Guides for the Rebuilt, Reconditioned and Other Used Automobile Parts Industry |
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Donald S. Clark
Federal Trade Commission
July 14, 2014
[Federal Register Volume 79, Number 134 (Monday, July 14, 2014)]
[Rules and Regulations]
[Pages 40623-40629]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-16339]
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FEDERAL TRADE COMMISSION
16 CFR Part 20
Guides for the Rebuilt, Reconditioned and Other Used Automobile
Parts Industry
AGENCY: Federal Trade Commission (FTC or Commission).
ACTION: Final Revisions to Guides.
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SUMMARY: The Commission has completed its review of the Guides for the
Rebuilt, Reconditioned and Other Used Automobile Parts Industry (Used
Auto Parts Guides or Guides) and has determined to revise and retain
the Guides.
DATES: This action is effective as of August 22, 2014.
ADDRESSES: The document is available on the Internet at the
Commission's Web site, www.ftc.gov.
FOR FURTHER INFORMATION CONTACT: Jonathan L. Kessler, Federal Trade
Commission, 1111 Superior Avenue, Suite 200, Cleveland, Ohio 44114,
(216) 263-3436, jkessler@ftc.gov.
SUPPLEMENTARY INFORMATION:
I. Introduction
The market for previously used automobile parts encompasses a broad
range of parts and assemblies of parts previously used on vehicles
(collectively, industry products or products). Industry products range
from mechanical or body parts removed from a salvaged vehicle and put
on a working vehicle without modification of any kind to parts that,
after removal from the original vehicle, undergo substantial
disassembly, rebuilding, inspection, and, in some instances, upgrading
from their original condition, before being returned to service. The
availability of these parts means vehicles stay in service longer and
for a lower price than if consumers had to rely only on new parts from
the manufacturer. One commenter asserted that without rebuilt or
remanufactured parts, 25% of the vehicles currently on the road, and a
higher percentage of off-road vehicles (e.g., construction and farm
equipment) would be out of service.\1\ Savings to consumers from using
rebuilt or remanufactured parts range from 20-50%.\2\
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\1\ Automotive Parts Remanufacturers Association (APRA), p. 1.
\2\ Id., p. 1; Motor & Equipment Manufacturers Association
(MEMA), pp 1-2 (MEMA submitted comments on behalf of its affiliated
organization, Motor & Equipment Remanufacturers Association.)
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The Guides for the Rebuilt, Reconditioned and Other Used Automobile
Parts Industry (Used Auto Parts Guides or Guides) provide advice to
industry members on how they can avoid engaging in unfair or deceptive
practices that violate Section 5 of the Federal Trade Commission Act,
15 U.S.C. 45.\3\ The Guides deem certain practices to be unfair or
deceptive, including the following:
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\3\ The final revised guides contain a new paragraph (b) in
section 20.0 describing the purpose and status of the guides, which
is consistent with the Commission's long standing treatment of its
industry guides. See 16 CFR 1.5.
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1. Misrepresenting industry products as new or misrepresenting the
amount of use of an industry product;
2. Misrepresenting the identity of anyone who worked on an industry
product after it was removed from the original vehicle;
3. Misrepresenting the condition of an industry product or the
amount of work done to it after its removal from the original vehicle.
II. Regulatory Review of the Guides
As part of its continuing program to review its rules and guides,
the Commission published a notice in the Federal Register on May 21,
2012, seeking written comments about the Used Auto Parts Guides,
including their costs, benefits, and scope.\4\ Twelve
[[Page 40624]]
comments were received.\5\ Five of the commenters expressed support for
the Guides because of the benefits they provide for consumers and/or
the marketplace and suggested no specific changes.\6\ Three commenters
recommended changes but also expressed support for the Guides.\7\ Two
commenters expressly made their support for the Guides contingent on
the Commission accepting their suggested changes.\8\ The two remaining
commenters were not clear about their support for the Guides.\9\
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\4\ 77 FR 29922 (May 21, 2012).
\5\ The commenters consisted of (a) six trade associations:
American Insurance Association (AIA), Automotive Parts
Remanufacturers Association, Automotive Recyclers Association (ARA),
Electric Rebuilders Association, Global Automakers, and Motor &
Equipment Manufacturers Association; (b) three consumer
organizations: American Automobile Association (AAA), Consumers
Union, and RetireSafe; (c) two businesses: Bryner Chevrolet (Bryner)
and United Auto Supply; and (d) one individual, Andrew Stilnovic.
The Commission has decided to accept and consider the delayed
submission of the AIA. This entity contacted the agency on August
14, 2012, eleven days after the August 3, 2012, close of the comment
period, stating that it had tried to submit its comments online and
thought it had done so successfully, but that its submission did not
appear on the Commission's Web site with the other comments. The
Commission notes that the document the AIA submitted on August 14 is
dated August 3, 2012, and accepts the AIA's explanation that it
thought it had submitted the comments on time.
The Commission declines to accept a secondary submission from
MEMA after the close of the comment period on August 3, 2012. On
August 28, 2012, MEMA sent a letter to then-Commission Chairman
Leibowitz, along with proposed revisions to the Guides that would
implement the suggestions in its original comment. MEMA did not
explain its failure to include these materials in its original
submission, which was timely. Thus, the Commission declines to
accept the August 28 submission.
