Insurance Cost Information Regulation |
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Topics: National Highway Traffic Safety Administration
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Barry Felrice
Federal Register
March 22, 1994
[Federal Register: March 22, 1994]
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Part X
Department of Transportation
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National Highway Traffic Safety Administration
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49 CFR Part 582
Insurance Cost Information Regulation; Rule and Notice
DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Part 582
[Docket No. 74-40; Notice 6]
Insurance Cost Information Regulation
AGENCY: National Highway Traffic Safety Administration (NHTSA), DOT.
ACTION: Denial of petition for reconsideration.
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SUMMARY: This notice denies a petition submitted by the National
Automobile Dealers Association (NADA) for NHTSA to stay the effective
date of and reconsider its final rule requiring new automobile dealers
to distribute insurance cost information to prospective purchasers
without charge. The petitioner urges that in place of making dealers
responsible for reproducing copies of the booklet containing the
information, the agency undertake that responsibility. After reviewing
the petition, the agency has concluded that the final rule is
consistent with section 201(e) of the Motor Vehicle Information and
Cost Savings Act. Similarly, the agency continues to believe that the
final rule is consistent with the rulemaking record. Finally, this
notice rejects the argument by the petitioner that the final rule is
unreasonable because the cost of reproducing copies of the insurance
cost information is substantially greater for dealers than for the
agency.
Based on these conclusions, NHTSA has decided to deny the
petitioner's request that the agency amend the final rule. In view of
this action, and of the fact that, subsequent to the filing of NADA's
petition, the agency provided NADA with five additional copies per
dealer of the 1993 insurance cost information booklet in return for
NADA's agreement to mail these copies to each new car dealer, there is
no basis for a stay of the effective date of the final rule.
Accordingly, the request for a stay is likewise denied.
FOR FURTHER INFORMATION CONTACT: Mr. Orron Kee, Office of Market
Incentives, National Highway Traffic Safety Administration, 400 Seventh
Street SW., Washington, DC 20590 (202) 366-4936.
SUPPLEMENTARY INFORMATION:
I. Background
On March 5, 1993, NHTSA published a final rule amending the
Insurance Cost Information Regulation (49 CFR part 582) to require
dealers of new automobiles to distribute to prospective purchasers
comparative insurance cost information that is prepared and provided
annually by the agency (58 FR 12545). The information consists of data
compiled by the Highway Loss Data Institute (HLDI). The rule was issued
to further implement section 201(e) of the Motor Vehicle Information
and Cost Savings Act (Cost Savings Act), which states that the
Secretary of Transportation
Shall by rule establish procedures requiring automobile dealers
to distribute to prospective purchasers information developed by the
Secretary and provided to the dealer which compares differences in
insurance costs for different makes and models of passenger motor
vehicles based upon differences in damage susceptibility and
crashworthiness.
NHTSA commenced this rulemaking proceeding in response to a lawsuit
filed by Consumers Union of the United States against the Secretary of
Transportation and NHTSA's Administrator to compel the agency to
``develop and ensure disclosure of comparative insurance cost
information'' in accordance with section 201(e). (Consumers Union v.
Pena, No. 90-2369, D.D.C., filed September 26, 1990, dismissed May 20,
1993). After meeting with representatives of Consumers Union and the
Insurance Institute for Highway Safety (IIHS) and further analyzing
insurance data, the agency tentatively concluded that collision loss
experience data collected and reported by HLDI are the best available
indicators of the effect of damage susceptibility on insurance costs,
although they bear no relationship to vehicle crashworthiness. Based on
the above, NHTSA published a proposal to require that new automobile
dealers make available to prospective purchasers collision loss
experience data that HLDI collects, updates, and publishes annually (56
FR 56963, November 7, 1991).
In response to comments on the proposal, the March 5, 1993 final
rule addressed such issues as the use of HLDI information as the data
source, the format of data presentation, the mandatory text to
accompany the HLDI data, the exclusion of personal injury protection
data, the responsibility for printing and distributing the information,
the timing of publication and dealer compliance, and the costs
associated with the rulemaking.
On March 24, 1993, NHTSA published a notice containing the 1993
text and data that new automobile dealers are required to include in an
insurance cost information booklet that they must make available to
prospective purchasers (58 FR 16098). NHTSA also mailed a sample copy
of the 1993 booklet to each new automobile dealer on the mailing list
used by the Department of Energy to distribute the ``Gas Mileage
Guide.'' The notice noted that dealers are responsible for reproducing
sufficient numbers of copies of the booklet to assure that they are
available to be given to prospective purchasers as of April 21, 1993.
