implied warranties on the face of the warranty, as mandated by 
MMWA.\4\ In promulgating the Disclosure Rule, the Commission determined 
that certain material facts about product warranties

[[Page 32681]]

must be disclosed because the failure to do so would be deceptive or 
misleading.
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    \4\ See 15 U.S.C. 2308(b).
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    Briefly, the Commission proposes to revise the Disclosure Rule to 
specify that disclosures mandated to appear ``on the face'' of a 
warranty posted on an Internet Web site or displayed electronically 
must be placed in close proximity to the location where the text of the 
warranty terms begins.

B. The Pre-Sale Availability Rule

    The Pre-Sale Availability Rule \5\ details the methods by which 
warrantors and sellers must provide warranty terms to consumers prior 
to sale of the warranted item. The Commission issued the Pre-Sale 
Availability Rule in response to a mandate from Congress as set forth 
in the MMWA.
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    \5\ 16 CFR part 702.
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    Briefly, the Commission proposes to revise the Pre-Sale 
Availability Rule to allow warrantors to post warranty terms on 
Internet Web sites if they also provide a non-Internet based method for 
consumers to obtain the warranty terms and satisfy certain other 
conditions.
    As discussed more fully below, these rule revisions are required to 
comply with Congress's passage of the E-Warranty Act \6\ (E-Warranty or 
the Act). The Commission invites comment on the proposed rule revisions 
generally and on the specific issues outlined in Section III of this 
Notice. The Commission seeks comment on the proposal through June 17, 
2016.
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    \6\ E-Warranty Act, Public Law 114-51 (Sept. 24, 2015).
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II. Background

    The MMWA authorizes the Commission to prescribe rules requiring 
disclosure of warranty terms and requiring that the terms of any 
written warranty on a consumer product be made available to the 
prospective purchaser prior to the sale of the product.\7\ In 1975, the 
Commission issued both the Disclosure Rule, which establishes 
disclosure requirements for written warranties, and the Pre-Sale 
Availability Rule, which includes requirements for sellers and 
warrantors to make the text of any warranty on a consumer product 
available to the consumer prior to sale. Among other things, the Pre-
Sale Availability Rule requires most sellers to make warranties readily 
available either by: (1) Displaying the warranty document in close 
proximity to the product or (2) furnishing the warranty document on 
request and posting signs in prominent locations advising consumers 
that warranties are available. The Pre-Sale Availability Rule requires 
warrantors to provide materials to enable sellers to comply with the 
Rule's requirements. The Rule also sets out how sellers should make 
warranty information available pre-sale if selling the product at 
retail locations, through catalogs, mail order, or door-to-door sales.
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    \7\ 15 U.S.C. 2302.
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    E-Warranty amends the MMWA to allow, under certain circumstances, 
the posting of warranties on warrantors' Internet Web sites as an 
alternative method of complying with the Pre-Sale Availability Rule, 
and to permit sellers to make warranty terms available to consumers 
pre-sale via electronic means where the warrantor has chosen the online 
option.\8\ E-Warranty charges the Commission with promulgating 
consistent changes to the Disclosure Rule and the Pre-Sale Availability 
Rule within one year of the Act's passage.\9\
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    \8\ In a recent review of the warranty interpretations, rules, 
and guides (16 CFR parts 700-703 and 239), which was completed 
before enactment of the E-Warranty Act, the Commission declined 
certain commenters' requests to allow brick-and-mortar sellers to 
refer consumers to online warranty terms as a method of complying 
with the Pre-Sale Availability Rule. The Commission noted that the 
intent of the Rule is to make warranty information available at the 
point of sale, so for the seller simply to refer the consumer to a 
Web site where the warranty could be found would be insufficient. 
See 80 FR 42710, 42717 (July 20, 2015).
    \9\ Under the E-Warranty Act, the Commission must issue the 
final amended rules by September 24, 2016. The Commission determines 
that taking of oral presentations from interested parties would 
interfere with its ability to amend the Disclosure Rule and the Pre-
Sale Availability Rule in a timely fashion. Accordingly, as provided 
by the E-Warranty Act, the Commission waives the requirement to give 
interested persons an opportunity for oral presentation. See Public 
Law 114-51, sec. 3(b)(2).
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III. The Commission's Proposed Rule Changes

    The Commission proposes to modify the Disclosure Rule and the Pre-
Sale Availability Rule to implement the E-Warranty Act and effectuate 
its purposes. Currently, sellers are obliged to provide warranty terms 
pre-sale to consumers through a variety of methods such as displaying 
them in close proximity to the warranted products, or by furnishing 
them upon request prior to sale and posting prominent signs to let 
customers know that warranties can be examined upon request, posting 
them in a catalog in close conjunction to the warranted product, or 
having them available for consumers' review in a door-to-door sales 
presentation. The proposed amendments will allow sellers the additional 
option of using an electronic method to make warranty terms available 
to consumers at the point of sale for warranted products where the 
warrantor has chosen the online method of disseminating the warranty 
terms.
    Warrantors currently must provide retailers the warranty materials 
sellers need to meet their requirements under the Pre-Sale Availability 
Rule, such as providing copies of the warranty, providing warranty 
stickers, tags, signs, or posters, or printing the warranty on the 
product's packaging. The amendment does not alter the duties of 
warrantors who do not choose to employ an online method to supply 
warranty terms. The E-Warranty Act provides that warrantors who choose 
the online method of disseminating warranty terms must provide 
consumers the address of the Internet Web site where the specific 
product's warranty terms can be reviewed and also supply a non-Internet 
method, such as a phone number or mailing address, for consumers and 
sellers to request the warranty terms. If a consumer or seller \10\ 
makes such a request, the warrantor must provide the warranty terms 
promptly and free and of charge.
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    \10\ Sellers are given the option of requesting the warranty 
terms free of charge from the warrantor because not all sellers will 
be equipped to employ an electronic option in cases where the 
warrantor has chosen the online method to supply warranty terms. For 
example, a small seller may not have Internet access or electronic 
devices to download and display warranty terms for consumers' review 
at the point of sale. Those sellers' duties to have warranty terms 
available pre-sale, however, have not changed under E-Warranty. The 
Commission believes that requiring warrantors to supply sellers with 
warranty terms upon request so that sellers can make them available 
for consumers' review at the point of sale effectuates Congress's 
desire to ensure the continued availability of pre-sale warranty 
terms.
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    The first proposed revisions alter Sec.  701.1 to add a definition 
of the term ``manufacturer'' at Sec.  701.1(g) (defining manufacturer 
as ``any person engaged in the business of making a consumer 
product''), add that term in the definition of ``warrantor,'' and re-
letter the paragraphs in Sec.  701.1 to account for the additional 
definition. The Commission proposes these revisions in light of E-
Warranty's use of the term ``manufacturer.''
    The next proposed revision adds a new Sec.  701.1(j)(3) to specify 
that, in conjunction with warranty terms posted on an Internet Web site 
or displayed electronically, the phrase ``on the face'' means in close 
proximity to the location where the warranty terms begin. Although the 
Disclosure Rule does not explicitly mention online commerce, it applies 
to the sale of warranted consumer products online. Commission staff 
recently updated the .Com Disclosures to provide additional guidance on 
disclosure obligations in

[[Page 32682]]

the online context. As stated in the updated .Com Disclosures, 
warranties communicated through visual text online are no different 
from paper versions and the same rules apply.\11\ The Commission 
therefore proposes to clarify this requirement for online disclosures.
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    \11\ See FTC, .Com Disclosures: How to Make Effective 
Disclosures in Digital Advertising (2013), at 3, fn.7, available at 
https://ftc.gov/os/2013/03/130312dotcomdisclosures.pdf.
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    The next proposed revision is to Sec.  702.1(d) to include the 
manufacturer in the definition of ``warrantor.'' The Commission 
proposes this revision to comport with E-Warranty's use of the term 
``manufacturer.'' The next revision adds a new Sec.  702.1(g) to define 
a ``manufacturer'' (in the same manner as the proposed revision of 
Sec.  701.1(g)) as ``any person engaged in the business of making a 
consumer product.''
    The next proposed revisions are to Sec.  702.3(a) to provide that 
sellers can provide warranty terms pre-sale through electronic means if 
the warrantor of the product has chosen the online option. If a seller 
uses an electronic means, that seller must still make the warranty text 
readily available for consumers' examination prior to sale.
    The proposed changes to Sec.  702.3(b)(1)(i) would remove 
superfluous instances of the term ``and/or'' and ``and'' in that 
paragraph, as the prefatory language already notes that the warrantor 
must use one or more of the methods described in that paragraph to 
provide sellers with the prescribed warranty materials.
    The next proposed revision adds a new Sec.  702.3(b)(2) to reflect 
that, as an alternative method of compliance with the Pre-Sale 
Availability Rule, a warrantor may refer consumers to an accessible 
digital copy of the warranty by providing to the consumer the Internet 
address where the specific product's warranty has been posted in a 
clear and conspicuous manner. To employ this option, the warrantor, 
among other duties, must supply in the product manual, or on the 
product or product packaging, the Internet address where the consumer 
can review and obtain the specific product's warranty terms, as well as 
the phone number, postal mailing address, or other reasonable non-
Internet based means for the consumer to request a free copy of the 
warranty terms.
    Proposed Sec.  702.3(b)(2)(iv) requires the warrantor utilizing the 
online option to provide sufficient information with the consumer 
product or on the Internet Web site so that the consumer can readily 
locate the specific product's warranty terms. The Commission believes 
that this requirement comports with Congress's directive that online 
warranties be available to consumers ``in a clear and conspicuous 
manner.'' \12\ Similarly, if a consumer or seller requests via phone, 
mail, or other reasonable non-Internet-based means, that the warrantor 
provide a hard copy of the warranty, proposed Sec.  702.3(b)(2)(ii) 
requires the warrantor to provide it promptly and free of charge, which 
comports with existing pre-sale requirements for catalog and mail order 
sales.
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    \12\ See 15 U.S.C. 2302(b)(4)(A)(i).
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    The next proposed revision alters Sec.  702.3(c)(2)(i)(B) to 
reflect that the mail-order or catalog seller must provide the address 
of the Internet Web site of the warrantor where the warranty terms can 
be reviewed (if such Internet Web site exists), as well as either a 
phone number or address that the consumer can use to request a free 
copy of the warranty, and notes that the copy may be provided 
electronically if the product's warrantor has used the online option.
    Finally, the next proposed revision alters Sec.  702.3(d)(2) to 
reflect that the door-to-door seller may supply the warranty through an 
electronic option if the product's warrantor has employed the online 
method.

