Retail Food Store Advertising and Marketing Practices Rule, 70053-70056 [2014-27798]

Download as PDF 70053 Rules and Regulations Federal Register Vol. 79, No. 227 Tuesday, November 25, 2014 This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. Prices of new books are listed in the first FEDERAL REGISTER issue of each week. FEDERAL TRADE COMMISSION 16 CFR Part 424 Retail Food Store Advertising and Marketing Practices Rule Federal Trade Commission (‘‘Commission’’ or ‘‘FTC’’). AGENCY: ACTION: Final rule. The FTC has completed its regulatory review of its Retail Food Store Advertising and Marketing Practices Rule (‘‘Unavailability Rule’’ or ‘‘Rule’’). After reviewing public comments regarding the Rule’s overall costs, benefits, and regulatory and economic impact, the Commission retains the Rule. The Commission, however, takes this opportunity to issue guidance concerning the Rule’s coverage. The Commission also corrects a typographical error, and ceases to publish dissents to the Rule’s previous amendment. SUMMARY: This action is effective on December 10, 2014. DATES: This document is available on the Internet at the Commission’s Web site, www.ftc.gov. Relevant portions of this proceeding, including the public comments received in response to the Advance Notice of Proposed Rulemaking, are available at: http:// www.ftc.gov/policy/public-comments/ initiative-387 and the related News Release is available at: http:// www.ftc.gov/opa/2011/08/ retailfood.shtm. wreier-aviles on DSK4TPTVN1PROD with RULES ADDRESSES: Jock Chung, (202) 326–2984, Attorney, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW., CC–9528, Washington, DC 20580. FOR FURTHER INFORMATION CONTACT: SUPPLEMENTARY INFORMATION: VerDate Sep<11>2014 14:24 Nov 24, 2014 Jkt 235001 I. Background The Unavailability Rule prohibits retail food stores 1 from advertising prices for food, grocery products, or other merchandise unless those stores have the advertised products in stock and readily available at, or below, the advertised prices. The Commission issued the Rule in 1971 to prevent unavailability and overpricing of advertised items.2 The Rule was based upon extensive research finding that retail food stores frequently did not make food readily available at advertised prices. In 1989, the Commission amended the Rule.3 These amendments provide an exception where ‘‘the advertisement clearly and adequately discloses that supplies of the advertised products are limited or the advertised products are available only at some outlets.’’ Furthermore, these amendments provide four defenses: Retail food stores do not violate the Rule if they (a) order advertised products early enough and in sufficient quantities to meet ‘‘reasonably anticipated demand,’’ (b) issue rainchecks for the advertised products, (c) offer comparable products at comparable prices to the advertised products, or (d) offer other compensation at least equal to the advertised value. These amendments eliminated the costs of excessive overstocking, which were passed on to consumers and greatly exceeded any benefits to consumers,4 while minimizing consumer losses associated with wasted trips to retail food stores.5 II. Regulatory Review The Commission reviews its rules and guides periodically to seek information 1 Retail food stores are stores that advertise food prices and sell more than incidental or minimal amounts of food. Federal Trade Commission: Part 424—Retail Food Store Advertising and Marketing Practices, 36 FR 8777 at 8781 (May 13, 1971) (‘‘Rule Promulgation’’). 2 Id. 3 Federal Trade Commission: Amendment to Trade Regulation Rule Concerning Retail Food Store Advertising and Marketing Practices: Final Amendments to Trade Regulation Rule, 54 FR 35456 (Aug. 28, 1989) (‘‘Rule Amendment’’). 4 Excessive overstocking caused retail food stores to carry excess inventory, including perishables, and to incur monitoring, recordkeeping, legal and survey costs, and indirect costs to document Rule compliance. Id. at 35460–35461. The record indicated that the costs imposed by the original rule exceeded benefits by ratios from over 21⁄2 to one to nearly eight to one. Id. at 35461. 