\6\ AIA, p. 1 (``[T]he current Guides provide a level of
consistency for the repair and insurance industries . . . We do not
believe there are any changes needed at this time.''); Consumers
Union, p. 1 (The Guides provide ``a basic and necessary protection
for consumers,'' and are still needed ``to protect consumers from
deceptive practices and maintain high standards in the used car
industry.''); Electric Rebuilders Association, pp. 1-2 (The Guides
``provide clear and readily understandable rules for the marketing
of used parts and the steps which must be taken before a used part
can be sold as rebuilt or remanufactured.''); Global Automakers, p.
1 (``The Guides provide important safeguards for consumers and
should be retained.'' The terms used to describe automobile parts
(original equipment manufacturer, aftermarket, rebuilt,
remanufactured, salvaged, used) can be very confusing and without
the Guides ``consumers may not have the information they need to
make informed purchase decisions.''); RetireSafe, p. 1 (The Guides
``are well-crafted to protect consumers,'' and the FTC should
``avoid imposing any new regulatory burdens that may lead to
additional costs being passed along to consumers.'').
\7\ AAA, p. 1 (``AAA believes that the current FTC guidelines
are extremely important to ensure that vehicle equipment information
is accurately identified and labeled to avoid any confusion by
consumers and automotive service and repair technicians. Overall,
AAA endorses the Commission's Used Auto Parts Guides and believes
they should be retained.''); APRA, p. 2 (``The Association believes
that the Guides are an important tool to ensure that previously used
motor vehicle parts are properly identified and that parts labeled
as `rebuilt' or `remanufactured' have received reconditioning
appropriate to the use of those terms. Therefore, except for a few
modifications suggested later in this letter, the Association
believes that the Guides should be retained in their current
form.''); Stilnovic (``These guides are most definitely needed in
this industry.'').
\8\ ARA, p. 1 (``ARA's continued support of the publication of
the Guides is only possible if amended.''); MEMA, p. 1 (``[T]he
Guides are outdated and outmoded because they suggest that
remanufactured automotive products and various used automotive
products are largely equivalent . . . .''), p. 5 (``We urge the FTC
not to finalize the Guides in the current format, . . . . [T]he
Commission should overhaul the Guides to reflect this ongoing
evolution of the remanufacturing industry.'').
\9\ Bryner (``THANK YOU for addressing this issue . . . . The
main concern I have with used parts is safety.'') (emphasis in
original); United Auto Supply (``[I]t has been my experience that in
MOST cases, commonly sold rebuilt/remanufactured/used aftermarket
parts are clearly labeled and described correctly to the purchaser .
. . . It has also been my experience that the marketplace quickly
punishes anyone selling sub-standard parts of any kind, new,
rebuilt, remanufactured, or used. I think there is a need for
careful regulation, but there exists a risk if those regulations are
hard to comply with . . . . It is my view that this problem is very
well regulated by the marketplace. I am unaware of any major
problems with mislabeled or misleading auto parts other than
counterfeit parts which is another issue.'').
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The Commission has determined to retain and revise the Guides. The
comments show a continuing need for the Guides for the benefits they
provide, including both protections for consumers and clarity for
industry members.\10\ Further, the Guides do not appear to impose
substantial costs; none of the commenters stated that compliance with
the Guides is burdensome. On balance, it appears that the benefits of
the Guides outweigh their costs. Therefore, the record supports
retaining them. In addition, as set forth below, the record supports
certain changes to the Guides. The Commission has considered numerous
other changes proposed by commenters and concluded not to adopt them.
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\10\ See generally supra, note 6.
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The remainder of this Section II summarizes the record and explains
the Commission's decisions as to specific items.
A. Terms Used To Describe Industry Products
Several commenters suggested that the Commission modify the Guides
to define additional terms used to describe industry products. These
commenters believed such definitions would further inform consumers as
to the amount of work done on an industry product after its removal
from the original vehicle.\11\ Industry products come in a broad range
of conditions. The current Guides define the terms ``rebuilt,''
``remanufactured,'' and ``factory rebuilt,'' \12\ but they also
mention, ``used,'' ``secondhand,'' ``repaired,'' ``reconditioned,'' and
``relined'' as examples of ``appropriate descriptive terms'' for
industry products while leaving these terms undefined.\13\ Commenters
suggested a rough hierarchy of industry products, with ``rebuilt'' and
``remanufactured'' describing products receiving the most reworking and
``used'' or ``salvaged'' the least.\14\
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\11\ See APRA, p. 2 (the Guides need to distinguish between a
part on which no work has been done and a part on which some work
has been done but not enough to qualify as ``rebuilt'' or
``remanufactured''); Bryner, p. 1 (parts from a salvage yard should
be labeled as such; ``recycled'' implies some work on a previously
used part); MEMA, pp 3-4 (specify that ``remanufactured'' parts are
neither new nor used); but see, AAA, p. 1 (the current guides are
important to ensure accurate identification and labeling of parts);
AIA, p. 1 (the current terms are appropriate and not in need of
changing).
\12\ 16 CFR 20.3.
\13\ 16 CFR 20.1(b).
\14\ APRA, pp. 2, 5; Global Automakers, p. 1; MEMA, pp. 3-4; and
Bryner.