IV. Regulatory Flexibility Act

    The Regulatory Flexibility Act \13\ (RFA) requires each agency 
either to provide an Initial Regulatory Flexibility Analysis (IRFA) 
with a proposed rule, or certify that the proposed rule will not have a 
significant economic impact on a substantial number of small 
entities.\14\ The FTC does not expect that the rule revisions 
necessitated by E-Warranty will have a significant economic impact on 
small sellers and warrantors. As discussed above, the proposed 
revisions will relieve those warrantors who choose the online method 
from providing warranty materials to certain sellers. Affected sellers, 
however, should be able easily to obtain the warranties and provide 
them to consumers for review at the point of sale, either by obtaining 
the warranties from the warrantor's Web site or by requesting a hard 
copy from the warrantor. Also, the proposed amendment allows sellers of 
goods whose warrantors have employed the online method the ability to 
provide pre-sale warranty terms electronically. Thus, if the proposal 
is adopted, a small seller that is in compliance with current law would 
need to take only minimal additional action to remain compliant.
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    \13\ 5 U.S.C. 603.
    \14\ 5 U.S.C. 605.
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    The small warrantor that does not choose the Internet option to 
supply warranty terms can remain compliant simply by continuing with 
its existing practices. The small warrantor that has been including the 
entire warranty with the warranted product and supplying warranty 
materials so that sellers can meet Pre-Sale Availability Rule 
obligations will have a smaller compliance burden under the proposal by 
being able to provide the warranty terms solely on an Internet Web 
site. That small warrantor, however, will likely incur costs to 
establish a phone number, address, or other non-Internet based method 
that consumers and sellers can use to request a free hard copy of 
warranty terms.
    With respect to the amendments to the Disclosure Rule, a small 
entity that is in compliance with current law need not take any 
different or additional action if the proposal is adopted, as the 
proposed revisions merely explain how the ``on the face of the 
warranty'' requirement applies to online warranty terms.
    Accordingly, this document serves as notice to the Small Business 
Administration of the FTC's certification of ``no effect.'' To ensure 
the accuracy of this certification, however, the Commission requests 
comment on whether the proposed rule will have a significant impact on 
a substantial number of small entities, including specific information 
on the number of entities that would be covered by the proposed rule, 
the number of these companies that are small entities, and the average 
annual burden for each entity. Although the Commission certifies under 
the RFA that the rule proposed in this notice would not, if 
promulgated, have a significant impact on a substantial number of small 
entities, the Commission has determined, nonetheless, that it is 
appropriate to publish an IRFA in order to inquire into the impact of 
the proposed rule on small entities. Therefore, the Commission has 
prepared the following analysis:

A. Reasons for the Proposed Rule Revisions

    As outlined in Section II, above, the Commission is proposing to 
amend the Disclosure Rule and Pre-Sale Availability Rule in connection 
with Congress's passage of E-Warranty. E-Warranty allows, under certain 
circumstances, the posting of warranties on manufacturers' Web sites as 
an alternative method of complying with the Pre-Sale Availability Rule, 
and

[[Page 32683]]

certain sellers' use of an electronic method to supply pre-sale 
warranty terms.

B. Statement of Objectives and Legal Basis

    The objective of the proposed amendments is to provide warrantors 
an online method of complying with the Disclosure Rule and the Pre-Sale 
Availability Rule, allow certain sellers to use an electronic method to 
provide pre-sale warranty terms to consumers, and to define what ``on 
the face'' of an online warranty means in the Disclosure Rule. The 
legal authority for this NPRM is the E-Warranty Act and the MMWA.

C. Description of Small Entities to Which the Rules Will Apply

    The small entities to which the Disclosure Rule applies are 
warrantors. The small entities to which the Pre-Sale Availability Rule 
applies are warrantors and sellers of warranted consumer products 
costing more than fifteen dollars. The Disclosure Rule and the Pre-Sale 
Availability Rule currently define a ``warrantor'' as ``any supplier or 
other person who gives or offers to give a written warranty.'' The Pre-
Sale Availability Rule defines a ``seller'' as ``any person who sells 
or offers for sale for purposes other than resale or use in the 
ordinary course of the buyer's business any consumer product.'' The 
proposed changes add ``manufacturers'' to both Rules' definitions of 
``warrantor.'' Sellers include retailers, catalog and mail order 
sellers, and door-to-door sellers.
    In 2014, the Commission estimated that there were 13,395 small 
manufacturers (warrantors) and 452,553 small retailers (sellers) 
impacted by the Rules.\15\
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    \15\ See 79 FR 8185 (Feb. 11, 2014), which relates to the Pre-
Sale Availability Rule, but should also apply to the Disclosure 
Rule.
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D. Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    The proposed amendments to the Disclosure Rule do not impose any 
new reporting, recordkeeping, or other compliance requirements, because 
the proposed amendments merely explain how the existing ``on the face 
of the warranty'' requirement applies to online and electronic warranty 
terms.
    The Pre-Sale Availability Rule imposes disclosure obligations on 
sellers and warrantors of warranted consumer goods actually costing 
more than fifteen dollars. Specifically, sellers must make warranty 
terms available prior to sale. Under the proposed revision, if the 
warrantor has chosen the online option, sellers may incur minimal 
additional costs if they need to request the warranty terms from the 
warrantor to provide them to consumers, but sellers will also have 
additional flexibility to make pre-sale warranty terms available to 
consumers electronically. Warrantors must provide sellers with warranty 
materials for sellers' use at the point of sale, or, under the proposed 
revision, provide the address of the warrantor's Internet Web site 
where consumers can review and obtain warranty terms in the product 
manual or on the product or product packaging, and the warrantor's 
contact information for the consumer to obtain the warranty terms via a 
non-Internet method.
    Neither the existing Pre-Sale Availability Rule nor the proposed 
amendments require sellers or warrantors to retain more records than 
may be necessary to provide consumers the warranty terms. The small 
entities potentially covered by these proposed amendments will include 
all such entities subject to the Rules, including suppliers, 
manufacturers and others who warrant consumer goods costing more than 
fifteen dollars and retailers, catalog and mail-order sellers, and 
door-to-door sellers who offer the warranted products. The professional 
skills necessary for compliance with the Rules as modified by the 
proposed amendments would include (1) warrantors' office and 
administrative support staff to receive consumers' and sellers' 
requests for warranty terms using a non-Internet based method and (2) 
sellers' office and administrative support staff to request warranty 
terms for pre-sale availability to consumers for warranted goods where 
the warrantor has elected only the Internet option.
    The Commission invites comment on the proposed amendments' impact 
on small sellers who might cease to receive point-of-sale warranty 
materials from those warrantors who choose to employ the online method 
to supply warranty terms.

E. Duplication, Overlap, or Conflict With Other Federal Rules

    The Commission has not identified any other federal statutes, 
rules, or policies that would duplicate, overlap, or conflict with the 
proposed amendments. The Commission invites comment and information on 
this issue.

F. Significant Alternatives to the Proposed Amendments

    As noted above at footnote 8, in a recent rule review of the Pre-
Sale Availability Rule, the Commission declined commenters' requests to 
allow offline sellers to comply with the Rule by advising buyers of the 
availability of the warranty at a particular Web site. The Commission 
noted that, because the intent of the Rule is to make warranty 
information available at the point of sale, a seller could not comply 
with its Pre-Sale Availability Rule obligations simply by referring the 
consumer to a Web site where the warranty could be found. The proposed 
revisions allow sellers to provide warranty terms electronically, but 
only in cases where the warrantor has chosen the online option.\16\ The 
proposed revisions comport with Congress's desire to allow warrantors 
the option of providing warranty terms online, as long as warrantors 
offer a non-Internet based method for consumers to obtain the warranty 
terms, as well as with Congress's mandate that the online method not 
supplant the seller's duty to provide warranty terms at the point of 
sale.
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    \16\ FTC staff noted in an opinion letter in 2009, however, that 
neither the MMWA nor its related rules prescribe making the warranty 
terms available only on paper. Letter from Allyson Himelfarb to 
Thomas Hughes (February 17, 2009), available at https://www.ftc.gov/sites/default/files/documents/advisory_opinions/opinion-09-1/opinion0901_0.pdf.
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    The Commission has not proposed any specific small entity 
exemption, differing timetables, or other significant alternatives, as 
the proposed amendments are narrowly tailored to permit E-Warranty's 
stated objectives of allowing warrantors to post warranty terms on 
Internet Web sites, certain sellers to use an electronic method to 
provide warranty terms pre-sale to consumers, and the ancillary purpose 
of clarifying that ``on the face of the warranty'' in the Web site or 
electronic context means ``in close proximity'' to the location where 
the warranty text begins. The Commission does not believe a special 
exemption for small entities or significant compliance alternatives are 
necessary or appropriate to minimize the compliance burden on small 
entities while achieving the intended purposes of E-Warranty.
    The Commission believes its proposed revisions will be minimally 
burdensome for small businesses and that they comply with Congress's 
mandate to allow warrantors to post warranty terms on an Internet Web 
site and certain sellers to employ a pre-sale electronic option, while 
ensuring pre-sale availability of warranty terms at the point of sale. 
The Commission, however, invites comment on regulatory alternatives 
that the Commission has not expressly considered for complying

[[Page 32684]]

with the proposed rule that might reduce compliance burdens on small 
entities while still achieving E-Warranty's objectives.

V. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA),\17\ Federal 
agencies are generally required to seek Office of Management and Budget 
(OMB) approval for information collection requirements prior to 
implementation. Under the PRA, the Commission may not conduct or 
sponsor, and, notwithstanding any other provision of law, a person is 
not required to respond to an information collection, unless the 
information displays a valid control number assigned by OMB.
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    \17\ 44 U.S.C. 3501-3520.
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    This proposal would amend 16 CFR parts 701 and 702. The collection 
of information related to the Disclosure Rule has been previously 
reviewed and approved by OMB in accordance with the PRA and assigned 
OMB Control Number 3084-0111.\18\ The collection of information related 
to the Pre-Sale Availability Rule has been previously reviewed and 
approved by OMB in accordance with the PRA and assigned OMB Control 
Number 3084-0112.\19\
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    \18\ See 78 FR 70046 (Nov. 22, 2013).
    \19\ See 79 FR 8185 (Feb. 11, 2014).
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    As explained below, the proposed amendments only slightly modify or 
add to information collection requirements that were previously 
approved by OMB. Under this proposal, a warrantor will be permitted, 
but not required, to use an online method for supplying warranty terms. 
The Commission does not believe that this proposed rule would impose 
any new or substantively revised collections of information as defined 
by the PRA.
    Under the most recent proposed clearance for the Pre-Sale 
Availability Rule,\20\ the Commission estimated the total annual hours 
burden to be 2,446,610. This figure represented a 20% reduction from 
the 2010 estimate based in large part on the growth of online sales and 
the online posting of warranty terms related to those sales. The 
Commission estimated the hours burden at 2,315,608 for retailers and 
131,002 for manufacturers. The Commission estimated the total annual 
labor cost in 2014 to be $51,379,000 (rounded to the nearest thousand).
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    \20\ See 78 FR 68446 (Nov. 14, 2013).
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    The Commission estimated the total annual capital or other non-
labor costs to be de minimis, because the vast majority of retailers 
and warrantors already have developed systems to provide the 
information required by the Pre-Sale Availability Rule. Compliance by 
retailers typically entails keeping warranties on file, in binders or 
otherwise, and posting an inexpensive sign indicating warranty 
availability. Warrantor compliance under the proposed revisions entails 
providing retailers with a copy of the warranties included with their 
product or providing with the warranted good the address of the 
warrantor's Internet Web site where the consumer can review and obtain 
such terms, along with the contact information where the consumer may 
use a non-Internet based method to obtain a free copy of the warranty 
terms. Sellers of warranted goods for which the warrantor has chosen 
the online option may, unless the warrantor provides the seller a hard 
copy of the warranty terms to make such terms, incur a slightly 
increased burden because the seller will have to ensure it provides 
consumers a method of reviewing the warranty terms at the point of 
sale, prior to sale. That burden, however, should be minimal, given 
that the warrantor will have to make the warranty terms available on an 
Internet Web site, and given the proposed provision requiring the 
warrantor to supply a hard copy of the warranty terms, promptly and 
free of charge, in response to a seller's request. The Commission 
believes that, in light of the proposed amendment, the annual capital 
or other non-labor costs will continue to be de minimis.