II. Petition for Reconsideration
On April 5, 1993, the National Automobile Dealers Association
(NADA) petitioned NHTSA to reconsider certain aspects of the March 1993
final rule. NADA is a national trade association that represents over
19,000 new automobile and truck dealers across the country. In
petitioning the agency to reconsider the final rule, NADA claimed that
requiring dealers to reproduce or otherwise obtain sufficient copies of
the insurance cost information was (1) inconsistent with and contrary
to section 201(e) of the Cost Savings Act, (2) contrary to the public
interest and to the rulemaking record, and (3) unreasonable. Each of
these contentions and the agency's response to them are discussed
below.
III. Agency's Response to the Petition
A. Congress Did Not Direct NHTSA to Bear the Costs of Reproducing and
Distributing Copies of Insurance Cost Information
In its petition for reconsideration, NADA stated that its principal
objection to the final rule ``arises from NHTSA's mandate that
automobile dealers, rather than the government, reproduce the insurance
cost information published in 49 CFR Sec. 582.5.'' NADA contended that
Congress' intent was for NHTSA to be responsible for reproducing the
requisite number of copies of the insurance cost information booklets
and distributing these copies to the dealers at no charge.
After reviewing the Cost Savings Act and its legislative history,
NHTSA continues to interpret section 201(e) as not requiring NHTSA to
bear the responsibility for reproducing and/or distributing the
insurance cost information. The agency's responsibility under section
201(e) is to ``develop'' the insurance cost information and ``provide''
it to dealers. The dealers have the responsibility under that same
section to ``distribute'' the information to prospective purchasers. By
sending a copy of the insurance cost information to new automobile
dealers, the agency fully met its legal duty to ``provide'' the
insurance cost information to dealers. Nothing in section 201(e)
requires the agency to supply dealers with multiple copies of such
information.
While section 201(e) does not expressly specify the party
responsible for reproducing this information, the agency believes that
the requirement for dealers to distribute the information necessarily
includes all actions necessary to comply with that requirement. The
only exception is that the information, as opposed to the booklets or
pamphlets containing the information, must be supplied by this agency.
Therefore, the responsibility for reproduction may properly be assigned
to the dealers.
Section 201(e) is similar to the provision of the National Traffic
and Motor Vehicle Safety Act (Vehicle Safety Act) that governs another
NHTSA consumer information program. Under section 112(d) of the Vehicle
Safety Act, the agency is authorized to require vehicle manufacturers
to give prospective purchasers of vehicles notification of performance
data and technical data related to performance and safety. Although
section 112(d) does not explicitly state that the manufacturers must
bear the responsibility of reproduction, NHTSA has consistently
required manufacturers to do so to comply with 49 CFR Part 575,
Consumer Information Regulations. Section 575.6(c) requires, among
other things, that vehicle manufacturers provide consumer information
to prospective vehicle purchasers ``* * * without charge and in
sufficient quantity to be available for retention * * *.''
Section 201(e) stands in marked contrast to section 506(b) of the
Cost Savings Act, which requires the Environmental Protection Agency
not only to ``compile'' fuel economy information, but also to
``prepare'' a booklet containing that information. Further, it requires
the Department of Energy to ``publish and distribute'' the ``Gas
Mileage Guide'' (emphasis added). The language of section 506(b)
demonstrates that when Congress wishes to require a government agency
to bear the expense of publishing and distributing consumer
information, it knows how to do so, and can do so unambiguously. NHTSA
concludes from the absence in section 201(e) of the clear language
found in section 506(b) that Congress did not intend to require that
NHTSA be responsible for the publication, reproduction, or distribution
of the insurance cost booklets.
In its petition, NADA focused on the legislative history of section
201(e), suggesting that the Conference Committee specifically rewrote
the House version of the section to clarify its intent that NHTSA bear
the responsibility to reproduce the insurance cost information and
provide dealers with a sufficient number of copies.
As explained below, NHTSA believes that NADA has not accurately
characterized this legislative history. The House version of section
201(e) would have required the agency to issue procedures requiring
dealers to provide insurance premium rate information to prospective
purchasers. The Conference Committee revised the section in two ways.
First, it changed the nature of the information to be provided. Instead
of premium rate information, prospective purchasers were to be provided
information on differences in insurance costs based on differences in
damage susceptibility and crashworthiness. Second, the Conference
Committee made the agency responsible for developing the information to
be distributed by the dealers. However, the Conference Committee did
not make any change to indicate that the agency would be responsible
for reproducing or distributing the information. In fact, that
Committee did not mention that issue.