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The Commission recognizes that it is possible consumers might
benefit from additional specificity in the meaning of terms used to
refer to industry products, but based on the record, with one
exception, it has determined not to change the way industry products
are described. With the exception of MEMA, the commenters on this topic
failed to identify what terms the Guides should define or to propose
definitions for those terms. Moreover, overall, the commenters
supported the Guides and believed they have been effective. In light of
this support and the lack of comments suggesting specific definitions,
the Commission believes the record supports only the one change
described below, concerning the term ``remanufactured.''
MEMA argued specifically that the Guides should be amended so as to
differentiate ``remanufactured'' from ``rebuilt''; the Guides now treat
these terms as equivalent. MEMA asserted, without providing supporting
data or other evidence, that including remanufactured products in the
same category as products sold with little or no reworking confuses
consumers. MEMA also argued that its definition of remanufactured
comports with how international trade agreements use the word.\15\
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\15\ MEMA, pp. 2-3.
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MEMA proposed applying the term ``remanufactured'' only to industry
products ``produced using a
[[Page 40625]]
standardized industrial process by which previously sold, worn or non-
functional products are returned to same-as-new, or better, condition
and performance.'' \16\ The standardized process, according to MEMA, is
done in a factory and requires ``technical specifications, including
engineering, quality, and testing standards to yield fully warranted
products.'' \17\ The process incorporates upgrades and corrects defects
identified since the product first went on a vehicle.\18\ MEMA urged
the Commission ``not to finalize the Guides in the current format,
which does not properly recognize the significant advancements made by
the U.S. remanufacturing industry over the past 30 years.'' \19\
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\16\ Id., (emphasis in original).
\17\ Id., p. 3 (emphasis in original).
\18\ MEMA distinguishes ``remanufactured'' from ``rebuilt''
parts. According to MEMA, an individual can rebuild a part without
following the same procedure every time, and any specific rebuilt
part may contain a high percentage of the components it originally
contained. As we understand it, MEMA's definition of remanufacturing
involves complete disassembly of an industry product into
components. An assembly line starts with one component, and as the
line advances additional components are added, some new, some,
perhaps, used. At the end of the line the remanufactured part is
complete. Each remanufactured part, however, may contain few, if any
components that were together originally, and assembly of each
remanufactured part follows the same procedure. The remanufacturing
process incorporates any upgrades, and corrects any defects
identified, since the part was made originally, changes that,
according to MEMA, may not occur in a part that is ``factory
rebuilt,'' as that term is defined in the Guides. See 16 CFR 20.3.
\19\ MEMA, p. 5.
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The Commission declines to adopt MEMA's proposed definition of
``remanufactured,'' but, as discussed below, is revising the Guides to
provide that the term ``remanufactured,'' like the term ``factory
rebuilt,'' should be used only if the product was rebuilt ``in a
factory generally engaged in the rebuilding'' of industry products. The
Commission declines to adopt MEMA's proposed definition of
``remanufactured'' because the Commission does not have a basis to
believe that MEMA's specific proposal will necessarily improve
consumers' understanding of the difference between remanufactured
products and other industry products.\20\ In addition, the record does
not identify any costs or confusion resulting from definitions in the
Guides not matching those in international trade agreements.
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\20\ Moreover, assuming, without deciding, that industry
products meeting MEMA's definition of ``remanufactured'' are
superior to ``rebuilt,'' ``factory rebuilt,'' or other industry
products, adopting MEMA's proposed definition is not necessary to
communicate this difference. Indeed, MEMA noted that it is
developing ``a certification program that will let consumers and
commercial customers know that remanufactured parts from MERA are
truly remanufactured.'' MEMA, p. 4 (MERA stands for Motor &
Equipment Remanufacturers Association, an affiliate of MEMA.) The
program would include ``a process certification seal that can be
affixed to the part and/or box and used in advertising and other
promotional materials by participating companies.'' Id.
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MEMA's comments, however, provided evidence that ``remanufacture''
involves a process performed in a factory setting in a way that
``rebuilt'' does not.\21\ The Commission has, therefore, decided to
change Sec. 20.3 to delete ``remanufacture'' from subsection (a) and
add it to subsection (b). Whereas the Guides currently impose the same
requirements on use of the terms ``remanufactured'' and ``rebuilt,''
the revised Guides provide the same requirements for the use of the
terms ``remanufactured'' and ``factory rebuilt.''
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\21\ MEMA, pp. 2-3. This distinction is also supported by
reference to prevailing understandings of the terms. For example,
Webster's Third New International Dictionary defines ``manufacture''
both as a noun (``the process or operation of making wares or other
material products by hand or by machinery esp. when carried on
systematically with division of labor'') and as a verb (``to produce
according to an organized plan and with division of labor'').
Webster's Third New International Dictionary 1378 (2002).
``Rebuilt,'' by contrast involves extensive repairs, reconstruction,
restoration to a previous state, or remodeling, but does not
indicate a systematic process. See id. at 1893.
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B. Disclosures
The May 2012 Federal Register Notice posed two questions about the
disclosures required by the Guides: (1) should the Guides define
``clear and conspicuous,'' and (2) should the Guides specify when an
installer of an industry product must disclose the use of that product
to the consumer.
1. Clear and Conspicuous
The Guides provide that ``clear and conspicuous'' disclosure that
the product is used or contains used parts should be made when industry
products are advertised or sold. These disclosures should appear in
advertisements and promotional literature, on invoices, on packaging,
and on the product itself. The current Guides suggest some descriptive
terms to describe a product's condition--``used,'' ``secondhand,''
``repaired,'' ``remanufactured,'' ``reconditioned,'' ``rebuilt,'' and
``relined'' \22\--and allow codes to describe the products on invoices
between different sellers.\23\ Beyond these statements, however, the
Guides do not prescribe specific methods for providing ``clear and
conspicuous'' disclosures.
