Federal Trade Commission Seeks Comments on Existing Rule, Two Proposed Rules

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

This week, the Federal Trade Commission (FTC) announced that it was seeking public comments in three rulemaking proceedings. Today, the agency issued a request for comments on its existing Cooling-Off Rule, which governs “door-to-door” sales of consumer goods and services. Yesterday, the agency asked for public comments on a revised proposed rule that would prohibit market manipulation in the petroleum industry and on a new proposal that would require certain vendors of personal health records and related entities to provide notice to consumers following a security breach.

Cooling-Off Rule

As part of its systematic review of its rules and guides, the FTC is seeking public comments on the costs and benefits of its Cooling-Off Rule. The rule, which was put in place in 1972 and last amended in October 1995, makes it an unfair and deceptive practice for anyone engaged in the “door-to-door” sale of consumer goods or services with a purchase price of $25 or more to fail to provide a buyer with certain oral and written disclosures regarding the buyer’s right to cancel within three business days, according to the agency. The FTC is seeking comments on whether modifications to the rule are needed to increase its benefits, reduce its costs, or address relevant changes in technology or economic conditions. The rule, 16 CFR Part 429, appears at CCH Trade Regulation Reporter ¶38,030.

The request for public comment has not yet been published in the Federal Register; however, it is available on the FTC’s website.

Written comments concerning the Cooling-Off Rule must be received no later than June 22, 2009. Comments should refer to “Cooling-Off Rule Regulatory Review, 16 CFR 429, Comment, Project No. P087109.” They should be mailed or delivered to: Federal Trade Commission/Office of the Secretary, Room H-135 (Annex M), 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. Comments can also be submitted in comments in electronic form at: https://secure.commentworks.com/ftc-cooling-offrulereview.

Rule Prohibiting Petroleum Market Manipulation

On April 16, a revised notice of proposed rulemaking was released by the FTC for the proposed rule prohibiting fraudulent conduct that could distort conditions in wholesale petroleum markets. The revised proposal (16 CFR Part 317) follows comments and concerns raised over earlier versions of the proposed rule.

“Like the initially proposed Rule, the revised proposed Rule would prohibit conduct that injects false information into market transactions,” according to the agency’s revised notice. “However, the revised proposed Rule more precisely identifies the conduct prohibited, and thus achieves a more appropriate balance between consumer protection interests and compliance burdens.”

The revised proposed rule would not impose any affirmative duties, obligations, or record-keeping requirements. Instead, it would prohibit a person from knowingly engaging in conduct—including making any untrue statement of material fact—that operates or would operate as a fraud or deceit on any person. In addition, it would prohibit a person from intentionally failing to state a material fact which both makes a given statement misleading under the circumstances and distorts or tends to distort market conditions for a covered product.

Violations of the revised proposed rule, if adopted, could result in the imposition of civil penalties of up to $1 million per violation per day, in addition to any relief available to the Commission under the FTC Act.

The FTC anticipates that the revised proposal will appear in the Federal Register on or about April 21, 2009. It is currently available on the FTC’s website.

Written comments must be received by May 20, 2009. Comments, should be labeled “Market Manipulation Rulemaking, P082900” and sent to: Federal Trade Commission, Market Manipulation Rulemaking, P.O. Box 2846, Fairfax, VA 22031-0846. Courier or overnight deliveries should be delivered to: Federal Trade Commission/Office of the Secretary, Room H-135 (Annex G), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Comments can also be filed in electronic form at: https://secure.commentworks.com/ftc-marketmanipulationRNPRM.

Health Breach Notification Rule

The FTC also released on April 16 a proposed rule authorized by the Health Information Technology for Economic and Clinical Health Act or the "HITECH Act," which was contained in the recently enacted American Recovery and Reinvestment Act of 2009. The Act requires the Commission to issue a temporary rule requiring vendors of personal health records and related entities to notify consumers if the security of their health information is breached.

The proposed rule also stipulates that if a service provider to one of these entities experiences a breach, it must notify the entity, which in turn must notify consumers of the breach. The proposed rule contains additional requirements governing the standard for what triggers the notice, as well as the timing, method, and content of notice. It also requires entities covered by the proposed rule to notify the FTC of any breaches.

The proposed rule would be temporary pending congressional action with respect to establishing requirements for security breach notifications. The HITECH Act requires the Department of Health and Human Services to study, in consultation with the FTC, potential privacy, security, and breach notification requirements and submit a report to Congress containing recommendations by next February.

The Commission proposes to issue the Health Breach Notification Rule as a new Part 318 of 16 CFR. It is anticipated that the notice of proposed rulemaking for the Health Breach Notification Rulemaking, Project No. R911002, will appear in the April 20, 2009, Federal Register. It is currently available on the FTC’s website.

Written comments on the proposal must be received on or before June 1, 2009. Comments should refer to “Health Breach Notification Rulemaking,Project No. R911002.” They should be mailed or delivered to: Federal Trade Commission/Office of the Secretary, Room H-135 (Annex M), 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. Comments can also be filed in electronic form at: https://secure.commentworks.com/healthbreachnotification.