5 Id. at 35459. PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 about their costs and benefits, as well as their regulatory and economic impact. This information assists the Commission in identifying rules and guides that warrant modification or rescission. Pursuant to this process, on August 18, 2011, the Commission sought comment on whether there is a continuing need for the Unavailability Rule.6 The Commission also invited comments suggesting modifications to the Rule.7 Additionally the Commission sought specific comments and evidence concerning whether it should broaden the Rule to include stores not currently covered by the Rule, such as drugstores, department stores, or electronics retailers.8 III. Regulatory Review Comments The Commission received comments from two organizations and fifty individuals.9 The Food Marketing Institute (‘‘FMI’’) identifies itself as a national trade association with 1,500 members, consisting of food retailers and wholesalers, in the United States and other countries.10 FMI states that its members operate 26,000 retail food stores and 14,000 pharmacies, make three-quarters of all retail food store sales in the United States, and have combined annual sales of $680 billion.11 The Heritage Foundation (‘‘HF’’) describes itself as a nonprofit corporation with a mission ‘‘to formulate and promote conservative public policies . . .’’ Forty-eight individuals explicitly or implicitly supported the Rule by relating personal benefits from retail food store rainchecks.12 For example, 6 Federal Trade Commission: Retail Food Store Advertising and Marketing Practices Rule: Advance Notice of Proposed Rulemaking; Request For Public Comment, 76 FR 51308 (Aug. 18, 2011) (‘‘Request for Public Comment’’). 7 Id. 8 Id. 9 All comments are available at: http:// www.ftc.gov/policy/public-comments/initiative-387. This document cites to these comments by indicating the surname or short form for the commenter, e.g., ‘‘FMI’’ for the Food Marketing Institute, and, for comments of more than one page, the page of the comment unless the citation refers to the entire comment. Cites to ‘‘John K’’ reference the comment signed in that way. 10 FMI at 1. 11 Id. 12 Hawthorne, DeWitt, Cosser, Dexter, Lewis, Marshall, Thompson, Ash, Herman, Hellmueller, Wright, Ickes, Gregory, Harris, Heiser, Nealy, Haass, E:\FR\FM\25NOR1.SGM Continued 25NOR1 70054 Federal Register / Vol. 79, No. 227 / Tuesday, November 25, 2014 / Rules and Regulations wreier-aviles on DSK4TPTVN1PROD with RULES one commenter stated that he accumulated 50 rainchecks in a 6-month period due to stockouts.13 Two individual commenters joined the organizational commenters in questioning whether the Commission should retain the Rule.14 FMI commented that the Rule is unnecessary because competition forces retail food stores to avoid stockouts and to compensate customers even without the Rule.15 Nonetheless, FMI stated that the Rule imposes no significant costs on retail food stores. FMI also cautioned that if the Commission retains the Rule, it should keep the 1989 amendments to avoid the costs eliminated by those amendments. HF recommended repealing the Rule, arguing increased competition should protect consumers.16 In support of this argument, it asserted that the number of grocery stores in America has grown substantially since the Rule was amended in 1989, noting that today there are 92,300 grocery stores nationwide and that large chains run thousands of stores each. It did not provide data on the number of stores in 1989. HF also stated that the number of farmers’ markets increased between 1994 and 2011. Finally HF commented that state regulation is adequate to protect consumers where competitive pressure is insufficient. Fitzsimmons recommended repealing the Rule generally while expanding it in ‘‘food deserts.’’ 17 For areas other than food deserts, he argued market competition is sufficient to protect consumers. Fitzsimmons also recommended that the Commission expand the Rule to cover non-traditional retail food stores in food deserts, where competition is insufficient to protect consumers. Finally, Lunsford recommended repealing the Rule because market competition and state regulatory Skaggs, Pritchard, Goodman, Frame, Cummings, DelSole, Wheat, Marino, John K, Rasley, Bacher, Samuel, Purcell, Dickey, Crofoot, Sinex, Aikins, Anonymous/Mad in Miami, Thorson, Angelo, Bates, Burleson, Boyd, Black, Marcuse, Steenhoven, Gettz, Millison, Nardo, Rose, and Doyal. 13 Angelo. 14 FMI, HF, Lunsford, Fitzsimmons. 