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\22\ ``Recycled'' may also be used if its usage complies with
the Guides for the Use of Environmental Marketing Claims, 16 CFR
260.7(e).
\23\ 16 CFR 20.1(b) (2013).
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One commenter responded on this point. The APRA suggested that the
Guides return to the language from before their 2002 revisions. Before
these revisions, the Guides not only gave examples of terms to describe
industry products,\24\ but also defined ``conspicuous.'' Conspicuous
disclosures were:
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\24\ 16 CFR 20.1(b)(1) (2000).
of such size or color contrast and so placed as to be readily
noticeable to purchasers or prospective purchasers reading
advertising, sales promotional literature, or invoices containing
same, or reading any representation as to content on the container
in which an industry product is packed, or inspecting an industry
product before installation, or with a minimum of disassembly after
installation.\25\
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\25\ 16 CFR 20.1(b)(2) (2000).
The APRA provided no data or other evidence on this point, but it
believes that the pre-2002 language was ``clearer and provided industry
participants with a better understanding of how the quality of the part
and the identity of the producer of the part had to be identified.''
\26\
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\26\ APRA, p. 9.
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The Commission has decided not to change the current language
regarding clear and conspicuous. The current Guides afford businesses
flexibility in complying with the Guide's disclosure provisions and
avoid a definition that is too narrow to apply to the myriad situations
in which a disclosure may be needed. Moreover, the record does not
indicate that sellers of industry products are having difficulty
understanding or applying the current language.\27\ Therefore, the
Commission has decided not to change this section of the Guides.
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\27\ In certain circumstances, the Guides do provide more
information about the placement and conspicuousness of disclosures.
See 16 CFR 20.2(b).
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2. Timing of Disclosures
Three commenters addressed the timing of disclosures to consumers,
responding to the Federal Register Notice's request for input on
whether the Guides should be changed to specify when an installer of an
industry product must disclose the use of the product to a
consumer.\28\
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\28\ The Guides would apply if the installer also manufactures,
sells, distributes, markets, or advertises the industry product.
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The AAA suggested that verbal disclosure of an industry product be
required when an installer seeks verbal authorization to proceed with a
repair. The AAA also suggested that signs in the installer's facility
should state that industry products may be used and that
[[Page 40626]]
use of an industry product be disclosed on the consumer's invoice. The
AAA further recommended that engines, transmissions, and other
assemblies represented to have ``low mileage'' be accompanied by
documentation of their conditions, such as pictures and Carfax
reports.\29\
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\29\ AAA, p. 2. Carfax is a private company that, for a fee,
provides title and insurance reports on specific vehicles, including
any insurance claims for repairs. The claims history may alert a
prospective purchaser of the car to check carefully for latent
problems.
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The APRA asserted that the Guides complement laws in some states
that require mechanics to disclose the use of industry products and
that without the Guides such disclosures would be ``more difficult and
less effective.'' \30\ The APRA, however, also asserts that disclosures
by installers should be regulated by state or local agencies.\31\
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\30\ APRA, p.5.
\31\ Id., pp. 9-10.
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Mr. Stilnovic suggested that car dealers provide consumers
interested in used cars with a pamphlet alerting the consumers to the
Guides and disclosing any industry products in the vehicle the consumer
is considering.
None of these commenters provided data or other evidence to support
their positions or indicate the extent of the problems they address,
and the Commission has determined not to modify the Guides without such
information. The AAA's suggestions on disclosure have intuitive appeal.
The existing record, however, does not contain specific evidence of a
problem with the timing of disclosures, nor does the Commission possess
other evidence of such a problem. The Commission will monitor
developments in this area and revise the Guides if evidence of problems
with the timing of disclosures about industry products arises.
Mr. Stilnovic's suggestion of a pamphlet disclosure given in
connection with used cars would impose burdens on dealers, with
uncertain benefits for consumers. The disclosure would inform consumers
of the Guides, but such generic information may well be of little value
at the time, when the consumer's focus is on the purchase of the
vehicle, not on a specific part. In addition, requiring a dealer to
disclose any industry products in a vehicle could require the dealer to
disclose information it does not have, such as in situations when the
dealer buys the vehicle at auction. For these reasons, the Commission
has chosen not to adopt this suggestion.
C. Coverage of the Guides
The May 2012 Federal Register Notice requested comments on whether
tires should be covered by the Guides and whether the existing list of
vehicles to which the Guides applied was sufficient or whether off-road
vehicles such as all-terrain vehicles, construction vehicles, and dune
buggies should be covered.\32\ Several commenters discussed one or more
of these topics, although with little analysis or data to support their
positions. The Commission has decided to add tires to the Guides, but
not to change the description of vehicles whose parts are covered by
the Guides.
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\32\ 77 FR 29922, 29923-29924 (May 21, 2012).