Invitation To Comment

    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before June 17, 2016. 
Write ``Amending Warranty Rules Pursuant to the E-Warranty Act, Matter 
No. P044403'' on your comment. Your comment--including your name and 
your state--will be placed on the public record of this proceeding, 
including, to the extent practicable, on the Commission Web site, at 
http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, 
the Commission tries to remove individuals' home contact information 
from comments before placing them on the Commission Web site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, such as 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. You are also solely responsible for 
making sure that your comment does not include any sensitive health 
information, including medical records or other individually 
identifiable health information. In addition, do not include any 
``[t]rade secret or any commercial or financial information which . . . 
is privileged or confidential,'' as discussed in section 6(f) of the 
FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). 
In particular, do not include competitively sensitive information such 
as costs, sales statistics, inventories, formulas, patterns, devices, 
manufacturing processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\21\ Your comment will be kept 
confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
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    \21\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
---------------------------------------------------------------------------

    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc//E-WarrantyAmendments by following the instructions on the web-
based form. If this Notice appears at http://www.regulations.gov/#!home, you also may file a comment through that Web site.
    If you file your comment on paper, write ``Amending Warranty Rules 
Pursuant to the E-Warranty Act, Matter No. P044403'' on your comment 
and on the envelope, and mail your comment to the following address: 
Federal Trade Commission, Office of the Secretary, 600 Pennsylvania 
Avenue NW., Suite CC-5610 (Annex E), Washington, DC 20580, or deliver 
your comment to the following address: Federal Trade Commission, Office 
of the Secretary, Constitution Center, 400 7th Street SW., 5th Floor, 
Suite 5610 (Annex E), Washington, DC 20024. If possible, submit your 
paper comment to the Commission by courier or overnight service.
    Visit the Commission Web site at https://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the

[[Page 32685]]

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 on or before June 17, 2016. For 
information on the Commission's privacy policy, including routine uses 
permitted by the Privacy Act, see http://www.ftc.gov/ftc/privacy.shtm.

List of Subjects in 16 CFR Parts 701 and 702

    Trade practices, Warranties.

    For the reasons set forth in the preamble, the Commission proposes 
to amend 16 CFR part 701 as follows:

PART 701--DISCLOSURE OF WRITTEN CONSUMER PRODUCT WARRANTY TERMS AND 
CONDITIONS

0
1. The authority citation for this part continues to read as follows:

    Authority: 15 U.S.C. 2302 and 2309.

0
2. Amend Sec.  701.1 by redesignating paragraphs (g) through (i) as 
paragraphs (h) through (j), adding new paragraph (g), and revising 
redesignated paragraph (j) to read as follows:


Sec.  701.1  Definitions.

* * * * *
    (g) Manufacturer means any person engaged in the business of making 
a consumer product.
* * * * *
    (j) On the face of the warranty means:
    (1) Where the warranty is a single sheet with printing on both 
sides of the sheet or where the warranty is comprised of more than one 
sheet, the page on which the warranty text begins;
    (2) Where the warranty is included as part of a larger document, 
such as a use and care manual, the page in such document on which the 
warranty text begins;
    (3) Where the warranty is on an Internet Web site or displayed 
electronically, in close proximity to the location where the warranty 
text begins.

PART 702--PRE-SALE AVAILABILITY OF WRITTEN WARRANTY TERMS

0
3. The authority citation for part 702 continues to read as follows:

    Authority: 15 U.S.C. 2302 and 2309.

0
4. Amend Sec.  702.1 by revising paragraph (d) and adding paragraph (g) 
to read as follows:


Sec.  702.1  Definitions.

* * * * *
    (d) Warrantor means any supplier, manufacturer, or other person who 
gives or offers to give a written warranty.
* * * * *
    (g) Manufacturer means any person engaged in the business of making 
a consumer product.
0
5. Revise Sec.  702.3 to read as follows:


Sec.  702.3  Pre-sale availability of written warranty terms.

    The following requirements apply to consumer products actually 
costing the consumer more than $15.00:
    (a) Duties of seller. Except as provided in paragraphs (c) and (d) 
of this section, the seller of a consumer product with a written 
warranty shall make a text of the warranty readily available for 
examination by the prospective buyer by:
    (1) Displaying it in close proximity to the warranted product 
(including through electronic or other means, if the warrantor has 
elected the option described in paragraph (b)(2) of this section), or
    (2) Furnishing it upon request prior to sale (including through 
electronic or other means, if the warrantor has elected the option 
described in paragraph (b)(2) of this section) and placing signs 
reasonably calculated to elicit the prospective buyer's attention in 
prominent locations in the store or department advising such 
prospective buyers of the availability of warranties upon request.
    (b) Duties of the warrantor. (1) A warrantor who gives a written 
warranty warranting to a consumer a consumer product actually costing 
the consumer more than $15.00 shall:
    (i) Provide sellers with warranty materials necessary for such 
sellers to comply with the requirements set forth in paragraph (a) of 
this section, by the use of one or more by the following means:
    (A) Providing a copy of the written warranty with every warranted 
consumer product;
    (B) Providing a tag, sign, sticker, label, decal or other 
attachment to the product, which contains the full text of the written 
warranty;
    (C) Printing on or otherwise attaching the text of the written 
warranty to the package, carton, or other container if that package, 
carton or other container is normally used for display purposes. If the 
warrantor elects this option a copy of the written warranty must also 
accompany the warranted product; or
    (D) Providing a notice, sign, or poster disclosing the text of a 
consumer product warranty. If the warrantor elects this option, a copy 
of the written warranty must also accompany each warranted product.
    (ii) Provide catalog, mail order, and door-to-door sellers with 
copies of written warranties necessary for such sellers to comply with 
the requirements set forth in paragraphs (c) and (d) of this section.
    (2) As an alternative method of compliance with paragraph (b)(1) of 
this section, a warrantor may provide the warranty terms in an 
accessible digital format on the warrantor's Internet Web site. If the 
warrantor elects this option, the warrantor must:
    (i) Provide information to the consumer that will inform the 
consumer how to obtain warranty terms by indicating, in a clear and 
conspicuous manner, in the product manual or on the product or product 
packaging:
    (A) The Internet Web site of the warrantor where such warranty 
terms can be reviewed; and
    (B) The phone number, the postal mailing address of the warrantor, 
or other reasonable non-Internet based means for the consumer to 
request a copy of the warranty terms;
    (ii) Provide a hard copy of the warranty terms promptly and free of 
charge upon request by a consumer or seller made pursuant to paragraph 
(b)(2)(i)(B) of this section;
    (iii) Ensure that warranty terms are posted in a clear and 
conspicuous manner and remain accessible to the consumer on the 
Internet Web site of the warrantor; and
    (iv) Provide information with the consumer product or on the 
Internet Web site of the warrantor sufficient to allow the consumer to 
readily identify on such Internet Web sites the warranty terms that 
apply to the specific product purchased by the consumer.
    (3) Paragraph (a)(1) of this section shall not be applicable with 
respect to statements of general policy on emblems, seals or insignias 
issued by third parties promising replacement or refund if a consumer 
product is defective, which statements contain no representation or 
assurance of the quality or performance characteristics of the product; 
provided that
    (i) The disclosures required by Sec.  701.3(a)(1) through (9) of 
this part are published by such third parties in each issue of a 
publication with a general circulation, and
    (ii) Such disclosures are provided free of charge to any consumer 
upon written request.
    (c) Catalog and mail order sales. (1) For purposes of this 
paragraph:
    (i) Catalog or mail order sales means any offer for sale, or any 
solicitation for an order for a consumer product with a written 
warranty, which includes instructions for ordering the product which do 
not require a personal visit to the seller's establishment.

[[Page 32686]]

    (ii) Close conjunction means on the page containing the description 
of the warranted product, or on the page facing that page.
    (2) Any seller who offers for sale to consumers consumer products 
with written warranties by means of a catalog or mail order 
solicitation shall:
    (i) Clearly and conspicuously disclose in such catalog or 
solicitation in close conjunction to the description of warranted 
product, or in an information section of the catalog or solicitation 
clearly referenced, including a page number, in close conjunction to 
the description of the warranted product, either:
    (A) The full text of the written warranty; or
    (B) The address of the Internet Web site of the warrantor where 
such warranty terms can be reviewed (if such Internet Web site exists), 
as well as that the written warranty can be obtained free upon specific 
request, and the address or phone number where such warranty can be 
requested. If this option is elected, such seller shall promptly 
provide a copy of any written warranty requested by the consumer (and 
may provide such copy through electronic or other means, if the 
warrantor has elected the option described in paragraph (b)(2) of this 
section).
    (ii) [Reserved].
    (d) Door-to-door sales. (1) For purposes of this paragraph:
    (i) Door-to-door sale means a sale of consumer products in which 
the seller or his representative personally solicits the sale, 
including those in response to or following an invitation by a buyer, 
and the buyer's agreement to offer to purchase is made at a place other 
than the place of business of the seller.
    (ii) Prospective buyer means an individual solicited by a door-to-
door seller to buy a consumer product who indicates sufficient interest 
in that consumer product or maintains sufficient contact with the 
seller for the seller reasonably to conclude that the person solicited 
is considering purchasing the product.
    (2) Any seller who offers for sale to consumers consumer products 
with written warranties by means of door-to-door sales shall, prior to 
the consummation of the sale, disclose the fact that the sales 
representative has copies of the warranties for the warranted products 
being offered for sale, which may be inspected by the prospective buyer 
at any time during the sales presentation. Such disclosure shall be 
made orally and shall be included in any written materials shown to 
prospective buyers. If the warrantor has elected the option described 
in paragraph (b)(2) of this section, the sales representative may 
provide a copy of the warranty through electronic or other means.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2016-12030 Filed 5-23-16; 8:45 am]
 BILLING CODE 6750-01-P