B. NHTSA is Authorized to Require Dealers to Furnish the Information
Without Charge
NADA contended that NHTSA has no authority to require automobile
dealers to distribute the insurance cost information without charge to
prospective purchasers. The agency disagrees.
Section 201(e) directs the agency to ``establish procedures
requiring automobile dealers to distribute [insurance cost information]
to prospective purchasers.'' This mandate necessarily includes the
authority to establish procedures that will ensure, to the extent
possible, achieving the purposes of the section. The agency believes
that prohibiting dealers from charging consumers for the information is
reasonably necessary to ensure that the information is distributed as
widely as possible. Allowing dealers to charge for the information
would create a disincentive for consumers to request that information,
thus undermining the purposes of section 201(e).
It is also noteworthy that the requirement that the material be
provided without charge was, as discussed above, included in the
original version of part 582 as it was promulgated in 1975. It was not
challenged at that time, and none of the commenters during the recent
rulemaking suggested that this requirement should be modified.
C. Although NHTSA Has the Authority To Assume the Costs of Reproduction
and Distribution, NHTSA Does Not Have the Funds To Do So
NHTSA agrees that it has the legal authority to assume the
responsibility for reproducing and mailing multiple copies of the
insurance cost booklets to dealers. However, as a practical matter, the
agency cannot do this because it lacks sufficient appropriated funds to
publish and distribute sufficient copies of the information booklet to
the thousands of new automobile dealers on an annual basis.
NADA disagreed with NHTSA's statement about lack of funds by
suggesting that Congress has over the years provided NHTSA with ``huge
resources specifically earmarked by Congress for the production and
reproduction of the insurance cost information document.'' NADA's
suggestion is incorrect. Congress has not ``earmarked'' any funds for
that specific purpose. While Congress has authorized funds for the
general purpose of implementing Title II of the Cost Savings Act, it
has not expressly appropriated these funds for the insurance cost
information program. Rather, Congress has intended that these funds
help implement the New Car Assessment Program (NCAP). See, e.g.,
``Department of Transportation and Related Agencies Appropriation Bill,
1993,'' 102d Congress, 2d Session, S. Rep. 102-351, July 30, 1992;
``Department of Transportation and Related Agencies Appropriation Bill,
1992,'' 102d Congress, 1st Session, S. Rep. 102-148, September 12,
1991. None of the funds actually appropriated by Congress were for
reproducing or publishing the insurance cost information.
All of the funds appropriated for NCAP are earmarked for that
purpose. Moreover, the agency cannot shift funds at will in disregard
of Congressional appropriations. Thus, the funds that would be
necessary to publish and distribute the insurance cost information
booklet are simply not available.
D. The Decision To Require Dealers To Bear the Costs of Reproducing and
Distributing the Booklet Was Appropriate Notwithstanding Public
Comments Urging the Agency To Bear Those Costs
NADA suggested that NHTSA's decision to require dealers to
reproduce sufficient copies of the insurance cost information was
inappropriate because the commenters on the NPRM generally favored
making the agency responsible for providing all necessary copies. The
agency disagrees.
In the NPRM, NHTSA proposed that automobile dealers would be
required to make the insurance cost information available to
prospective purchasers within 30 days of NHTSA's annual publication of
the updated information in the Federal Register. The proposal suggested
that vehicle manufacturers or dealer trade associations could provide
the booklets to dealers. The agency solicited comments about
alternative methods of distribution, including having the government
publish booklets and send copies to dealers or having the government
supply a sample booklet to each dealer, who would be responsible for
making copies of the booklet.
No commenter specifically addressed the costs of any of the
distribution options. NADA and several other commenters requested that
the distribution be patterned after DOE's method for publishing and
distributing the ``Gas Mileage Guide'' to dealers.
As explained in the preamble to the Final Rule, NHTSA concluded,
after reviewing the public comments and other available information,
that the most appropriate method of distribution, given the constraints
on the agency's resources, would be to provide each dealer with a
single copy of the booklet and have dealers reproduce the booklet so
that it would be available to prospective purchasers. The agency
concluded that including the information in DOE's ``Gas Mileage Guide''
would be unworkable, given problems with differences in presentation
and timing, as the categories in the gas mileage guide do not
correspond to those in the insurance guide and could lead to confusion.