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1. Tires
The current Used Auto Parts Guides expressly state that they do not
apply to tires because tires are covered by a separate guide.\33\ When
the Used Auto Parts Guides were last reviewed, tires were covered by
the Tire Advertising and Labeling Guides, which have since been
rescinded.\34\ The rescission announcement stated that changes in
technology and tire marketing had made most of those guides obsolete
and that intervening regulations by the National Highway Traffic Safety
Administration already required disclosure of information consumers
were likely to want when purchasing tires; the few remaining provisions
of the tire guides did not warrant keeping them as a separate
regulation. The rescission announcement noted that used and retreaded
tires are seldom found in the consumer market but account for as much
as 60% of the large truck market. The rescission announcement also
noted that the failure to disclose that a tire was used or retreaded
would likely constitute deception in violation of Section 5 of the FTC
Act.\35\
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\33\ 16 CFR 20.0.
\34\ 69 FR 56932 (September 23, 2004).
\35\ 69 FR at 56933.
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The Commission believes the Used Auto Parts Guides should now apply
to tires. The risk of overlap or contradiction between the Guides and
the tire guides no longer exists, and continuing to exclude tires from
the Used Auto Parts Guides could be interpreted to mean that sellers
need not disclose when tires are used or retreaded. The Commission
notes that two of the three commenters on this topic support having the
Guides apply to tires.\36\ Therefore, Sec. 20.0 of the Guides has been
changed to remove the last sentence, which contains the exclusion, and
to add tires to the example list of industry products.
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\36\ ARA, p. 7 (include tires in the Guides, but require ``a
visual appearance inspection and tread depth evaluation to determine
whether a tire should be resold''); Stilnovic (include tires in the
Guides so consumers know what they are getting). The Commission
declines to adopt ARA's inspection and evaluation requirements
because the purpose of the Guides is to provide notice to consumers,
not to establish quality standards.
The third commenter on this topic urged continued exclusion of
tires because the terms used in the Guides to describe industry
products have not been applied to used tires or ``mean something
different when applied to tires,'' creating the potential for
confusion. APRA, p. 13. The Commission does not believe the
likelihood of confusion outweighs the benefits of ensuring that used
tires are sold in a non-deceptive manner. Sellers of used tires are
not required to use any of the terms mentioned in the Guides and may
continue to use terms they have used in the past as long as the use
is not deceptive.
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2. Vehicles Whose Parts Are Covered by the Guides
The current Used Auto Parts Guides apply to parts ``designed for
use in automobiles, trucks, motorcycles, tractors, or similar self-
propelled vehicles.'' \37\ The Commission requested comments on whether
this list adequately described the vehicles to which the Guides should
apply. The APRA, the only commenter on this issue, advocated expressly
including off-road vehicles in the Guides because the benefits of
industry products are the same for owners of these vehicles as for
owners of on-road vehicles and compliance by businesses would be easy.
The APRA, however, did not identify existing buyer deception or seller
confusion from the existing language.
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\37\ 16 CFR 20.0.
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The Commission has decided not to change the language in the Guides
that describes the vehicles covered. From the single comment, the
Commission cannot determine that a need for change exists or that any
change would not have adverse effects that a more thorough record would
reveal. Although it declines to amend the Guides in this regard, the
Commission notes it has the authority to pursue sellers who deceive
buyers of any product about that product's previous use or reworking.
Section 5's broad prohibition against unfair and deceptive acts or
practices continues to apply in these situations, regardless of whether
the products are covered by the Guides.
D. Education
The May 21, 2012, Federal Register Notice asked if there is a need
to educate consumers or businesses about the Guides. Several commenters
responded that there is such a need, and the AAA offered to collaborate
with the
[[Page 40627]]
Commission on educational efforts.\38\ Similarly, the APRA encouraged
the FTC to promote the Guides on its Web site, through private
organizations, and consumer brochures.\39\
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\38\ AAA, p. 2.
\39\ APRA, p. 12.
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The ARA urged the FTC to educate consumers about the potential
biases of manufacturers promoting original parts.\40\ MEMA requested
that the Commission educate the public on the quality and benefits of
remanufactured products and to support MEMA's ``Manufactured Again''
certification program.\41\ Mr. Stilnovic urged education regarding the
potential presence of industry products in used cars. He also suggested
that the Commission provide data showing how long industry products
lasted versus new products, so consumers could make more informed
decisions.
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\40\ ARA, p. 2.
\41\ MEMA, pp. 2, 4.
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No change to the Guides is needed for the Commission to augment its
educational efforts on this issue, and accordingly, no change has been
made on this topic. The Commission will continue to look for
opportunities to educate consumers about the benefits and drawbacks of
industry products and to educate businesses about their obligations
when selling such products.
E. Other Comments
Commenters mentioned other topics, not discussed above.
1. American Automobile Association
The AAA suggests that ten additional items be added to the forty-
seven examples in the current Guides of parts that might be sold as
industry products.\42\ The Commission believes the examples should be
up-to-date, but stresses that the Guides provide examples of industry
products, and not an exhaustive list. Accordingly, the revised Guides
include some of the parts suggested by the AAA, but other parts were
removed to yield a shorter list of examples overall. No substantive
change is intended by removing an item from the list. The revised list
includes tires.\43\
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\42\ AAA, p. 1; see 16 CFR 20.0.
