Mitor 2016 Ss - Final

Supporting Statement For
Mail, Internet or Telephone Order Merchandise Rule
16 C.F.R. Part 435
(OMB Control No. 3084-0106)

(1) Necessity for Collecting the Information
Under authority of the FTC Act, 15 U.S.C. § 41 et seq., the Federal Trade Commission
(“FTC” or “Commission”) promulgated the Mail Order Merchandise Trade Regulation Rule, 16
C.F.R. Part 435, the original title of the Rule on October 22, 1975 (40 Fed. Reg. 49,492). The
Rule became effective on February 2, 1976 (40 Fed. Reg. at 49,494). In 1993, the Commission
amended the Rule under authority of Section 18 of the FTC Act, 15 U.S.C. § 57a, to include
merchants who solicited orders for merchandise by telephone (including by telefax or by
computer through the use of a modem), and renamed it the Mail or Telephone Order
Merchandise Rule. 58 Fed. Reg. 49,096 (September 21, 1993). The amended Rule took effect
on March 1, 1994. 58 Fed. Reg. at 49,123. In 2014, Commission amended the Rule, effective
December 8, 2014, to clarify that it covers all Internet merchandise orders and permits
flexibility in making refunds and refund notices, as well as clarifying refund obligations for
non-enumerated payments. 79 FR 55615 (Sept. 17, 2014). The Rule was also renamed the
Mail, Internet, or Telephone Order Merchandise Trade Regulation Rule (“MITOR” or “Rule”).
The MITOR implements Section 5 of the FTC Act, 15 U.S.C. § 45, and is designed to
prevent interstate direct marketers from unilaterally changing the shipment time in a
merchandise sales contract, a material term. Without the Rule, consumers would be faced with
unexplained delays or failures of direct marketers to ship mail or telephone order merchandise,
or failures to provide refunds for unshipped mail or telephone merchandise.
The 1975 rulemaking record for the MITOR -- which included, among other things,
thousands of consumer complaints to state and federal authorities -- demonstrated that many
merchants were failing to: (a) ship mail order merchandise to consumers in the time they
promised or in the time consumers reasonably expected; (b) ship the merchandise at all; and/or
(c) failing to provide prompt or full refunds for unshipped merchandise.
The 1994 rulemaking record demonstrated that, as merchants increasingly turned to the
telephone for soliciting or taking orders for merchandise, the delayed shipment and refund
problems of the mail order industry had migrated to the telephone segment of the direct
marketing industry. When the Commission issued the 1994 amendment, it defined “telephone”
and, by extension, “telephone order sales,” in a manner that would encompass direct sales
through facsimile and the Internet.
The MITOR requires merchants to disclose to customers when shipment is delayed
and, absent customer consent to delayed shipment, to refund customer payments for unshipped

          2 

merchandise.1 All notices of delay must afford consumers the means to exercise their options
at the merchant’s expense. The MITOR also requires the merchant, without being asked, to
cancel the order and make a full and prompt refund whenever: (1) the merchant determines
that it will never be able to ship the merchandise; (2) the merchant fails to provide a required
notice of delay within the originally promised shipment time or within any revised shipment
time; (3) the consumer exercises any cancellation option before the merchant ships; or (4) the
merchant is unable to ship and the consumer fails to agree to delayed shipment within the time
required for expressly agreeing to delay. When the MITOR requires the merchant to make a
refund, it also requires disclosure of this fact, either by the act of making the refund itself
(where the merchandise was paid for originally by cash, check or money order), or by
notifying the consumer that any charge to the consumer’s charge account will be reversed or
that the merchant will take no action that will result in a charge.
The MITOR contains no recordkeeping requirements per se. It establishes, however, a
rebuttable presumption against merchants who lack documentary proof of mechanisms to assure
timely shipments. Similarly, absent supportive records, it is presumed that a merchant has failed
to comply with the Rule’s requirements for timely delay option notices and refunds. See 16
C.F.R. §§ 435.2(a)(4) and 435.2(d).
The Rule’s reasonable basis requirements and associated rebuttable presumptions are
interpreted by prudent industry members as requiring merchants to keep records of at least the
merchant’s procedures for: (1) estimating consumer demand for and securing adequate sources
of supply for each item of merchandise offered for sale by mail, telephone, or the Internet; (2)
receiving and fulfilling orders; (3) accurately recording information relating to each order; and
(4) assuring that the merchant’s usually automated communications with consumers about any
changing fulfillment circumstances comply with the notice and refund provisions of the
MITOR. Merchants customarily keep such records in the ordinary course of business,
however; consequently, their retention of these documents does not constitute a “collection of
information” under OMB’s regulations that implement the Paperwork Reduction Act (“PRA”).
See 5 C.F.R. 1320.3(b)(2).
(2)