15 FMI commented that it did not believe that there is a continuing need for the rule because competitive pressures induce retailers to respond to the needs of their customers, and ‘‘[t]here is no incentive for grocery retailers to engage in the types of activity the Unavailability Rule was intended to address.’’ FMI at 2–4. 16 HF asserted that ‘‘market competition clearly can police against any grocery businesses that advertise products that they do not have for sale at the advertised price.’’ HF at 3. 17 Fitzsimmons recommended that the Rule define food deserts as low-income areas where the nearest grocery store is more than a mile away. Fitzsimmons at 3. VerDate Sep<11>2014 14:24 Nov 24, 2014 Jkt 235001 agencies adequately protect consumers.18 IV. Retention of the Unavailability Rule The Commission retains the rule in its existing form. To determine whether the Rule should be amended, repealed, or retained, the Commission has evaluated a number of factors, including the relative costs and benefits of the Rule and its effect on competition and consumer choice. The Commission has determined that the Rule imposes no significant costs on retail food stores, and it benefits consumers as there is evidence that market or state regulatory forces would not adequately protect consumers without the Rule. Given this record, the Commission has no basis to repeal or amend the Rule at this time. None of the comments identified any specific costs or burdens associated with complying with the Rule. To the contrary, FMI—which represents grocery companies and thus would have the clearest understanding of any burdens the Rule might impose— commented that it ‘‘does not believe the Rule imposes significant costs on retailers.’’ 19 Furthermore, even the comments that opposed retention favored the consumer-friendly practices required by the Rule, including restrictions on overpricing and unavailability.20 These comments simply opined that, even if the Rule were eliminated, market forces would result in the same arrangements the Rule requires. If this is true, the Rule cannot impose any significant cost. Conversely, the record lacks factual support to conclude that market forces alone would be sufficient to protect consumers without the Rule.21 Although comments state that the 18 Lunsford argued that ‘‘market competition should deter most business from deceptive practices.’’ 19 FMI at 5. 20 FMI stated that stockouts hurt retailers because they increase costs while also decreasing customer satisfaction. Id. at 3–4. HF stated that ‘‘[n]o-one would condone the commercial conduct prohibited by the Unavailability Rule.’’ HF at 2. Lunsford indicated that unavailability and overpricing are not ‘‘honest business.’’ Fitzsimmons proposed retaining and expanding the Rule for certain geographic areas to prevent ‘‘predatory business practices.’’ Fitzsimmons at 2–3. This support contrasts with the evidence that compliance with the Commission’s original Rule was costly and wasteful. See Rule Amendment, 54 FR 35460–35462 (noting, for example, that retail food stores stocked excessive inventory and incurred monitoring and recordkeeping costs to comply with the original Rule). 21 In American Financial Services Ass’n v. FTC, 767 F.2d 957, 987–988 (D.C. Cir. 1985), the court found that it was not unreasonable for the Commission, in promulgating the Credit Practices Rule, to discount ‘‘abstract or . . . theoretical arguments . . . which have little or no factual support in the record.’’ PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 number of grocery stores in America has increased, they do not provide any market analysis of the level of competition in this industry.22 The market may have many participants nationwide, but there is no indication that competition exists sufficient to preserve the benefits of the Rule for all, or even most, local markets throughout the country. Two commenters that questioned the general need for the Rule asserted that there are geographic areas of lower food marketplace competition, and demographic groups with limited food shopping options.23 Thus, even if, as asserted, the national-level food marketplace were sufficiently competitive, the Rule would still be necessary to protect groups with limited food shopping options. Further, there is evidence that even with the Rule, some stores do not respond to the current level of competition by avoiding stockouts and providing rainchecks or other compensation. Eleven commenters complained of difficulties obtaining rainchecks, or of inadequate rainchecks that, for