                                                    32680                    Federal Register / Vol. 81, No. 100 / Tuesday, May 24, 2016 / Proposed Rules

                                                    The Proposal                                            PART 71—DESIGNATION OF CLASS A,                         following the instructions in the
                                                                                                            B, C, D, AND E AIRSPACE AREAS; AIR                      Request for Comment part of the
                                                       The FAA is proposing an amendment                    TRAFFIC SERVICE ROUTES; AND                             SUPPLEMENTARY INFORMATION section
                                                    to Title 14 Code of Federal Regulations                 REPORTING POINTS                                        below. Write ‘‘Amending Warranty
                                                    (14 CFR) Part 71 by establishing Class E                                                                        Rules Pursuant to the E-Warranty Act,
                                                    airspace extending upward from 700                      ■ 1. The authority citation for 14 CFR                  Matter No. P044403’’ on your comment,
                                                    feet above the surface within a 7-mile                  part 71 continues to read as follows:                   and file your comment online at https://
                                                    radius of Park River Airport—WC                           Authority: 49 U.S.C. 106(f), 106(g); 40103,           ftcpublic.commentworks.com/ftc//E-
                                                    Skjerven Field, Park River, ND, to                      40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR,            WarrantyAmendments, by following the
                                                    accommodate new standard instrument                     1959–1963 Comp., p. 389.                                instructions on the web-based form. If
                                                    approach procedures. Controlled                                                                                 you prefer to file your comment on
                                                    airspace is needed for the safety and                   § 71.1       [Amended]
                                                                                                                                                                    paper, write ‘‘Amending Warranty Rules
                                                    management of IFR operations at the                     ■ 2. The incorporation by reference in                  Pursuant to the E-Warranty Act, Matter
                                                    airport.                                                14 CFR 71.1 of FAA Order 7400.9Z,                       No. P044403’’ on your comment and on
                                                                                                            Airspace Designations and Reporting
                                                       Class E airspace designations are                                                                            the envelope, and mail your comment to
                                                                                                            Points, dated August 6, 2015, and
                                                    published in paragraph 6005 of FAA                                                                              the following address: Federal Trade
                                                                                                            effective September 15, 2015, is
                                                    Order 7400.9Z, dated August 6, 2015,                                                                            Commission, Office of the Secretary,
                                                                                                            amended as follows:
                                                    and effective September 15, 2015, which                                                                         600 Pennsylvania Avenue NW., Suite
                                                    is incorporated by reference in 14 CFR                  Paragraph 6005 Class E Airspace Areas                   CC–5610 (Annex E), Washington, DC
                                                    71.1. The Class E airspace designations                 Extending Upward From 700 Feet or More                  20580, or deliver your comment to the
                                                    listed in this document will be                         Above the Surface of the Earth.                         following address: Federal Trade
                                                    published subsequently in the Order.                    *        *      *      *       *                        Commission, Office of the Secretary,
                                                                                                                                                                    Constitution Center, 400 7th Street SW.,
                                                    Regulatory Notices and Analyses                         AGL ND E5 Park River, ND [New]                          5th Floor, Suite 5610 (Annex E),
                                                                                                            Park River Airport—WC Skjerven Field                    Washington, DC 20024.
                                                       The FAA has determined that this                       (Lat. 48°23′39″ N., long. 097°46′51″ W.)
                                                    regulation only involves an established                   That airspace extending upward from 700
                                                                                                                                                                    FOR FURTHER INFORMATION CONTACT:    Gary
                                                    body of technical regulations for which                 feet above the surface within a 7-mile radius           Ivens, (202) 326–2330, Attorney,
                                                    frequent and routine amendments are                     of Park River Airport—WC Skjerven Field.                Division of Marketing Practices, Federal
                                                    necessary to keep them operationally                                                                            Trade Commission, 600 Pennsylvania
                                                                                                              Issued in Fort Worth, Texas, on May 10,
                                                    current, is non-controversial and                       2016.
                                                                                                                                                                    Ave. NW., Washington, DC 20580.
                                                    unlikely to result in adverse or negative               Robert W. Beck,                                         SUPPLEMENTARY INFORMATION:
                                                    comments. It, therefore: (1) Is not a                   Manager, Operations Support Group, ATO
                                                    ‘‘significant regulatory action’’ under                 Central Service Center.                                 I. Summary of the Proposed Rules
                                                    Executive Order 12866; (2) is not a                     [FR Doc. 2016–11957 Filed 5–23–16; 8:45 am]             A. The Disclosure Rule
                                                    ‘‘significant rule’’ under DOT
                                                                                                            BILLING CODE 4910–13–P
                                                    Regulatory Policies and Procedures (44                                                                            The Disclosure Rule 1 establishes
                                                    FR 11034; February 26, 1979); and (3)                                                                           disclosure requirements for written
                                                    does not warrant preparation of a                                                                               warranties on consumer products that
                                                                                                            FEDERAL TRADE COMMISSION
                                                    regulatory evaluation as the anticipated                                                                        cost more than $15.00.2 In 1975, the
                                                    impact is so minimal. Since this is a                   16 CFR Parts 701 and 702                                Commission issued the Disclosure Rule
                                                    routine matter that will only affect air                                                                        as authorized by Congress in the
                                                    traffic procedures and air navigation, it               RIN 3084–AB24 and AB25                                  Magnuson-Moss Warranty Act 3
                                                    is certified that this rule, when                                                                               (MMWA).
                                                                                                            Rule Governing Disclosure of Written
                                                    promulgated, would not have a                           Consumer Product Warranty Terms                           The Disclosure Rule also specifies the
                                                    significant economic impact on a                        and Conditions; Rule Governing Pre-                     aspects of warranty coverage that must
                                                    substantial number of small entities                    Sale Availability of Written Warranty                   be disclosed in written warranties, as
                                                    under the criteria of the Regulatory                    Terms                                                   well as the exact language that must be
                                                    Flexibility Act.                                                                                                used for certain disclosures with respect
                                                                                                            ACTION: Notice of proposed rulemaking;                  to state law regarding the duration of
                                                    Environmental Review
                                                                                                            request for public comment.                             implied warranties and the availability
                                                       This proposal will be subject to an                                                                          of consequential or incidental damages.
                                                                                                            SUMMARY:   The Federal Trade
                                                    environmental analysis in accordance                                                                            Under the Disclosure Rule, warranty
                                                                                                            Commission (FTC or Commission)
                                                    with FAA Order 1050.1F,                                                                                         information must be disclosed in
                                                                                                            proposes to amend the rules on
                                                    ‘‘Environmental Impacts: Policies and                                                                           simple, easily understandable, and
                                                                                                            Disclosure of Written Consumer Product
                                                    Procedures’’ prior to any FAA final                                                                             concise language in a single document.
                                                                                                            Warranty Terms and Conditions
                                                    regulatory action.                                                                                              Similarly, the warrantor must disclose
                                                                                                            (Disclosure Rule) and Pre-Sale
                                                                                                                                                                    any limitations on the duration of
                                                    List of Subjects in 14 CFR Part 71                      Availability of Written Warranty Terms
                                                                                                                                                                    implied warranties on the face of the
                                                                                                            (Pre-Sale Availability Rule) to give effect
                                                                                                                                                                    warranty, as mandated by MMWA.4 In
mstockstill on DSK3G9T082PROD with PROPOSALS




                                                     Airspace, Incorporation by reference,                  to the E-Warranty Act, which allows for
                                                                                                                                                                    promulgating the Disclosure Rule, the
                                                    Navigation (air).                                       the use of Internet Web sites to
                                                                                                                                                                    Commission determined that certain
                                                                                                            disseminate warranty terms to
                                                    The Proposed Amendment                                                                                          material facts about product warranties
                                                                                                            consumers in some circumstances.
                                                      Accordingly, pursuant to the                          DATES: Comments must be received on                       1 16 CFR part 701.
                                                    authority delegated to me, the Federal                  or before June 17, 2016.                                  2 40 FR 60171–60172 (Dec. 31, 1975).
                                                    Aviation Administration proposes to                     ADDRESSES: Interested parties may file a                  3 15 U.S.C. 2302.

                                                    amend 14 CFR part 71 as follows:                        comment online or on paper, by                            4 See 15 U.S.C. 2308(b).




                                               VerDate Sep<11>2014   17:13 May 23, 2016   Jkt 238001   PO 00000   Frm 00002     Fmt 4702   Sfmt 4702   E:\FR\FM\24MYP1.SGM   24MYP1


                                                                               Federal Register / Vol. 81, No. 100 / Tuesday, May 24, 2016 / Proposed Rules                                                     32681