Use of the Information

The primary purpose of the Rule’s disclosure requirements is to provide consumers
timely information on the shipment status of their orders, and to afford them the power to
consent to any changed shipment time or to rescind the contract and promptly obtain the return
of their money. Using this information, consumers can seek alternative sources of the
merchandise and make time-effective purchasing decisions. The Rule’s recordkeeping

1
Merchants must seek customer consent for delayed shipment if they cannot ship within the time
initially stated or, if not stated, for delays exceeding 30 days after receiving a properly completed order
from the buyer or, regarding seller-financed orders, delays beyond 50 days thereafter. 16 C.F.R. §
435.2(a)(1)(i)- (ii).

          3 

provisions enable merchants to demonstrate compliance with the Rule and, absent such
substantiation, provide grounds for possible Commission enforcement action for noncompliance.
(3)

Consideration of the Use of Improved Information Technology to Reduce Burden

Information processing hardware and software implicitly can be a part of the “systems
and procedures which assure compliance” alluded to by the rebuttable presumptions regarding
judicial enforcement of the MITOR, 16 C.F.R. §§ 435.2(a)(4) and 435.2(d). Most merchants
currently use -- or employ fulfillment houses that use -- advanced information processing
technology to comply with the Rule. Most merchants record inventory and consumer order
information in computers programmed to generate packing slips and address labels in time for
shipment. For goods that computer systems identify as being on back order, the systems may
also be programmed to generate rule-compliant delay notices or refunds within the times
required by the Rule. Additionally, many merchants and fulfillment houses have acquired and
integrated with their information processing technology bar code scanner capabilities that
provide information in real time on the status of each order, from generating the packing slip to
placing the order in the shipper’s hands. Thus, computerized records of order receipt and
timely shipment or delay notification or refund are the merchant’s primary evidence of rule
compliance.
Under the Commission’s rule review program, patterned loosely after the Regulatory
Flexibility Act, 5 U.S.C. § 601 et seq. (“RFA”), the Commission periodically solicits comments
on ways to minimize the recordkeeping burden demonstrating rule compliance through the use
of automated collection techniques and other forms of information technology. On September
21, 1993, the Commission, in response to input from the direct marketing industry, eliminated
provisions in the MOR that created rebuttable presumptions of non-compliance where the
merchant uses means other than first class mail to provide rule-required delay option notices to
consumers. By eliminating these presumptions the Commission indicated that it would
facilitate the use by industry of other or more convenient means to provide notification, such as
by telephone, 58 Fed. Reg. 49,096, 49,111-12. As Internet sales have grown, so too has the use
of the Internet by businesses to provide these rule-required notifications to consumers.
The Commission has additionally sought input on ways to reduce burden through its
PRA-required notices to the public when seeking OMB clearance to collect information
associated with the MITOR (see item #8 of this Supporting Statement). Finally, consistent
with the Government Paperwork Elimination Act, Pub. L. No. 105-277, Title XVII, 112 Stat.
2681- 749, apart from notifications concerning “prompt refunds” (16 C.F.R. § 435.1(b)),
nothing in the Rule prescribes that disclosures be made, records filed or kept, or signatures
executed, on paper or in any particular format that would preclude the use of electronic
methods to comply with the Rule's requirements.

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(4)

Efforts to Identify Duplication

The original version of the Rule has been in effect since February 2, 1976. Throughout,
FTC staff have worked closely with the industry. Staff attorneys practicing in this area verify
that the disclosure and substantiation requirements of the rule do not duplicate any other
requirements.
(5)

Efforts to Minimize Burden on Small Organizations

The Rule’s disclosure and substantiation requirements are designed to impose minimal
burden on affected members of the industry, regardless of size. The Commission’s 1986 RFA
review of the Rule found that, based on an industry-wide survey of direct marketers, nearly half
of all small and large firms surveyed reported no incremental compliance costs and that an
additional 27% reported compliance expenditures less than $500 annually. Among affected
entities, 81% of small businesses and 65% of large businesses reported that eliminating the Rule
would not alter their business practices because “[m]ost mail order firms, large and small, feel
the concept of the [Mail Order] rule is sound business practice that enhances the growth and
development of a mail order business and they do not wish to have the Rule eliminated.” See
51 Fed. Reg. 1516, 1517 (Jan. 14, 1986). Moreover, in promulgating the 1994 amendments,
the Commission found during its related RFA analysis of the then proposed amendments that
the amended Rule would not have a significant impact upon a substantial number of small
entities. See 58 Fed. Reg. at 49,118-20.
As part of an ongoing review of its rules, the Commission continues to examine the
MITOR to determine, among other things, whether new technology or changes in technology
can be used to reduce regulatory burdens that the Rule may impose.
(6)