NHTSA also explained that it did not have sufficient appropriated funds
available to publish and distribute multiple copies of the booklets to
the thousands of new automobile dealers in the country. Including this
information in the DOE guide would not alleviate this funding shortage.
See 58 FR 12545, 12548.
Notwithstanding this discussion in the preamble to the final rule,
NADA stated that NHTSA's decision to provide each dealer with a single
copy ``ignored'' the docket comments. In particular, NADA contended
that ``Every comment addressing the specific issue of who should
produce or reproduce the insurance cost document urged NHTSA to
recognize that it was the government's responsibility.''
The agency recognizes that the commenters who addressed this issue
urged the government to assume the responsibility for reproduction.
However, in reaching a final decision after seeking public comments on
a proposed rule, an agency is neither required nor expected to tally
the comments and fashion a rule in accordance with the majority
position. Procedurally, an agency is required under the Administrative
Procedure Act to carefully consider the comments on all significant
issues and explain its reasons for accepting or rejecting those
comments. Substantively, an agency is required to issue a rule
consistent with the statute authorizing the rulemaking. The agency
regards its actions in preparing and issuing the final rule as being
consistent with these requirements.
After reviewing NADA's petition, NHTSA continues to believe that
requiring dealers to reproduce the insurance cost information booklets
is consistent with section 201(e) and is appropriate and necessary,
especially in light of the agency's limited funds. The commenters
opposing the final rule generally did not suggest that the agency
lacked authority to place the responsibility for reproducing the
booklet on the dealers. Instead, they simply suggested that, as a
matter of policy, it was preferable to place the responsibility on the
government, either through direct distribution by NHTSA or by adding
the insurance cost information to the DOE ``Gas Mileage Guide.''
However, as explained above, those options were not feasible.
E. NHTSA Considered the Interests of the Dealers
NADA also stated that the requirement did not adequately consider
the interests of the nation's light duty motor vehicle dealers, over 85
percent of which are small businesses.
NHTSA recognizes that most dealers are small businesses. However,
the agency disagrees with the suggestion that it did not adequately
consider the interests of the dealers. The agency notes that in the
final rule it fully discussed the effects of the rule on small entities
in accordance with the Regulatory Flexibility Act. NHTSA acknowledged
that while many automobile dealers that will be affected by the
regulation are small businesses, the regulation will not have a
significant economic impact on dealers, either individually or
collectively. Indeed, the economic impact on any dealer is likely to be
minimal. The agency estimated in the final rule that a dealer's annual
duplicating costs associated with the rule would not exceed $175.00 and
that the actual costs would probably be much lower. Based on these
considerations, the agency determined that no final regulatory
flexibility analysis was required to be prepared. In view of the
discussion below about the costs of reproducing the insurance cost
information, NHTSA continues to believe that these conclusions are
appropriate.
F. Requiring Dealers To Reproduce Sufficient Copies Is Reasonable
Notwithstanding Any Difference in the Cost of Government Versus
Individual Dealer Reproduction
In the preamble to the final rule, the agency estimated
photocopying costs to be approximately five cents per page or 40 cents
for each of the eight-page booklets. That estimate was based on
commonly available commercial copying rates. The agency further stated
that even that low estimated cost could be significantly reduced if
two-sided copying were used or if a central source, such as a trade
association, printed the booklet in large volume and made it available
to dealers.
In its petition, NADA claimed that the cost of private reproduction
of the booklet would be far greater than the cost of governmental
reproduction and that therefore it was unreasonable for NHTSA to
require dealers to reproduce the booklet. NADA disagreed with the
agency's estimate that copying would cost five cents per page, claiming
that it would cost between 15 cents and 25 cents per page to copy the
information. Assuming that between 8,000,000 and 10,000,000 pages
(i.e., 1,000,000 to 1,250,000 booklets) would need to be copied, NADA
claimed that the rulemaking would cost its members between $1,200,000
and $2,500,000. NADA also stated that it would be far less expensive
for the government to reproduce and distribute the information than for
each automobile dealer to do so.
NHTSA has again examined the costs related to making multiple
copies of the insurance cost information and continues to believe that
the dealers' duplicating costs are slight. NHTSA stands by its figures
for commonly available commercial copying costs. Indeed, the agency has
learned of a large midwestern printer who has offered to provide 50
copies of the booklet for $20.00 plus shipping costs, a figure directly
in line with the agency's estimate of 40 cents per booklet.
NADA did not suggest in its petition that the commonly available
commercial copying costs are actually higher than the agency's figure.