                                                    must be disclosed because the failure to                  warranties are available. The Pre-Sale                 where the warrantor has chosen the
                                                    do so would be deceptive or misleading.                   Availability Rule requires warrantors to               online method of disseminating the
                                                      Briefly, the Commission proposes to                     provide materials to enable sellers to                 warranty terms.
                                                    revise the Disclosure Rule to specify                     comply with the Rule’s requirements.                      Warrantors currently must provide
                                                    that disclosures mandated to appear ‘‘on                  The Rule also sets out how sellers                     retailers the warranty materials sellers
                                                    the face’’ of a warranty posted on an                     should make warranty information                       need to meet their requirements under
                                                    Internet Web site or displayed                            available pre-sale if selling the product              the Pre-Sale Availability Rule, such as
                                                    electronically must be placed in close                    at retail locations, through catalogs, mail            providing copies of the warranty,
                                                    proximity to the location where the text                  order, or door-to-door sales.                          providing warranty stickers, tags, signs,
                                                    of the warranty terms begins.                                E-Warranty amends the MMWA to                       or posters, or printing the warranty on
                                                                                                              allow, under certain circumstances, the                the product’s packaging. The
                                                    B. The Pre-Sale Availability Rule                         posting of warranties on warrantors’                   amendment does not alter the duties of
                                                       The Pre-Sale Availability Rule 5                       Internet Web sites as an alternative                   warrantors who do not choose to
                                                    details the methods by which                              method of complying with the Pre-Sale                  employ an online method to supply
                                                    warrantors and sellers must provide                       Availability Rule, and to permit sellers               warranty terms. The E-Warranty Act
                                                    warranty terms to consumers prior to                      to make warranty terms available to                    provides that warrantors who choose
                                                    sale of the warranted item. The                           consumers pre-sale via electronic means                the online method of disseminating
                                                    Commission issued the Pre-Sale                            where the warrantor has chosen the                     warranty terms must provide consumers
                                                    Availability Rule in response to a                        online option.8 E-Warranty charges the                 the address of the Internet Web site
                                                    mandate from Congress as set forth in                     Commission with promulgating                           where the specific product’s warranty
                                                    the MMWA.                                                 consistent changes to the Disclosure                   terms can be reviewed and also supply
                                                       Briefly, the Commission proposes to                    Rule and the Pre-Sale Availability Rule                a non-Internet method, such as a phone
                                                    revise the Pre-Sale Availability Rule to                  within one year of the Act’s passage.9                 number or mailing address, for
                                                    allow warrantors to post warranty terms                                                                          consumers and sellers to request the
                                                                                                              III. The Commission’s Proposed Rule
                                                    on Internet Web sites if they also                                                                               warranty terms. If a consumer or
                                                                                                              Changes
                                                    provide a non-Internet based method for                                                                          seller 10 makes such a request, the
                                                    consumers to obtain the warranty terms                       The Commission proposes to modify                   warrantor must provide the warranty
                                                    and satisfy certain other conditions.                     the Disclosure Rule and the Pre-Sale                   terms promptly and free and of charge.
                                                       As discussed more fully below, these                   Availability Rule to implement the E-                     The first proposed revisions alter
                                                    rule revisions are required to comply                     Warranty Act and effectuate its                        § 701.1 to add a definition of the term
                                                    with Congress’s passage of the E-                         purposes. Currently, sellers are obliged               ‘‘manufacturer’’ at § 701.1(g) (defining
                                                    Warranty Act 6 (E-Warranty or the Act).                   to provide warranty terms pre-sale to                  manufacturer as ‘‘any person engaged in
                                                    The Commission invites comment on                         consumers through a variety of methods                 the business of making a consumer
                                                    the proposed rule revisions generally                     such as displaying them in close                       product’’), add that term in the
                                                    and on the specific issues outlined in                    proximity to the warranted products, or                definition of ‘‘warrantor,’’ and re-letter
                                                    Section III of this Notice. The                           by furnishing them upon request prior                  the paragraphs in § 701.1 to account for
                                                    Commission seeks comment on the                           to sale and posting prominent signs to                 the additional definition. The
                                                    proposal through June 17, 2016.                           let customers know that warranties can                 Commission proposes these revisions in
                                                                                                              be examined upon request, posting them                 light of E-Warranty’s use of the term
                                                    II. Background                                            in a catalog in close conjunction to the               ‘‘manufacturer.’’
                                                       The MMWA authorizes the                                warranted product, or having them                         The next proposed revision adds a
                                                    Commission to prescribe rules requiring                   available for consumers’ review in a                   new § 701.1(j)(3) to specify that, in
                                                    disclosure of warranty terms and                          door-to-door sales presentation. The                   conjunction with warranty terms posted
                                                    requiring that the terms of any written                   proposed amendments will allow sellers                 on an Internet Web site or displayed
                                                    warranty on a consumer product be                         the additional option of using an                      electronically, the phrase ‘‘on the face’’
                                                    made available to the prospective                         electronic method to make warranty                     means in close proximity to the location
                                                    purchaser prior to the sale of the                        terms available to consumers at the                    where the warranty terms begin.
                                                    product.7 In 1975, the Commission                         point of sale for warranted products                   Although the Disclosure Rule does not
                                                    issued both the Disclosure Rule, which                                                                           explicitly mention online commerce, it
                                                                                                                8 In a recent review of the warranty
                                                    establishes disclosure requirements for                                                                          applies to the sale of warranted
                                                                                                              interpretations, rules, and guides (16 CFR parts
                                                    written warranties, and the Pre-Sale                      700–703 and 239), which was completed before           consumer products online. Commission
                                                    Availability Rule, which includes                         enactment of the E-Warranty Act, the Commission        staff recently updated the .Com
                                                    requirements for sellers and warrantors                   declined certain commenters’ requests to allow         Disclosures to provide additional
                                                                                                              brick-and-mortar sellers to refer consumers to         guidance on disclosure obligations in
                                                    to make the text of any warranty on a                     online warranty terms as a method of complying
                                                    consumer product available to the                         with the Pre-Sale Availability Rule. The
                                                                                                                                                                        10 Sellers are given the option of requesting the
                                                    consumer prior to sale. Among other                       Commission noted that the intent of the Rule is to
                                                                                                              make warranty information available at the point of    warranty terms free of charge from the warrantor
                                                    things, the Pre-Sale Availability Rule                    sale, so for the seller simply to refer the consumer   because not all sellers will be equipped to employ
                                                    requires most sellers to make warranties                  to a Web site where the warranty could be found        an electronic option in cases where the warrantor
                                                    readily available either by: (1)                          would be insufficient. See 80 FR 42710, 42717 (July    has chosen the online method to supply warranty
                                                    Displaying the warranty document in                       20, 2015).                                             terms. For example, a small seller may not have
                                                                                                                                                                     Internet access or electronic devices to download
mstockstill on DSK3G9T082PROD with PROPOSALS




                                                                                                                9 Under the E-Warranty Act, the Commission
                                                    close proximity to the product or (2)                     must issue the final amended rules by September        and display warranty terms for consumers’ review
                                                    furnishing the warranty document on                       24, 2016. The Commission determines that taking        at the point of sale. Those sellers’ duties to have
                                                    request and posting signs in prominent                    of oral presentations from interested parties would    warranty terms available pre-sale, however, have
                                                    locations advising consumers that                         interfere with its ability to amend the Disclosure     not changed under E-Warranty. The Commission
                                                                                                              Rule and the Pre-Sale Availability Rule in a timely    believes that requiring warrantors to supply sellers
                                                                                                              fashion. Accordingly, as provided by the E-            with warranty terms upon request so that sellers
                                                      5 16   CFR part 702.                                    Warranty Act, the Commission waives the                can make them available for consumers’ review at
                                                      6 E-Warranty   Act, Public Law 114–51 (Sept. 24,        requirement to give interested persons an              the point of sale effectuates Congress’s desire to
                                                    2015).                                                    opportunity for oral presentation. See Public Law      ensure the continued availability of pre-sale
                                                      7 15 U.S.C. 2302.                                       114–51, sec. 3(b)(2).                                  warranty terms.



                                               VerDate Sep<11>2014     17:13 May 23, 2016   Jkt 238001   PO 00000   Frm 00003   Fmt 4702   Sfmt 4702   E:\FR\FM\24MYP1.SGM    24MYP1


                                                    32682                    Federal Register / Vol. 81, No. 100 / Tuesday, May 24, 2016 / Proposed Rules

                                                    the online context. As stated in the                    warranty terms. The Commission                        law would need to take only minimal
                                                    updated .Com Disclosures, warranties                    believes that this requirement comports               additional action to remain compliant.
                                                    communicated through visual text                        with Congress’s directive that online                    The small warrantor that does not
                                                    online are no different from paper                      warranties be available to consumers                  choose the Internet option to supply
                                                    versions and the same rules apply.11                    ‘‘in a clear and conspicuous manner.’’ 12             warranty terms can remain compliant
                                                    The Commission therefore proposes to                    Similarly, if a consumer or seller                    simply by continuing with its existing
                                                    clarify this requirement for online                     requests via phone, mail, or other                    practices. The small warrantor that has
                                                    disclosures.                                            reasonable non-Internet-based means,                  been including the entire warranty with
                                                       The next proposed revision is to                     that the warrantor provide a hard copy                the warranted product and supplying
                                                    § 702.1(d) to include the manufacturer                  of the warranty, proposed                             warranty materials so that sellers can
                                                    in the definition of ‘‘warrantor.’’ The                 § 702.3(b)(2)(ii) requires the warrantor to           meet Pre-Sale Availability Rule
                                                    Commission proposes this revision to                    provide it promptly and free of charge,               obligations will have a smaller
                                                    comport with E-Warranty’s use of the                    which comports with existing pre-sale                 compliance burden under the proposal
                                                    term ‘‘manufacturer.’’ The next revision                requirements for catalog and mail order               by being able to provide the warranty
                                                    adds a new § 702.1(g) to define a                       sales.                                                terms solely on an Internet Web site.
                                                    ‘‘manufacturer’’ (in the same manner as                    The next proposed revision alters                  That small warrantor, however, will
                                                    the proposed revision of § 701.1(g)) as                 § 702.3(c)(2)(i)(B) to reflect that the               likely incur costs to establish a phone
                                                    ‘‘any person engaged in the business of                 mail-order or catalog seller must                     number, address, or other non-Internet
                                                    making a consumer product.’’                            provide the address of the Internet Web               based method that consumers and
                                                       The next proposed revisions are to                   site of the warrantor where the warranty              sellers can use to request a free hard
                                                    § 702.3(a) to provide that sellers can                  terms can be reviewed (if such Internet               copy of warranty terms.
                                                    provide warranty terms pre-sale through                 Web site exists), as well as either a                    With respect to the amendments to
                                                    electronic means if the warrantor of the                phone number or address that the                      the Disclosure Rule, a small entity that
                                                    product has chosen the online option. If                consumer can use to request a free copy               is in compliance with current law need
                                                    a seller uses an electronic means, that                 of the warranty, and notes that the copy              not take any different or additional
                                                    seller must still make the warranty text                may be provided electronically if the                 action if the proposal is adopted, as the
                                                    readily available for consumers’                        product’s warrantor has used the online               proposed revisions merely explain how
                                                    examination prior to sale.                              option.                                               the ‘‘on the face of the warranty’’
                                                       The proposed changes to                                 Finally, the next proposed revision                requirement applies to online warranty
                                                    § 702.3(b)(1)(i) would remove                           alters § 702.3(d)(2) to reflect that the              terms.
                                                    superfluous instances of the term ‘‘and/                door-to-door seller may supply the                       Accordingly, this document serves as
                                                    or’’ and ‘‘and’’ in that paragraph, as the              warranty through an electronic option if              notice to the Small Business
                                                    prefatory language already notes that the               the product’s warrantor has employed                  Administration of the FTC’s
                                                                                                            the online method.                                    certification of ‘‘no effect.’’ To ensure
                                                    warrantor must use one or more of the
                                                                                                                                                                  the accuracy of this certification,
                                                    methods described in that paragraph to                  IV. Regulatory Flexibility Act                        however, the Commission requests
                                                    provide sellers with the prescribed
                                                                                                               The Regulatory Flexibility Act 13                  comment on whether the proposed rule
                                                    warranty materials.
                                                                                                            (RFA) requires each agency either to                  will have a significant impact on a
                                                       The next proposed revision adds a
                                                                                                            provide an Initial Regulatory Flexibility             substantial number of small entities,
                                                    new § 702.3(b)(2) to reflect that, as an
                                                                                                            Analysis (IRFA) with a proposed rule, or              including specific information on the
                                                    alternative method of compliance with
                                                                                                            certify that the proposed rule will not               number of entities that would be
                                                    the Pre-Sale Availability Rule, a
                                                                                                            have a significant economic impact on                 covered by the proposed rule, the
                                                    warrantor may refer consumers to an
                                                                                                            a substantial number of small entities.14             number of these companies that are
                                                    accessible digital copy of the warranty
                                                                                                            The FTC does not expect that the rule                 small entities, and the average annual
                                                    by providing to the consumer the
                                                                                                            revisions necessitated by E-Warranty                  burden for each entity. Although the
                                                    Internet address where the specific
                                                                                                            will have a significant economic impact               Commission certifies under the RFA
                                                    product’s warranty has been posted in a
                                                                                                            on small sellers and warrantors. As                   that the rule proposed in this notice
                                                    clear and conspicuous manner. To
                                                                                                            discussed above, the proposed revisions               would not, if promulgated, have a
                                                    employ this option, the warrantor,
                                                                                                            will relieve those warrantors who                     significant impact on a substantial
                                                    among other duties, must supply in the
                                                                                                            choose the online method from                         number of small entities, the
                                                    product manual, or on the product or
                                                                                                            providing warranty materials to certain               Commission has determined,
                                                    product packaging, the Internet address
                                                                                                            sellers. Affected sellers, however,                   nonetheless, that it is appropriate to
                                                    where the consumer can review and
                                                                                                            should be able easily to obtain the                   publish an IRFA in order to inquire into
                                                    obtain the specific product’s warranty
                                                                                                            warranties and provide them to                        the impact of the proposed rule on small
                                                    terms, as well as the phone number,
                                                                                                            consumers for review at the point of                  entities. Therefore, the Commission has
                                                    postal mailing address, or other
                                                                                                            sale, either by obtaining the warranties              prepared the following analysis:
                                                    reasonable non-Internet based means for
                                                    the consumer to request a free copy of                  from the warrantor’s Web site or by                   A. Reasons for the Proposed Rule
                                                    the warranty terms.                                     requesting a hard copy from the                       Revisions
                                                       Proposed § 702.3(b)(2)(iv) requires the              warrantor. Also, the proposed
                                                                                                            amendment allows sellers of goods                        As outlined in Section II, above, the
                                                    warrantor utilizing the online option to                                                                      Commission is proposing to amend the
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                                                    provide sufficient information with the                 whose warrantors have employed the
                                                                                                            online method the ability to provide                  Disclosure Rule and Pre-Sale
                                                    consumer product or on the Internet                                                                           Availability Rule in connection with
                                                    Web site so that the consumer can                       pre-sale warranty terms electronically.
                                                                                                            Thus, if the proposal is adopted, a small             Congress’s passage of E-Warranty. E-
                                                    readily locate the specific product’s                                                                         Warranty allows, under certain
                                                                                                            seller that is in compliance with current
                                                       11 See FTC, .Com Disclosures: How to Make
                                                                                                                                                                  circumstances, the posting of warranties
                                                    Effective Disclosures in Digital Advertising (2013),
                                                                                                             12 See 15 U.S.C. 2302(b)(4)(A)(i).                   on manufacturers’ Web sites as an
                                                    at 3, fn.7, available at https://ftc.gov/os/2013/03/     13 5 U.S.C. 603.                                     alternative method of complying with
                                                    130312dotcomdisclosures.pdf.                             14 5 U.S.C. 605.                                     the Pre-Sale Availability Rule, and