example, expired before sale items were restocked.24 Thus, the weight of the evidence shows that market forces are not sufficient to ensure that retail food stores make useful rainchecks conveniently available. HF and Lunsford commented that state consumer protection agencies provide sufficient recourse when retailers deceptively advertise the availability of sale items.25 They did not, however, submit evidence about actions taken by state agencies. Notably, no state or local regulatory agencies submitted comments. The record, therefore, does not support the argument that state regulations supplant the continued need for the Rule.26 Because the Rule does not impose significant costs, the practices it requires benefit consumers, 27 and there is evidence that those practices would not continue in the absence of the Rule, 22 HF and Fitzsimmons comment that there are 92,300 grocery stores in America, but do not provide evidence that this number is above a threshold for a sufficiently competitive marketplace. HF at 2, Fitzsimmons at 1. 23 HF at 3, Fitzsimmons at 2–3. 24 Dexter, Harris, Heiser, Haas, Pritchard, Cummings, Wheat, John K, Dickey, Crofoot, Burleson. 25 HF at 4 & n.14, Lunsford. 26 The four state laws cited by HF do not establish that most states directly regulate retail food stare advertising. Indeed, one of those laws broadly prohibits unfair and deceptive practices but does not address specifically the advertising of sale items. Wash. Rev. Code § 19.86.020. 27 Forty-eight consumer commenters supported continuing to require rainchecks. E:\FR\FM\25NOR1.SGM 25NOR1 Federal Register / Vol. 79, No. 227 / Tuesday, November 25, 2014 / Rules and Regulations the Commission retains the Rule in its present form. V. Coverage of the Unavailability Rule The Commission asked whether it should broaden the Rule’s coverage beyond retail food stores.28 In response, thirty two comments 29 favored extending coverage to include, for example, retail stores generally,30 Black Friday retailers,31 and electronics retailers.32 One comment favored expanding the Rule to include nontraditional food stores located in food deserts.33 None, however, provided evidence about the effects of amending the Rule’s coverage, or evidence that the Rule’s present coverage is inadequate. Therefore, the Commission is not proposing to extend the coverage of the Rule. However, the Commission notes that the Rule is not limited to ‘‘traditional’’ retail food stores. For example, supercenters, warehouse clubs, dollar stores, and drug stores increasingly offer food or grocery products and advertise discounts for these items. Such stores constitute a significant portion of the retail food marketplace. According to the U.S. Department of Agriculture, the proportion of American food sales for home consumption by nontraditional food retailers rose from 13.7 percent in 2000 to 21.5 percent in 2011.34 The Rule covers these types of stores. 28 Request for Public Comment, 76 FR at 51309. Dexter, Lewis, Marshall, Thompson, Ash, Hellmueller, Wright, Ickes, Gregory, Harris, Heiser, Nealy, Skaggs, Pritchard, Frame, Cummings, DelSole, John K, Bacher, Samuel, Purcell, Crofoot, Sinex, Anonymous/Mad in Miami, Thorson, Bates, Burleson, Boyd, Steenhoven, Gettz, Rose, and Doyal. Several comments suggested amending the Rule to cover specific retailers. See Wright (Walgreens), Ickes (CVS, Rite-Aid, Target), Gregory (Target), Heiser (Target, Wal-Mart), Haas (Walgreens), Frame (CVS), Bates (Wal-Mart, Fred Myer), Gettz (Walgreens, CVS, Rite-Aid), and Rose (Walgreens, Wal-Mart, Target). The Commission declines to amend the Rule to name specific retailers because, among other things, their business models could change, taking them out of the ambit of the Rule. 30 See Thompson, Ickes, and Harris. 31 See Ash. 32 See Wright, Heiser. 33 Fitzsimmons. 34 ‘‘Since the late 1990s, nontraditional retailers have steadily increased their relative share of foodat-home sales, compared with traditional retailers. Nontraditional stores’ share of food-at-home sales increased from 13.7 percent in 2000 to 21.5 percent in 2011 (traditional foodstores and nonstore food sales—such as mail order, home delivery, and direct sales by farms, processors, and wholesalers— account for the remaining shares). Most of the growth in food sales is due to supercenters and warehouse club stores, whose sales more than doubled over the period. More recently, dollar stores—such as Dollar General and Family Dollar— and drugstores—such as Rite Aid, CVS, and Walgreens—have increased sales by expanding retail food offerings.’’ U.S. Dept. of Agriculture, Econ. Res. Serv., Retail Trends, February 5, 2014, wreier-aviles on DSK4TPTVN1PROD with RULES 29 See VerDate Sep<11>2014 14:24 Nov 24, 2014 Jkt 235001 VI. Other Suggested Rule Changes In its request for public comments, the Commission invited suggested Rule changes. In response, comments suggested amending the Rule to: (1) Prohibit: (a) failure to conspicuously display advertised items, e.g., positioning products so that sale priced items are difficult to identify or locate, and (b) overpricing, e.g., scanning merchandise at full price rather than at the sale price; 35 (2) require retail food stores to provide rainchecks promptly upon demand; 36 and (3) require retail food stores to compensate consumers for consequential losses caused by unavailability.37 As set forth below, the first and second suggestions are unnecessary because they are already encompassed by the Rule, and the Commission declines to propose the third because the record lacks evidence to support such a change. A. Display of Advertised Items and Overpricing The Rule already prohibits failure to conspicuously display advertised items and overpricing. Consequently, no amendment is necessary to address concerns about these issues.38 The Commission has entered two cease and desist orders against retail food stores solely for overpricing,39 and three for overpricing and unavailability.40 These orders demonstrate that merely stocking advertised items was not sufficient to comply with the original Rule. The Commission amended the Rule in 1989 to eliminate explicit display and pricing requirements.41 At that time, however, the Commission stated ‘‘the simple requirement that advertised items be ‘readily available to customers’ available at http://www.ers.usda.gov/topics/foodmarkets-prices/retailing-wholesaling/retailtrends.aspx. 35 Ash, Ickes, Sinex at 1, Black. 36 Dexter, Heiser, Haass, Cummings, Pritchard, Dickey, Crofoot, Burleson. 37 Cummings, Boyd, Thorson, Ickes. 38 Ash, Ickes, Sinex at 1, Black. 39 Fred Meyer, Inc., 87 F.T.C. 112, 115 (1976); Safeway Stores, Inc., 91 F.T.C. 975 (1978). 40 Fisher Foods, Inc., 90 F.T.C. 473 (1977); The Kroger Co., 90 F.T.C. 459 (1977); and Shop-Rite Foods, Inc., 90 F.T.C. 500 (1977). 41 Paragraph 424.1(b)(1)(i) of the original Rule required that where advertised items are not readily available to customers, i.e., displayed for consumers, retail food stores provide ‘‘clear and adequate notice that . . . items are in stock and may be obtained upon request.’’ Rule Promulgation, 36 FR at 8781. Paragraph 424.1(b)(2) of the original Rule prohibited any failure ‘‘to make the advertised items conspicuously and readily available for sale at or below the advertised prices.’’ Id. PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 70055 implicitly includes a requirement that items be stocked in such a way that a reasonable consumer would not be precluded from obtaining them.’’ 42 The Commission further stated that the prohibition against overpricing ‘‘is implicit in the requirement that products advertised for sale at a stated price be available.’’ 43 Consequently, the Rule already requires proper display and prohibits overpricing.44 B. Rainchecks The raincheck defense, 16 CFR 424.2(b), provides that a store complies with the Rule if it offers consumers a ‘‘raincheck’’ when the advertised product is out of stock. Commenters requested two amendments to address barriers they have encountered in the market. First, they asked the FTC to require stores to provide rainchecks during a consumer’s initial visit to a store.45 Second, they requested an amendment to prohibit rainchecks that expire before the store restocks the advertised merchandise.46 Because the Rule already prohibits these practices, there is no need for amendments. The raincheck defense only provides protection if the store ‘‘offers’’ a raincheck at the time a consumer attempts to purchase the sale item.47 By definition, a raincheck is a guarantee to sell an item in the future at its current advertised price.48 If, at the time of the violation,49 a store promises to offer a raincheck in the future, it has merely promised to make the requisite offer at a future date. It has failed to offer a 42 Federal Trade Commission: Retail Food Store Advertising and Marketing Practices: Notice of Proposed Rulemaking, 50 FR 43224 at 43226 (Oct. 24, 1985) (‘‘Notice of Proposed Rulemaking’’). 