\43\ The current Guides list the following items as examples of
parts that can be industry products: ``anti-lock brake systems, air
conditioners, alternators, armatures, air brakes, brake cylinders,
ball bearings, brake shoes, heavy duty vacuum brakes, calipers,
carburetors, cruise controls, cylinder heads, clutches, crankshafts,
constant velocity joints, differentials, drive shafts, distributors,
electronic control modules, engines, fan clutches, fuel injectors,
fuel pumps, front wheel drive axles, generators, master cylinders,
oil pumps, power brake units, power steering gears, power steering
pumps, power window motors, rack and pinion steering units, rotors,
starter drives, speedometers, solenoids, smog pumps, starters,
stators, throttle body injectors, torque convertors [sic],
transmissions, turbo chargers, voltage regulators, windshield wiper
motors, and water pumps.'' 16 CFR 20.0.
The revised Guides list the following items as examples of parts
that can be industry products: ``airbags, alternators and
generators, anti-lock brake systems, brake cylinders, carburetors,
catalytic converters, differentials, engines, fuel injectors, hybrid
drive systems and hybrid batteries, navigation and audio systems,
power steering pumps, power window motors, rack and pinion units,
starters, steering gears, superchargers and turbochargers, tires,
transmissions and transaxles, and water pumps.'' See infra, text of
revised Sec. 20.0.
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2. American Parts Remanufacturers Association
The APRA's comments included two suggestions not covered above.
a. The APRA believes that most industry products of American origin
comply with the Guides but that products from foreign sources do not.
The APRA suggested that the Commission (1) state explicitly in the
Guides that they apply to foreign products; (2) work to increase
awareness of the Guides among importers of industry products; (3)
educate Immigration and Customs Enforcement about the Guides; and (4)
monitor compliance with the Guides by importers. The APRA provided no
indication of the scope of the alleged imported-part problem or
explanation of why any Guide noncompliance that is occurring cannot be
addressed through enforcement actions under Section 5 of the FTC
Act.\44\
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\44\ 15 U.S.C. 45.
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The Commission has determined that it is not necessary to amend the
Guides as the APRA suggests. The Guides currently apply to the
``manufacture, sale, distribution, marketing, and advertising'' of
industry products, and the Guides currently prohibit providing the
means or instrumentality to others to violate the law. The Commission
has jurisdiction over entities conducting business in the United States
regardless of the country of origin of the original new product or of
the reconstructed or otherwise used product. Therefore, as the
Commission has explained previously, the Guides currently cover foreign
rebuilders and importers of used auto parts who distribute or sell used
auto parts in the United States.\45\ Accordingly, a change in the
Guides is not necessary for them to apply to importers. In addition, a
change in the Guides is unnecessary to expand education efforts for
businesses and other government agencies or to investigate possible
violations of the FTC Act through non-compliance with the Guides.
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\45\ 67 FR 9919, 9921 (March 5, 2002).
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b. The APRA also suggested that the Guides require original
trademarks to be left on a rebuilt or remanufactured industry product.
It argues that such information would give the consumer and/or
installer greater assurance that the product was right for the
consumer's vehicle.
The Commission declines to adopt this suggestion. The current
Guides and law allow original markings to be left on a part if (1) the
part is properly disclosed as an industry product and (2) the reworker
is identified (if the reworker is different from the original
manufacturer).\46\ There is no need for the Guides to require a
reworker to retain trademarks of the original manufacturer. If a
reworker believes leaving these marks on the part provides a
marketplace benefit, it can do so, and consumers and installers can
choose whether to purchase from those reworkers. A reworker who
believes it benefits from removing original markings (in favor, for
example, of promoting its own brand as a rebuilder), can adopt that
practice, and consumers and installers can choose based on their own
preferences.
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\46\ 16 CFR 20.2; Champion Spark Plug Co., v. Sanders, 331 U.S.
125 (1947).
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3. Automotive Recyclers Association
The ARA suggested three other amendments to the Guides, stating
that its support for the Guides was contingent on its proposed changes.
a. The ARA requested that the Commission prosecute car
manufacturers and dealers who run ads promoting new repair parts. The
ARA argues that such ads unfairly or deceptively imply that industry
products, including recycled original-equipment body parts, are not as
good as new parts. The ARA believes such ads ``cause consumers to doubt
the viability of recycled parts and cause consumers needlessly to
annually spend billions of dollars. FTC should use these guides to help
ensure that such anticompetitive practices cease.'' \47\ The ads the
ARA provided, however, are in trade publications and promote the
benefits of new manufacturer parts. Such general statements to a
sophisticated audience have little likelihood of being broadly
problematic. While the Commission would evaluate claims of deception on
a case-by-case basis, it concludes that no changes to the Guides are
necessary to address ARA's concerns. The Commission could take action
against deceptive
[[Page 40628]]
advertising, by car manufacturers or others, without changing the
Guides.
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\47\ ARA, p. 2.
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b. The ARA believes the Guides should require car manufacturers to
provide information on parts recycling in materials given to the
consumer when the car is purchased as new. According to the ARA,
European Union directives promote recycling and require vehicle
manufacturers to provide information on the ``dismantling, storage and
testing'' of components when an item is no longer useful.\48\
Similarly, the ARA wants the Commission to recognize private standards
setting organizations for recycled ``green'' parts and to state in the
Guides that use of industry products is a form of recycling.\49\
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\48\ Id., p. 2.
\49\ Id., p. 6.
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The Commission has decided not to make these changes. Historically,
the Guides have neither promoted nor discouraged the use of industry
products but have instead sought to ensure that consumers have accurate
information from which to make a choice. The Commission sees no reason
to deviate from this position.
c. The ARA requests that the Commission require online parts
sellers to be licensed in the states in which they sell.\50\ The
Commission declines to make this change. The purpose of the Guides is
to assist industry members in avoiding unfair or deceptive acts or
practices in the advertising and sale of industry products, such as
misrepresentations regarding the condition of products. The Commission
declines to recommend licensing requirements for online sellers and has
no authority to enforce state licensing laws.