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                                                                             Federal Register / Vol. 81, No. 100 / Tuesday, May 24, 2016 / Proposed Rules                                                   32683

                                                    certain sellers’ use of an electronic                   revision, if the warrantor has chosen the             declined commenters’ requests to allow
                                                    method to supply pre-sale warranty                      online option, sellers may incur                      offline sellers to comply with the Rule
                                                    terms.                                                  minimal additional costs if they need to              by advising buyers of the availability of
                                                                                                            request the warranty terms from the                   the warranty at a particular Web site.
                                                    B. Statement of Objectives and Legal
                                                                                                            warrantor to provide them to                          The Commission noted that, because the
                                                    Basis                                                   consumers, but sellers will also have                 intent of the Rule is to make warranty
                                                       The objective of the proposed                        additional flexibility to make pre-sale               information available at the point of
                                                    amendments is to provide warrantors an                  warranty terms available to consumers                 sale, a seller could not comply with its
                                                    online method of complying with the                     electronically. Warrantors must provide               Pre-Sale Availability Rule obligations
                                                    Disclosure Rule and the Pre-Sale                        sellers with warranty materials for                   simply by referring the consumer to a
                                                    Availability Rule, allow certain sellers                sellers’ use at the point of sale, or, under          Web site where the warranty could be
                                                    to use an electronic method to provide                  the proposed revision, provide the                    found. The proposed revisions allow
                                                    pre-sale warranty terms to consumers,                   address of the warrantor’s Internet Web               sellers to provide warranty terms
                                                    and to define what ‘‘on the face’’ of an                site where consumers can review and                   electronically, but only in cases where
                                                    online warranty means in the Disclosure                 obtain warranty terms in the product                  the warrantor has chosen the online
                                                    Rule. The legal authority for this NPRM                 manual or on the product or product                   option.16 The proposed revisions
                                                    is the E-Warranty Act and the MMWA.                     packaging, and the warrantor’s contact                comport with Congress’s desire to allow
                                                                                                            information for the consumer to obtain                warrantors the option of providing
                                                    C. Description of Small Entities to                     the warranty terms via a non-Internet                 warranty terms online, as long as
                                                    Which the Rules Will Apply                              method.                                               warrantors offer a non-Internet based
                                                       The small entities to which the                         Neither the existing Pre-Sale                      method for consumers to obtain the
                                                    Disclosure Rule applies are warrantors.                 Availability Rule nor the proposed                    warranty terms, as well as with
                                                    The small entities to which the Pre-Sale                amendments require sellers or                         Congress’s mandate that the online
                                                    Availability Rule applies are warrantors                warrantors to retain more records than                method not supplant the seller’s duty to
                                                    and sellers of warranted consumer                       may be necessary to provide consumers                 provide warranty terms at the point of
                                                    products costing more than fifteen                      the warranty terms. The small entities                sale.
                                                    dollars. The Disclosure Rule and the                    potentially covered by these proposed                    The Commission has not proposed
                                                    Pre-Sale Availability Rule currently                    amendments will include all such                      any specific small entity exemption,
                                                    define a ‘‘warrantor’’ as ‘‘any supplier or             entities subject to the Rules, including              differing timetables, or other significant
                                                    other person who gives or offers to give                suppliers, manufacturers and others                   alternatives, as the proposed
                                                    a written warranty.’’ The Pre-Sale                      who warrant consumer goods costing                    amendments are narrowly tailored to
                                                    Availability Rule defines a ‘‘seller’’ as               more than fifteen dollars and retailers,              permit E-Warranty’s stated objectives of
                                                    ‘‘any person who sells or offers for sale               catalog and mail-order sellers, and door-             allowing warrantors to post warranty
                                                    for purposes other than resale or use in                to-door sellers who offer the warranted               terms on Internet Web sites, certain
                                                    the ordinary course of the buyer’s                      products. The professional skills                     sellers to use an electronic method to
                                                    business any consumer product.’’ The                    necessary for compliance with the Rules               provide warranty terms pre-sale to
                                                    proposed changes add ‘‘manufacturers’’                  as modified by the proposed                           consumers, and the ancillary purpose of
                                                    to both Rules’ definitions of                           amendments would include (1)                          clarifying that ‘‘on the face of the
                                                    ‘‘warrantor.’’ Sellers include retailers,               warrantors’ office and administrative                 warranty’’ in the Web site or electronic
                                                    catalog and mail order sellers, and door-               support staff to receive consumers’ and               context means ‘‘in close proximity’’ to
                                                    to-door sellers.                                        sellers’ requests for warranty terms                  the location where the warranty text
                                                       In 2014, the Commission estimated                    using a non-Internet based method and                 begins. The Commission does not
                                                    that there were 13,395 small                            (2) sellers’ office and administrative                believe a special exemption for small
                                                    manufacturers (warrantors) and 452,553                  support staff to request warranty terms               entities or significant compliance
                                                    small retailers (sellers) impacted by the               for pre-sale availability to consumers for            alternatives are necessary or appropriate
                                                    Rules.15                                                warranted goods where the warrantor                   to minimize the compliance burden on
                                                                                                            has elected only the Internet option.                 small entities while achieving the
                                                    D. Description of the Projected                            The Commission invites comment on                  intended purposes of E-Warranty.
                                                    Reporting, Recordkeeping, and Other                     the proposed amendments’ impact on                       The Commission believes its
                                                    Compliance Requirements                                 small sellers who might cease to receive              proposed revisions will be minimally
                                                      The proposed amendments to the                        point-of-sale warranty materials from                 burdensome for small businesses and
                                                    Disclosure Rule do not impose any new                   those warrantors who choose to employ                 that they comply with Congress’s
                                                    reporting, recordkeeping, or other                      the online method to supply warranty                  mandate to allow warrantors to post
                                                    compliance requirements, because the                    terms.                                                warranty terms on an Internet Web site
                                                    proposed amendments merely explain                      E. Duplication, Overlap, or Conflict                  and certain sellers to employ a pre-sale
                                                    how the existing ‘‘on the face of the                   With Other Federal Rules                              electronic option, while ensuring pre-
                                                    warranty’’ requirement applies to online                                                                      sale availability of warranty terms at the
                                                    and electronic warranty terms.                            The Commission has not identified                   point of sale. The Commission,
                                                      The Pre-Sale Availability Rule                        any other federal statutes, rules, or                 however, invites comment on regulatory
                                                    imposes disclosure obligations on                       policies that would duplicate, overlap,               alternatives that the Commission has
                                                                                                            or conflict with the proposed
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                                                    sellers and warrantors of warranted                                                                           not expressly considered for complying
                                                    consumer goods actually costing more                    amendments. The Commission invites
                                                    than fifteen dollars. Specifically, sellers             comment and information on this issue.                  16 FTC staff noted in an opinion letter in 2009,

                                                    must make warranty terms available                                                                            however, that neither the MMWA nor its related
                                                                                                            F. Significant Alternatives to the                    rules prescribe making the warranty terms available
                                                    prior to sale. Under the proposed                       Proposed Amendments                                   only on paper. Letter from Allyson Himelfarb to
                                                                                                                                                                  Thomas Hughes (February 17, 2009), available at
                                                      15 See 79 FR 8185 (Feb. 11, 2014), which relates        As noted above at footnote 8, in a                  https://www.ftc.gov/sites/default/files/documents/
                                                    to the Pre-Sale Availability Rule, but should also      recent rule review of the Pre-Sale                    advisory_opinions/opinion-09-1/opinion0901_
                                                    apply to the Disclosure Rule.                           Availability Rule, the Commission                     0.pdf.



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                                                    32684                    Federal Register / Vol. 81, No. 100 / Tuesday, May 24, 2016 / Proposed Rules