Consequences of Conducting the Collection Less Frequently

The substantiation requirements of the Rule ensure that consumers are provided
reliable shipment information in the merchant’s solicitation of order sales and in
required notifications of delay. The disclosure and refund requirements ensure that
consumers are notified of delays and empowered to cancel orders and obtain prompt
refunds in delayed shipment situations. Doing less this would circumvent the Rule’s
purpose.
(7)

Circumstances Requiring Collection Inconsistent With Guidelines

The collection of information in the Rule is consistent with all applicable guidelines
contained in 5 C.F.R. § 1320.5(d)(2).

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(8)

Consultation Outside the Agency

In connection with the instant PRA clearance request, the FTC sought public comment on
the Rule’s information collection requirements and on the associated estimates of PRA burden.
See 81 Fed. Reg. 2,860 (January 19, 2016). The Commission received two comments but neither
one addressed the issues raised by the public comment request. Pursuant to the OMB regulations
that implement the PRA (5 C.F.R. Part 1320), the FTC is providing a second opportunity for
public comment while seeking OMB approval to extend the existing paperwork clearance for the
Rule.
(9)

Payments and Gifts to Respondents
Not applicable. The Rule contains no provisions for payments or gifts to respondents.

(10) & (11) Assurances of Confidentiality/Matters of a Sensitive Nature
To the extent that the Commission collects information for law enforcement purposes
under the Rule’s recordkeeping provisions, the confidentiality measures of Section 21 of the
FTC Act, 15 U.S.C. § 57b-2, will apply.
(12)

Estimated Burden/Associated Labor Costs

Estimated total annual hours burden: 1,953,840 hours
In its 2012-2013 PRA-related Federal Register Notices2 and corresponding submission to
OMB, FTC staff estimated that established companies each spend an average of 50 hours per
year on compliance with the Rule, and that new industry entrants spend an average of 230 hours
(an industry estimate) for compliance measures associated with start-up.3 Thus, the total
estimated hours burden was calculated by multiplying the estimated number of established
companies x 50 hours, multiplying the estimated number of new entrants x 230 hours, and
adding the two products.
No substantive provisions in the Rule have been amended or changed since staff’s prior
submission to OMB. Thus, the Rule’s disclosure requirements remain the same. Moreover, no
public comments were received regarding the above-noted estimates; thus, staff will apply them
to the current PRA burden analysis.
Since the prior submission to OMB, however, the number of businesses engaged in the

2
77 FR 64994 (Oct. 24, 2012); 78 FR 5443 (Jan. 25, 2013).
3

Most of the estimated start-up time relates to the development and installation of computer systems
geared to more efficiently handle customer orders.

          6 

sale of merchandise by mail or by telephone has changed. Data from the U.S. Census Bureau4 
indicates that, between 2000 and 2008, the number of businesses subject to the MITOR grew
from 11,800 to 21,900, or an average increase of 1,263 new businesses a year [(21,900
businesses in 2008 - 11,800 businesses in 2000) ÷ 8 years].5 Assuming this growth rate
continued in 2009 through 2015, and continues in 2016 through 2018, the average number of
established businesses during the three-year period for which OMB clearance is sought for the
Rule would be 33,267: 6
Year:

Established Businesses

New Entrants

2016

32,004

1,263

2017

33,267

1,263

2018

34,530

1,263

Average:

33,267

1,263

In an average year during the three-year OMB clearance period, staff estimates that
established businesses and new entrants will devote 1,953,840 hours, to comply with the MITOR
[(33,267 established businesses x 50 hours) + (1,263 new entrants x 230 hours) = 1,953,840].
The estimated PRA burden per merchant to comply with the MITOR is likely overstated.
The mail-order industry has been subject to the basic provisions of the Rule since 1976 and the
telephone and Internet order industry since 1994. Thus, businesses have had several years (and
some have had decades) to integrate compliance systems into their business procedures.
Moreover, arguably much of the estimated time burden for disclosure-related compliance would
be incurred even absent the Rule. Industry trade associations and individual witnesses have
consistently taken the position that providing consumers with notice about the status of their

4
See Table 1048, “Retail Trade--Establishments, Employees, and Payroll,” U.S. Census Bureau,
(2012), http://www2.census.gov/library/publications/2011/compendia/statab/131ed/tables/12s1048.xls.  