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\50\ Id., p. 5.
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4. Bryner Chevrolet
Bryner Chevrolet took no explicit position on the Guides. Rather,
it argued that safety-related industry products from a salvage yard--
suspension, steering, and brake parts--are inherently dangerous and
should not be used, even though insurance companies prepare estimates
that include these unsafe parts. Bryner's comment fails to explain what
changes to the Guides, if any, are needed to address its concerns.
The Commission has decided that Bryner's comment warrants no
changes to the Guides. The comment contains no data or other evidence
with which the Commission can weigh the threat to consumer safety
against the benefits of access to less expensive parts. Even if the
data existed, the safety of vehicles and their parts fits better within
the jurisdiction of the National Highway Traffic Safety Administration
rather than the FTC.\51\
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\51\ See 49 CFR 1.94(b).(stating that the National Highway
Traffic Safety Administration is responsible for ``establishing and
enforcing safety standards and regulations,'' conducting research
related to motor vehicle safety, and investigating safety-related
defects in motor vehicles and motor vehicle equipment).
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III. Section by Section Discussion of the Changes
In response to the comments received and the Commission's own
analysis, several changes have been made to the current Guides. This
part discusses the changes to each section of the Guides.
A. Title
The title has not been changed, other than to add a comma after
``reconditioned,'' for stylistic purposes. No substantive change is
intended.
B. Section 20.0 Scope and Purpose of the Guides
This section has undergone a number of changes, including the
creation of two paragraphs. Paragraph (a) contains the existing Sec.
20.0 with some revisions. First, the description of items to which the
Guides apply (industry products) is changed from ``used parts and
assemblies containing used parts'' to ``parts that are not new, and
assemblies containing such parts.'' This change is intended to remove
the circularity in the existing definition, in which ``used'' was part
of the definition of ``used.'' The change also avoids potential
confusion over the scope of industry products. ``Used'' sometimes
refers to a part to which little has been done between its removal from
one car and installation on another, with other terms applying to
products receiving more reworking.\52\ The change clarifies that
``industry product'' has a broad meaning that includes all parts that
are not new, even parts that have been substantially reworked.\53\
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\52\ See supra, note 13 and related text.
\53\ The change does not create any new category of industry
product. MEMA's comment described remanufactured products as ``Not
New, Not Used.'' MEMA, p. 2, but the use of ``not new'' in the
revised Guides is broader than MEMA's meaning of remanufactured.
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Section 20.0(a) of the revised Guides differs from Sec. 20.0 of
the existing Guides in other ways. The last sentence and following
parenthetical, which exclude tires from the Guides, have been removed
and tires have been added to the sample list of industry products.\54\
In addition, the sample list of industry products has been shortened
and updated, but no substantive change is intended by these changes
other than the addition of tires. Finally, the section has been edited
for style and clarity, with no substantive change intended by these
edits.
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\54\ See supra, Section II.C.1.
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Paragraph (b) of revised Sec. 20.0 is a new provision, describing
the purpose and status of the Guides, which are consistent with the
Commission's long-standing treatment of industry guides.
C. Section 20.1 Deception Generally
Some of the language has been amended to improve readability. In
addition, the order of the list of appropriate descriptive terms has
been changed to approximate the amount of reworking that some industry
members believe the terms indicate.\55\ No substantive change is
intended by any of these modifications.
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\55\ See supra, note 13 and related text.
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D. Section 20.2 Deception as to the Identity of a Rebuilder,
Remanufacturer, Reconditioner, Reliner or Other Reworker
Section 20.2, including the title, has been changed to add ``other
reworker'' to those to whom this section applies. The persons and
processes mentioned in this section relate to some ways of changing a
part after its removal from a vehicle--``rebuild,'' ``remanufacture,''
``recondition,'' and ``reline''--but other terms could also apply,
including ``overhaul,'' ``retread,'' ``repair,'' and ``refurbish.''
Adding ``other reworker'' clarifies that, regardless of what is done to
the part, the identity of the person doing it cannot be misrepresented,
and may have to be disclosed. This section also contains stylistic
changes designed to improve readability without changing the section's
substance.
E. Section 20.3 Misrepresentation of the Terms ``Rebuilt,'' ``Factory
Rebuilt,'' ``Remanufactured,'' etc.
The parenthetical at the end of Sec. 20.3, referring to Sec.
20.2, has been removed as unnecessary. No substantive change is
intended. The word ``remanufactured'' has been removed from subsection
(a) of this section and added to subsection (b). As discussed earlier,
this change results in the same requirements applying to the terms
``remanufactured'' and ``factory rebuilt.'' \56\
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\56\ See supra, text following note 18.
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List of Subjects in 16 CFR Part 20
Advertising, Consumer protection, Motor vehicles, Trade practices.
For the reasons stated above, the Federal Trade Commission revises
16 CFR Part 20 to read as follows:
[[Page 40629]]
PART 20--GUIDES FOR THE REBUILT, RECONDITIONED, AND OTHER USED
AUTOMOBILE PARTS INDUSTRY
Sec.
20.0 Scope and purpose of the guides.
20.1 Deception generally.
20.2 Deception as to identity of a rebuilder, remanufacturer,
reconditioner, reliner, or other reworker.