                                                    with the proposed rule that might                       Pre-Sale Availability Rule. Compliance                not include any sensitive health
                                                    reduce compliance burdens on small                      by retailers typically entails keeping                information, including medical records
                                                    entities while still achieving E-                       warranties on file, in binders or                     or other individually identifiable health
                                                    Warranty’s objectives.                                  otherwise, and posting an inexpensive                 information. In addition, do not include
                                                                                                            sign indicating warranty availability.                any ‘‘[t]rade secret or any commercial or
                                                    V. Paperwork Reduction Act                              Warrantor compliance under the                        financial information which . . . is
                                                       Under the Paperwork Reduction Act                    proposed revisions entails providing                  privileged or confidential,’’ as discussed
                                                    of 1995 (PRA),17 Federal agencies are                   retailers with a copy of the warranties               in section 6(f) of the FTC Act, 15 U.S.C.
                                                    generally required to seek Office of                    included with their product or                        46(f), and FTC Rule 4.10(a)(2), 16 CFR
                                                    Management and Budget (OMB)                             providing with the warranted good the                 4.10(a)(2). In particular, do not include
                                                    approval for information collection                     address of the warrantor’s Internet Web               competitively sensitive information
                                                    requirements prior to implementation.                   site where the consumer can review and                such as costs, sales statistics,
                                                    Under the PRA, the Commission may                       obtain such terms, along with the                     inventories, formulas, patterns, devices,
                                                    not conduct or sponsor, and,                            contact information where the consumer                manufacturing processes, or customer
                                                    notwithstanding any other provision of                  may use a non-Internet based method to                names.
                                                    law, a person is not required to respond                obtain a free copy of the warranty terms.                If you want the Commission to give
                                                    to an information collection, unless the                Sellers of warranted goods for which the              your comment confidential treatment,
                                                    information displays a valid control                    warrantor has chosen the online option                you must file it in paper form, with a
                                                    number assigned by OMB.                                 may, unless the warrantor provides the                request for confidential treatment, and
                                                       This proposal would amend 16 CFR                     seller a hard copy of the warranty terms              you have to follow the procedure
                                                    parts 701 and 702. The collection of                    to make such terms, incur a slightly                  explained in FTC Rule 4.9(c), 16 CFR
                                                    information related to the Disclosure                   increased burden because the seller will              4.9(c).21 Your comment will be kept
                                                    Rule has been previously reviewed and                   have to ensure it provides consumers a                confidential only if the FTC General
                                                    approved by OMB in accordance with                      method of reviewing the warranty terms                Counsel, in his or her sole discretion,
                                                    the PRA and assigned OMB Control                        at the point of sale, prior to sale. That             grants your request in accordance with
                                                    Number 3084–0111.18 The collection of                   burden, however, should be minimal,                   the law and the public interest.
                                                    information related to the Pre-Sale                     given that the warrantor will have to                    Postal mail addressed to the
                                                    Availability Rule has been previously                   make the warranty terms available on an               Commission is subject to delay due to
                                                    reviewed and approved by OMB in                         Internet Web site, and given the                      heightened security screening. As a
                                                    accordance with the PRA and assigned                    proposed provision requiring the                      result, we encourage you to submit your
                                                    OMB Control Number 3084–0112.19                         warrantor to supply a hard copy of the                comments online. To make sure that the
                                                       As explained below, the proposed                     warranty terms, promptly and free of                  Commission considers your online
                                                    amendments only slightly modify or                      charge, in response to a seller’s request.            comment, you must file it at https://
                                                    add to information collection                           The Commission believes that, in light                ftcpublic.commentworks.com/ftc//E-
                                                    requirements that were previously                       of the proposed amendment, the annual                 WarrantyAmendments by following the
                                                    approved by OMB. Under this proposal,                   capital or other non-labor costs will                 instructions on the web-based form. If
                                                    a warrantor will be permitted, but not                  continue to be de minimis.                            this Notice appears at http://
                                                    required, to use an online method for                                                                         www.regulations.gov/#!home, you also
                                                                                                            Invitation To Comment                                 may file a comment through that Web
                                                    supplying warranty terms. The
                                                    Commission does not believe that this                      You can file a comment online or on                site.
                                                    proposed rule would impose any new or                   paper. For the Commission to consider                    If you file your comment on paper,
                                                    substantively revised collections of                    your comment, we must receive it on or                write ‘‘Amending Warranty Rules
                                                    information as defined by the PRA.                      before June 17, 2016. Write ‘‘Amending                Pursuant to the E-Warranty Act, Matter
                                                       Under the most recent proposed                       Warranty Rules Pursuant to the E-                     No. P044403’’ on your comment and on
                                                    clearance for the Pre-Sale Availability                 Warranty Act, Matter No. P044403’’ on                 the envelope, and mail your comment to
                                                    Rule,20 the Commission estimated the                    your comment. Your comment—                           the following address: Federal Trade
                                                    total annual hours burden to be                         including your name and your state—                   Commission, Office of the Secretary,
                                                    2,446,610. This figure represented a                    will be placed on the public record of                600 Pennsylvania Avenue NW., Suite
                                                    20% reduction from the 2010 estimate                    this proceeding, including, to the extent             CC–5610 (Annex E), Washington, DC
                                                    based in large part on the growth of                    practicable, on the Commission Web                    20580, or deliver your comment to the
                                                    online sales and the online posting of                  site, at http://www.ftc.gov/os/                       following address: Federal Trade
                                                    warranty terms related to those sales.                  publiccomments.shtm. As a matter of                   Commission, Office of the Secretary,
                                                    The Commission estimated the hours                      discretion, the Commission tries to                   Constitution Center, 400 7th Street SW.,
                                                    burden at 2,315,608 for retailers and                   remove individuals’ home contact                      5th Floor, Suite 5610 (Annex E),
                                                    131,002 for manufacturers. The                          information from comments before                      Washington, DC 20024. If possible,
                                                    Commission estimated the total annual                   placing them on the Commission Web                    submit your paper comment to the
                                                    labor cost in 2014 to be $51,379,000                    site.                                                 Commission by courier or overnight
                                                    (rounded to the nearest thousand).                         Because your comment will be made                  service.
                                                       The Commission estimated the total                   public, you are solely responsible for                   Visit the Commission Web site at
                                                    annual capital or other non-labor costs                 making sure that your comment does                    https://www.ftc.gov to read this Notice
                                                                                                            not include any sensitive personal                    and the news release describing it. The
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                                                    to be de minimis, because the vast
                                                    majority of retailers and warrantors                    information, such as Social Security                  FTC Act and other laws that the
                                                    already have developed systems to                       number, date of birth, driver’s license               Commission administers permit the
                                                    provide the information required by the                 number or other state identification
                                                                                                            number or foreign country equivalent,                   21 In particular, the written request for

                                                      17 44                                                 passport number, financial account                    confidential treatment that accompanies the
                                                            U.S.C. 3501–3520.                                                                                     comment must include the factual and legal basis
                                                      18 See 78 FR 70046 (Nov. 22, 2013).                   number, or credit or debit card number.               for the request, and must identify the specific
                                                      19 See 79 FR 8185 (Feb. 11, 2014).                    You are also solely responsible for                   portions of the comment to be withheld from the
                                                      20 See 78 FR 68446 (Nov. 14, 2013).                   making sure that your comment does                    public record. See FTC Rule 4.9(c), 16 CFR 4.9(c).



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                                                                             Federal Register / Vol. 81, No. 100 / Tuesday, May 24, 2016 / Proposed Rules                                            32685

                                                    collection of public comments to                          (g) Manufacturer means any person                   sellers to comply with the requirements
                                                    consider and use in this proceeding as                  engaged in the business of making a                   set forth in paragraphs (c) and (d) of this
                                                    appropriate. The Commission will                        consumer product.                                     section.
                                                    consider all timely and responsive                      ■ 5. Revise § 702.3 to read as follows:                  (2) As an alternative method of
                                                    public comments that it receives on or                                                                        compliance with paragraph (b)(1) of this
                                                                                                            § 702.3 Pre-sale availability of written
                                                    before June 17, 2016. For information on                                                                      section, a warrantor may provide the
                                                                                                            warranty terms.
                                                    the Commission’s privacy policy,                                                                              warranty terms in an accessible digital
                                                    including routine uses permitted by the                    The following requirements apply to                format on the warrantor’s Internet Web
                                                    Privacy Act, see http://www.ftc.gov/ftc/                consumer products actually costing the                site. If the warrantor elects this option,
                                                    privacy.shtm.                                           consumer more than $15.00:                            the warrantor must:
                                                                                                               (a) Duties of seller. Except as provided
                                                    List of Subjects in 16 CFR Parts 701 and                                                                         (i) Provide information to the
                                                                                                            in paragraphs (c) and (d) of this section,
                                                    702                                                                                                           consumer that will inform the consumer
                                                                                                            the seller of a consumer product with a
                                                                                                                                                                  how to obtain warranty terms by
                                                      Trade practices, Warranties.                          written warranty shall make a text of the
                                                                                                                                                                  indicating, in a clear and conspicuous
                                                      For the reasons set forth in the                      warranty readily available for
                                                                                                                                                                  manner, in the product manual or on
                                                    preamble, the Commission proposes to                    examination by the prospective buyer
                                                                                                                                                                  the product or product packaging:
                                                    amend 16 CFR part 701 as follows:                       by:
                                                                                                                                                                     (A) The Internet Web site of the
                                                                                                               (1) Displaying it in close proximity to
                                                                                                                                                                  warrantor where such warranty terms
                                                    PART 701—DISCLOSURE OF                                  the warranted product (including
                                                                                                                                                                  can be reviewed; and
                                                    WRITTEN CONSUMER PRODUCT                                through electronic or other means, if the
                                                                                                            warrantor has elected the option                         (B) The phone number, the postal
                                                    WARRANTY TERMS AND CONDITIONS
                                                                                                            described in paragraph (b)(2) of this                 mailing address of the warrantor, or
                                                    ■ 1. The authority citation for this part               section), or                                          other reasonable non-Internet based
                                                    continues to read as follows:                              (2) Furnishing it upon request prior to            means for the consumer to request a
                                                                                                            sale (including through electronic or                 copy of the warranty terms;
                                                        Authority: 15 U.S.C. 2302 and 2309.
                                                                                                            other means, if the warrantor has                        (ii) Provide a hard copy of the
                                                    ■  2. Amend § 701.1 by redesignating                                                                          warranty terms promptly and free of
                                                    paragraphs (g) through (i) as paragraphs                elected the option described in
                                                                                                            paragraph (b)(2) of this section) and                 charge upon request by a consumer or
                                                    (h) through (j), adding new paragraph                                                                         seller made pursuant to paragraph
                                                    (g), and revising redesignated paragraph                placing signs reasonably calculated to
                                                                                                            elicit the prospective buyer’s attention              (b)(2)(i)(B) of this section;
                                                    (j) to read as follows:                                                                                          (iii) Ensure that warranty terms are
                                                                                                            in prominent locations in the store or
                                                    § 701.1   Definitions.                                  department advising such prospective                  posted in a clear and conspicuous
                                                                                                            buyers of the availability of warranties              manner and remain accessible to the
                                                    *     *      *    *     *
                                                                                                            upon request.                                         consumer on the Internet Web site of the
                                                      (g) Manufacturer means any person
                                                                                                               (b) Duties of the warrantor. (1) A                 warrantor; and
                                                    engaged in the business of making a
                                                    consumer product.                                       warrantor who gives a written warranty                   (iv) Provide information with the
                                                                                                            warranting to a consumer a consumer                   consumer product or on the Internet
                                                    *     *      *    *     *                                                                                     Web site of the warrantor sufficient to
                                                      (j) On the face of the warranty means:                product actually costing the consumer
                                                                                                            more than $15.00 shall:                               allow the consumer to readily identify
                                                      (1) Where the warranty is a single
                                                                                                               (i) Provide sellers with warranty                  on such Internet Web sites the warranty
                                                    sheet with printing on both sides of the
                                                                                                            materials necessary for such sellers to               terms that apply to the specific product
                                                    sheet or where the warranty is
                                                                                                            comply with the requirements set forth                purchased by the consumer.
                                                    comprised of more than one sheet, the
                                                    page on which the warranty text begins;                 in paragraph (a) of this section, by the                 (3) Paragraph (a)(1) of this section
                                                      (2) Where the warranty is included as                 use of one or more by the following                   shall not be applicable with respect to
                                                    part of a larger document, such as a use                means:                                                statements of general policy on
                                                    and care manual, the page in such                          (A) Providing a copy of the written                emblems, seals or insignias issued by
                                                    document on which the warranty text                     warranty with every warranted                         third parties promising replacement or
                                                    begins;                                                 consumer product;                                     refund if a consumer product is
                                                      (3) Where the warranty is on an                          (B) Providing a tag, sign, sticker, label,         defective, which statements contain no
                                                    Internet Web site or displayed                          decal or other attachment to the                      representation or assurance of the
                                                    electronically, in close proximity to the               product, which contains the full text of              quality or performance characteristics of
                                                    location where the warranty text begins.                the written warranty;                                 the product; provided that
                                                                                                               (C) Printing on or otherwise attaching                (i) The disclosures required by
                                                    PART 702—PRE-SALE AVAILABILITY                          the text of the written warranty to the               § 701.3(a)(1) through (9) of this part are
                                                    OF WRITTEN WARRANTY TERMS                               package, carton, or other container if                published by such third parties in each
                                                                                                            that package, carton or other container               issue of a publication with a general
                                                    ■ 3. The authority citation for part 702                                                                      circulation, and
                                                                                                            is normally used for display purposes.
                                                    continues to read as follows:                                                                                    (ii) Such disclosures are provided free
                                                                                                            If the warrantor elects this option a copy
                                                        Authority: 15 U.S.C. 2302 and 2309.                 of the written warranty must also                     of charge to any consumer upon written
                                                    ■ 4. Amend § 702.1 by revising                          accompany the warranted product; or                   request.
                                                    paragraph (d) and adding paragraph (g)                     (D) Providing a notice, sign, or poster               (c) Catalog and mail order sales. (1)
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                                                    to read as follows:                                     disclosing the text of a consumer                     For purposes of this paragraph:
                                                                                                            product warranty. If the warrantor elects                (i) Catalog or mail order sales means
                                                    § 702.1   Definitions.                                  this option, a copy of the written                    any offer for sale, or any solicitation for
                                                    *     *     *     *     *                               warranty must also accompany each                     an order for a consumer product with a
                                                      (d) Warrantor means any supplier,                     warranted product.                                    written warranty, which includes
                                                    manufacturer, or other person who gives                    (ii) Provide catalog, mail order, and              instructions for ordering the product
                                                    or offers to give a written warranty.                   door-to-door sellers with copies of                   which do not require a personal visit to
                                                    *     *     *     *     *                               written warranties necessary for such                 the seller’s establishment.