Instead, it made estimates based on dealers making copies with their
own reproduction facilities and included in those estimates a variety
of overhead costs. If a dealer's cost for internal reproduction were as
high as NADA estimates, it is difficult to understand why the dealer
would not choose instead to have the booklet reproduced commercially.
In addition, the agency notes that NADA's petition did not address the
possible cost savings available from two-sided copying or from having
NADA or State automobile dealer associations publish this information
in large quantities.
NHTSA recognizes that the per-copy cost of printing a large number
of copies is less than the cost of photocopying 50 or fewer copies.
However, it should also be noted that the agency's approach minimizes
mailing costs, which would be much higher if the government had to send
50 copies of the booklet to each dealer, rather than one copy. In
addition, the agency's approach minimizes waste, since dealers will
only have to produce the number of copies they actually need. If the
government were to send a specific number of copies (such as 50) to
each dealer, it is likely that many copies would go to waste.
G. Prior Agency Statements Do Not Suggest That the Agency Would Bear
the Cost of Reproducing and Distributing Copies of Insurance Cost
Information
NADA has also contended that language in NHTSA notices in 1975 and
1990 indicated that the agency believed at those times that
reproduction and distribution costs should be borne by the agency.
The preamble to the 1975 final rule establishing Part 582 does not
suggest that the agency believed that section 201(e) required NHTSA to
bear those costs. NADA has cited the agency's statement in that
preamble that it ``will prepare comparative indices for the dealers to
distribute to prospective purchasers.'' However, this statement was
nothing more than a reflection of the agency's duty to develop the
substance of the text of the booklets. The statement did not address,
directly or indirectly, the issue of who would pay for reproduction and
distribution of the information.
Moreover, in the notice of proposed rulemaking leading to the 1975
final rule, NHTSA stated that section 582.4(b), which requires dealers
to provide the insurance cost information without charge, was modeled
after the identical provision in 49 CFR part 575, NHTSA's Consumer
Information Regulations, which is discussed in section III.A. of this
Notice. The agency noted that section 575.6(c) was intended to prevent
manufacturers or dealers from undermining the consumer information
program by charging consumers for the covered information. Had NHTSA
intended to bear the responsibility for reproducing the insurance cost
information, there would have been no need to incorporate language from
Part 575 in the 1975 insurance cost information rule.
NHTSA's 1990 denial of a Consumers Union rulemaking petition
requesting the agency to generate and distribute consumer information
regarding bumper performance does not indicate a contrary view. The
agency's statement in its denial notice that implementing the Consumers
Union request ``would require an unwarranted expenditure of the
agency's limited resources'' was a reference to the costs of obtaining
and analyzing the information necessary for a bumper performance
information program, not the costs of reproducing or distributing it.
H. NHTSA-NADA Actions Regarding Reproduction and Distribution of the
Information Booklets Eased the Burden on Dealers for the First Year of
the Program
After the filing of NADA's petition, NHTSA decided to take action
in cooperation with NADA to facilitate compliance by the dealers in the
first year of the insurance cost information program.
In an effort to help dealers to implement this regulation in a
smooth fashion in its first year, NHTSA and NADA agreed to provide
dealers with five additional copies of the 1993 insurance cost
information booklet. NHTSA reproduced these copies of the booklet, and
NADA mailed them to all new automobile dealers (approximately 24,000),
including dealers who are not members of that organization. While this
program may not have provided many dealers with sufficient copies of
the booklet to satisfy their responsibilities under the final rule, any
dealer needing additional copies bore the responsibility for
reproducing or otherwise obtaining them from private sources.
With respect to 1994, NHTSA advised the House and Senate
appropriations committees that additional funds would be needed if more
than one copy of the booklet were to be provided to each dealer. The
funds were not provided. The agency will therefore provide a single
sample copy of the 1994 booklet to each automobile dealer on the
Department of Energy's mailing list for the ``Gas Mileage Guide.'' The
copy will enable the dealers to reproduce and distribute the booklet to
prospective purchasers.
I. Agency Decision
After considering NADA's petition for reconsideration and the other
relevant information, NHTSA has decided not to amend Part 582 as
requested by the petitioner. Accordingly, NADA's petition for
reconsideration is denied. In view of this denial, and of the NHTSA-
NADA action to provide dealers with additional copies of the 1993
booklet, there is no basis for a stay of the effective date of the
final rule. Accordingly, the request for a stay is likewise denied.
Issued on: March 17, 1994.
Barry Felrice,
Associate Administrator for Rulemaking.
[FR Doc. 94-6678 Filed 3-21-94; 8:45 am]
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