5

Conceptually, this might understate the number of new entrants in that it does not factor in the
possibility that established businesses from an earlier year’s comparison might have exited the market
preceding the later year of measurement. Given the virtually unlimited diversity of retail
establishments, it is very unlikely that there is a reliable external measure of such exit; nonetheless, as
in the past, the Commission invites public comment that might better inform these estimates.
6

As noted above, the existing OMB clearance for the Rule expires on April 30, 2016, and the FTC is
seeking to extend the clearance for three years.

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orders fosters consumer loyalty and encourages repeat purchases, which are important to direct
marketers’ success. Accordingly, the Rule’s notification requirements would be followed in any
event by most merchants to meet consumer expectations regarding timely shipment, notification
of delay, and prompt and full refunds. Thus, it appears that much of the time and expense
associated with Rule compliance may not constitute “burden” under the PRA.7
Estimated labor costs: $44,879,705
FTC staff derived labor costs by applying appropriate hourly cost figures to the burden
hours described above. According to the most recent data available from the Bureau of Labor
and Statistics,8 the mean hourly income for workers in sales and related occupations was
$21.92/hr. The bulk of the burden of complying with the MITOR is borne by clerical personnel
along with assistance from sales personnel. Staff believes that the mean hourly income for
workers in sales and related occupations is an appropriate measure of a direct marketer’s average
labor cost to comply with the Rule. Thus, the total annual labor cost to new and established
businesses for MITOR compliance during the three-year period for which OMB approval is
sought would be approximately $44,879,705 (1,953,840 hours x $22.97/hr.). Relative to direct
industry sales, this total is negligible.9
(13)

Capital and Other Non-labor Costs

Estimated annual non-labor cost burden: $0 or minimal
The applicable requirements impose minimal start-up costs, as businesses subject to the

7
Conceivably, in the three years since the FTC’s most recent clearance request to OMB for this Rule,
many businesses have upgraded the information management systems needed to comply with the Rule
and to track orders more effectively. These upgrades, however, were primarily prompted by the
industry’s need to deal with growing consumer demand for merchandise (resulting, in part, from
increased public acceptance of making purchases over the telephone and, more recently, the Internet).
Accordingly, most companies now provide updated order information of the kind required by the Rule
in their ordinary course of business. Under the OMB regulation implementing the PRA, burden is
defined to exclude any effort that would be expended regardless of any regulatory requirement. 5 CFR
1320.3(b)(2).
8

See Table 1, National employment and wage data from the Occupational Employment Statistics
survey by occupation, May 2015, at http://www.bls.gov/news.release/ocwage.t01.htm.

9

Considering that sales for “electronic shopping and mail-order houses” grew from $235 billion in
2009 to $348 billion in 2013 (according to “Estimated Annual Sales of U.S. Retail and Food Services
Firms by Kind of Business: 1992 Through 2013,” available at
http://www.census.gov/econ/isp/sampler.php?naicscode=454111&naicslevel=6?cssp=SERP, staff
estimates the annual mail, Internet, or telephone sales to consumers in the three-year period for which
OMB clearance is sought will average $461 billion. Thus, the projected average labor cost for MITOR
compliance by existing and new businesses for that period would amount to 0.01% of sales.

          8 

Rule generally have or obtain necessary equipment for other business purposes, i.e., inventory
and order management, and customer relations. For the same reason, staff anticipates printing
and copying costs to be minimal, especially given that mail, Internet, and telephone order
merchants have increasingly turned to electronic communications to notify consumers of delay
and to provide cancellation options. Staff believes that the above requirements necessitate
ongoing, regular training so that covered entities stay current and have a clear understanding of
federal mandates, but that this would be a small portion of, and subsumed within, the ordinary
training that employees receive apart from that associated with the information collected under
the Rule.
(14)

Estimated Cost to the Federal Government

The estimated yearly cost to the Federal Government resulting from MITOR
enforcement activities, including benefits and overhead costs, is $270,000, which is based on
the assumption that the Rule’s enforcement will entail one full attorney/economist work-year
($175,000), clerical and other support services ($75,000), and overhead costs ($20,000).
(15)

Program Changes/Adjustments

The slight increase in annual burden hours [from 1,764,390 (2013) up to 1,953,840 in
2016] is an adjustment accounting for slightly more estimated established businesses now
(29,478 in 2013 and 33,267 in 2016). Also, the annual labor costs go from $31,830,000 (2013)
up to $44,879,705 in 2016, in part because the hourly rate is slightly higher ($18.04/hour in
2013 and $22.97/hour in 2016) and in part because the annual hours are slightly higher because
there are more estimated established businesses.
(16)

Statistical Use of Information
There are no plans to publish for statistical use any information required by the Rule.

(17)

Display of the Expiration Date for OMB Approval
Not applicable.

(18)

Exceptions to the “Certification for Paperwork Reduction Act Submissions”
Not applicable.