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                                                    32686                    Federal Register / Vol. 81, No. 100 / Tuesday, May 24, 2016 / Proposed Rules

                                                       (ii) Close conjunction means on the                  paragraph (b)(2) of this section, the sales           Division of Investment Management,
                                                    page containing the description of the                  representative may provide a copy of                  Securities and Exchange Commission,
                                                    warranted product, or on the page facing                the warranty through electronic or other              100 F Street NE., Washington, DC
                                                    that page.                                              means.                                                20549–8549.
                                                       (2) Any seller who offers for sale to                  By direction of the Commission.                     SUPPLEMENTARY INFORMATION: The
                                                    consumers consumer products with                                                                              Commission intends to issue an order
                                                                                                            Donald S. Clark,
                                                    written warranties by means of a catalog                                                                      under the Investment Advisers Act of
                                                    or mail order solicitation shall:                       Secretary.
                                                                                                            [FR Doc. 2016–12030 Filed 5–23–16; 8:45 am]
                                                                                                                                                                  1940 (‘‘Advisers Act’’ or ‘‘Act’’).1
                                                       (i) Clearly and conspicuously disclose
                                                    in such catalog or solicitation in close                BILLING CODE 6750–01–P                                I. Background
                                                    conjunction to the description of                                                                               Section 205(a)(1) of the Advisers Act
                                                    warranted product, or in an information                                                                       generally prohibits an investment
                                                    section of the catalog or solicitation                  SECURITIES AND EXCHANGE                               adviser from entering into, extending,
                                                    clearly referenced, including a page                    COMMISSION                                            renewing, or performing any investment
                                                    number, in close conjunction to the                                                                           advisory contract that provides for
                                                    description of the warranted product,                   17 CFR Part 275
                                                                                                                                                                  compensation to the adviser based on a
                                                    either:                                                 [Release No. IA–4388; File No. S7–08–16]              share of capital gains on, or capital
                                                       (A) The full text of the written                                                                           appreciation of, the funds of a client.2
                                                    warranty; or                                            Performance-Based Investment                          Congress prohibited these compensation
                                                       (B) The address of the Internet Web                  Advisory Fees                                         arrangements (also known as
                                                    site of the warrantor where such
                                                                                                            AGENCY: Securities and Exchange                       performance compensation or
                                                    warranty terms can be reviewed (if such
                                                                                                            Commission.                                           performance fees) in 1940 to protect
                                                    Internet Web site exists), as well as that
                                                                                                                                                                  advisory clients from arrangements that
                                                    the written warranty can be obtained                    ACTION: Notice of intent to issue order.
                                                                                                                                                                  Congress believed might encourage
                                                    free upon specific request, and the
                                                                                                            SUMMARY:     The Securities and Exchange              advisers to take undue risks with client
                                                    address or phone number where such
                                                                                                            Commission (‘‘Commission’’) intends to                funds to increase advisory fees.3 In
                                                    warranty can be requested. If this option
                                                                                                            issue an order that would adjust for                  1970, Congress provided an exception
                                                    is elected, such seller shall promptly
                                                                                                            inflation, as appropriate, dollar amount              from the prohibition for advisory
                                                    provide a copy of any written warranty
                                                                                                            thresholds in the rule under the                      contracts relating to the investment of
                                                    requested by the consumer (and may
                                                                                                            Investment Advisers Act of 1940 that                  assets in excess of $1,000,000,4 if an
                                                    provide such copy through electronic or
                                                                                                            permits investment advisers to charge                 appropriate ‘‘fulcrum fee’’ is used.5
                                                    other means, if the warrantor has
                                                                                                            performance-based fees to ‘‘qualified                 Congress subsequently authorized the
                                                    elected the option described in
                                                                                                            clients.’’ Under that rule, an investment             Commission to exempt, by rule or order,
                                                    paragraph (b)(2) of this section).
                                                       (ii) [Reserved].                                     adviser may charge performance-based                  any advisory contract from the
                                                       (d) Door-to-door sales. (1) For                      fees if a ‘‘qualified client’’ has a certain          performance fee prohibition if the
                                                    purposes of this paragraph:                             minimum net worth or minimum dollar                   contract is with persons who the
                                                       (i) Door-to-door sale means a sale of                amount of assets under the management
                                                                                                                                                                     1 15 U.S.C. 80b. Unless otherwise noted, all
                                                    consumer products in which the seller                   of the adviser. The Commission’s order
                                                                                                                                                                  references to statutory sections are to the
                                                    or his representative personally solicits               would increase, to reflect inflation, the             Investment Advisers Act, and all references to rules
                                                    the sale, including those in response to                minimum net worth that a ‘‘qualified                  under the Investment Advisers Act, including rule
                                                    or following an invitation by a buyer,                  client’’ must have under the rule. The                205–3, are to Title 17, Part 275 of the Code of
                                                    and the buyer’s agreement to offer to                   order would not increase the minimum                  Federal Regulations [17 CFR 275].
                                                                                                                                                                     2 15 U.S.C. 80b–5(a)(1).
                                                    purchase is made at a place other than                  dollar amount of assets under                            3 H.R. Rep. No. 2639, 76th Cong., 3d Sess. 29
                                                    the place of business of the seller.                    management.                                           (1940). Performance fees were characterized as
                                                       (ii) Prospective buyer means an                                                                            ‘‘heads I win, tails you lose’’ arrangements in which
                                                                                                            DATES:  Hearing or Notification of
                                                    individual solicited by a door-to-door                                                                        the adviser had everything to gain if successful and
                                                                                                            Hearing: An order adjusting the dollar                little, if anything, to lose if not. S. Rep No. 1775,
                                                    seller to buy a consumer product who
                                                                                                            amount tests specified in the definition              76th Cong., 3d Sess. 22 (1940).
                                                    indicates sufficient interest in that
                                                                                                            of ‘‘qualified client’’ will be issued                   4 15 U.S.C. 80b–5(b)(2). Trusts, governmental
                                                    consumer product or maintains                                                                                 plans, collective trust funds, and separate accounts
                                                                                                            unless the Commission orders a hearing.
                                                    sufficient contact with the seller for the                                                                    referred to in section 3(c)(11) of the Investment
                                                                                                            Interested persons may request a
                                                    seller reasonably to conclude that the                                                                        Company Act of 1940 (‘‘Investment Company Act’’)
                                                                                                            hearing by writing to the Commission’s                [15 U.S.C. 80a–3(c)(11)] are not eligible for this
                                                    person solicited is considering
                                                                                                            Secretary. Hearing requests should be                 exception from the performance fee prohibition
                                                    purchasing the product.                                                                                       under section 205(b)(2)(B) of the Advisers Act.
                                                       (2) Any seller who offers for sale to                received by the Commission’s Office of
                                                                                                                                                                     5 15 U.S.C. 80b–5(b). A fulcrum fee generally
                                                    consumers consumer products with                        the Secretary by 5:30 p.m. on June 13,
                                                                                                                                                                  involves averaging the adviser’s fee over a specified
                                                    written warranties by means of door-to-                 2016. Hearing requests should state the               period and increasing or decreasing the fee
                                                    door sales shall, prior to the                          nature of the writer’s interest, the reason           proportionately with the investment performance of
                                                    consummation of the sale, disclose the                  for the request, and the issues contested.            the company or fund in relation to the investment
                                                                                                            Persons who wish to be notified of a                  record of an appropriate index of securities prices.
                                                    fact that the sales representative has                                                                        See rule 205–2 under the Advisers Act; Adoption
                                                    copies of the warranties for the                        hearing may request notification by                   of Rule 205–2 under the Investment Advisers Act
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                                                    warranted products being offered for                    writing to the Commission’s Secretary.                of 1940, As Amended, Definition of ‘‘Specified
                                                                                                            ADDRESSES: Secretary, Securities and                  Period’’ Over Which Asset Value of Company or
                                                    sale, which may be inspected by the                                                                           Fund Under Management is Averaged, Investment
                                                    prospective buyer at any time during the                Exchange Commission, 100 F Street NE.,                Advisers Act Release No. 347 (Nov. 10, 1972) [37
                                                    sales presentation. Such disclosure shall               Washington, DC 20549–1090.                            FR 24895 (Nov. 23, 1972)].
                                                    be made orally and shall be included in                 FOR FURTHER INFORMATION CONTACT:                         In 1980, Congress added another exception to the
                                                                                                                                                                  prohibition against charging performance fees, for
                                                    any written materials shown to                          Amanda Hollander Wagner, Senior                       contracts involving business development
                                                    prospective buyers. If the warrantor has                Counsel, Investment Company                           companies under certain conditions. See section
                                                    elected the option described in                         Rulemaking Office, at (202) 551–6792,                 205(b)(3) of the Advisers Act.



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Document Created: 2016-05-24 05:21:34
Document Modified: 2016-05-24 05:21:34
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionProposed Rules
ActionNotice of proposed rulemaking; request for public comment.
DatesComments must be received on or before June 17, 2016.
ContactGary Ivens, (202) 326-2330, Attorney, Division of Marketing Practices, Federal Trade Commission, 600 Pennsylvania Ave. NW., Washington, DC 20580.
FR Citation81 FR 32680 
RIN Number3084-AB24
CFR Citation16 CFR 701
16 CFR 702
CFR AssociatedTrade Practices and Warranties

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