20.3 Misrepresentation of the terms ``rebuilt,'' ``factory
rebuilt,'' ``remanufactured,'' etc.
Authority: 15 U.S.C. 41-58.
Sec. 20.0 Scope and purpose of the guides.
(a) The Guides in this part apply to the manufacture, sale,
distribution, marketing and advertising (including advertising in
electronic format, such as on the Internet) of parts that are not new,
and assemblies containing such parts, that were designed for use in
automobiles, trucks, motorcycles, tractors, or similar self-propelled
vehicles, regardless of whether such parts or assemblies have been
cleaned, repaired, reconstructed, or reworked in any other way
(industry product or product). Industry products include, but are not
limited to, airbags, alternators and generators, anti-lock brake
systems, brake cylinders, carburetors, catalytic converters,
differentials, engines, fuel injectors, hybrid drive systems and hybrid
batteries, navigation and audio systems, power steering pumps, power
window motors, rack and pinion units, starters, steering gears,
superchargers and turbochargers, tires, transmissions and transaxles,
and water pumps.
(b) These guides set forth the Federal Trade Commission's current
views about the manufacture, sale, distribution, and advertising of
industry products. The guides help businesses avoid making claims that
are unfair or deceptive under Section 5 of the FTC Act, 15 U.S.C. 45.
They do not confer any rights on any person and do not operate to bind
the FTC or the public. The Commission, however, can take action under
the FTC Act if a business makes a claim inconsistent with the guides.
In any such enforcement action, the Commission must prove that the
challenged act or practice is unfair or deceptive in violation of
Section 5 of the FTC Act.
Sec. 20.1 Deception generally.
(a) It is unfair or deceptive to represent, directly or by
implication, that any industry product is new or unused when such is
not the fact, or to misrepresent the current condition, or extent of
previous use, reconstruction, or repair of any industry product.
(b) It is unfair or deceptive to offer for sale or sell any
industry product without disclosing, clearly and conspicuously, in
advertising, in promotional literature, on invoices, and on the
product's packaging that the item is an industry product. Additionally,
it is unfair or deceptive to offer for sale or to sell any industry
product that appears new or unused without disclosing on the product
itself that it is an industry product, using appropriate descriptive
terms with sufficient permanency to remain visible for a reasonable
time after installation. Examples of appropriate descriptive terms
include, but are not limited to ``Used,'' ``Secondhand,'' ``Repaired,''
``Relined,'' ``Reconditioned,'' ``Rebuilt,'' or ``Remanufactured.'' If
the term ``recycled'' is used, it should be used in a manner consistent
with the requirements for that term set forth in the Guides for the Use
of Environmental Marketing Claims, 16 CFR 260.7(e). On invoices to the
trade only, the disclosure may be by use of any number, mark, or other
symbol that is clearly understood by industry members as meaning that
the part so marked on the invoices is not new.
(c) It is unfair or deceptive to place any means or instrumentality
in the hands of others so that they may mislead consumers as to the
previous use of industry products.
Sec. 20.2 Deception as to the identity of a rebuilder,
remanufacturer, reconditioner, reliner, or other reworker.
(a) It is unfair or deceptive to misrepresent the identity of the
rebuilder, remanufacturer, reconditioner, reliner or other reworker of
an industry product.
(b) If the identity of the original manufacturer of an industry
product, or the identity of the manufacturer for which the product was
originally made, is revealed and the product was rebuilt,
remanufactured, reconditioned, relined, or otherwise reworked by
someone else, it is unfair or deceptive to fail to disclose such fact
wherever the original manufacturer is identified in advertising or
promotional literature concerning the industry product, on the
container in which the product is packed, and on the product itself, in
close conjunction with, and of the same permanency and conspicuousness
as, the disclosure that the product is not new. Examples of such
disclosures include:
(1) Disclosure of the identity of the rebuilder: ``Rebuilt by John
Doe Co.''
(2) Disclosure that the industry product was rebuilt by an
independent rebuilder: ``Rebuilt by an Independent Rebuilder.''
(3) Disclosure that the industry product was rebuilt by someone
other than the manufacturer identified: ``Rebuilt by other than XYZ
Motors.''
(4) Disclosure that the industry product was rebuilt for the
identified manufacturer: ``Rebuilt for XYZ Motors.''
Sec. 20.3 Misrepresentation of the terms ``rebuilt,'' ``factory
rebuilt,'' ``remanufactured,'' etc.
(a) It is unfair or deceptive to use the word ``Rebuilt,'' or any
word of similar import, to describe an industry product which, since it
was last subjected to any use, has not been dismantled and
reconstructed as necessary, all of its internal and external parts
cleaned and made rust and corrosion free, all impaired, defective or
substantially worn parts restored to a sound condition or replaced with
new, rebuilt (in accord with the provisions of this paragraph) or
unimpaired used parts, all missing parts replaced with new, rebuilt or
unimpaired used parts, and such rewinding or machining and other
operations performed as are necessary to put the industry product in
sound working condition.
(b) It is unfair or deceptive to represent an industry product as
``Remanufactured'' or ``Factory Rebuilt'' unless the product was
rebuilt as described in paragraph (a) of this section at a factory
generally engaged in the rebuilding of such products.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2014-16339 Filed 7-11-14; 8:45 am]
BILLING CODE 6750-01-P