43 Paragraph 424.1 of the amended Rule. Id. at 43225. 44 Moreover, advertising one price and charging a higher price is an unfair or deceptive act or practice in violation of Section 5(a) of the FTC Act. See, e.g., Budget Rent-A-Car System, Inc., FTC Docket C– 4212 (Jan. 2, 2008). 45 Heiser, Pritchard, Dickey, Crofoot, and Burleson stated that stores had made them wait excessive periods during a visit to receive a raincheck. Dexter, Heiser, Haass, and Cummings stated that stores had refused to provide rainchecks prior to the final date of sales. 46 Dexter, Harris, Wheat. John K recommended that the Commission amend the Rule to require rainchecks with no expiration date. The Commission does not have evidence on the costs or benefits of such an amendment, and therefore declines to propose it at this time. 47 16 CFR 424.2(b) 48 Rain Check Definition, Oxford Dictionaries, http://www.oxforddictionaries.com/us/definition/ american_english/rain-check (last visited Nov. 12, 2014). 49 The violation occurs when a store advertises a sale price for an item but does not have it in stock and readily available for consumers during the advertised sale period. 16 CFR 424.1. E:\FR\FM\25NOR1.SGM 25NOR1 70056 Federal Register / Vol. 79, No. 227 / Tuesday, November 25, 2014 / Rules and Regulations raincheck at all, and the defense is not available to it.50 Similarly, a store that offers a ‘‘raincheck’’ that expires before the store restocks the advertised item cannot use the defense. The raincheck must provide ‘‘compensation equal to that of the advertised savings.’’ 51 A raincheck that expires before consumers can use it has no value, much less value equal to the advertised savings. Therefore, it is not a ‘‘raincheck’’ at all. These clear requirements are consistent with the purpose of the ‘‘raincheck’’ defense.52 The defense protects consumers’ ability to purchase items at advertised sale prices without ‘‘needless transportation cost[s].’’ 53 Using a raincheck, a consumer can purchase an item at the sale price during the consumer’s next trip to the store, thereby avoiding extra travel time or expenses. Failing to offer rainchecks at the time it cannot make advertised products readily available to consumers, such as when a store refuses to provide rainchecks until a sale ends, would require consumers to make additional trips and pay extra travel costs, thereby undermining the purpose of the Rule.54 C. Consequential Costs From Unavailability Four comments noted that consumers may not realize all savings even when offered rainchecks or comparable merchandise under the defenses in paragraphs 424.2(b), (c), or (d) of the Rule.55 For example, promotions such as ‘‘Register Rewards’’ or coupon doubling may expire before consumers can use rainchecks, or manufacturers’ coupons may not apply to similar products offered under the defense in 16 CFR 424.2(c). Therefore, these comments proposed amending the Rule to require retail food stores to compensate consumers for consequential costs caused by unavailability.56 The record, however, does not contain evidence regarding the nature or extent of any such consequential losses. Nor does it contain evidence to support a factual determination regarding the potential costs or benefits of amending the Rule to require compensation for consequential costs from unavailability. Consequently, the Commission does not propose amending the Rule at this time to require compensation for consequential losses. VII. Conclusion wreier-aviles on DSK4TPTVN1PROD with RULES CFR 424.1. 51 Rule Amendment, 54 FR at 35463. 52 To the extent that there is any ambiguity about the meaning of ‘‘raincheck,’’ it is proper to interpret the term consistently with the purpose of the Rule. See Public Citizen v. U.S. Dept. of Justice, 491 U.S. 440, 455 (1989). 53 Notice of Proposed Rulemaking, 50 FR at 43230. See also Id. at 43225 (‘‘the Rule could produce benefits by saving shoppers an extra trip back to the same store or to another store to purchase the advertised item (the ‘trip gain’).’’); Rule Amendment, 54 FR at 35459 (the Rule benefits consumers ‘‘through the avoidance of trip losses (‘the trip gain’), which are losses that result from the expense of wasted trips to retail outlets for advertised items that are unavailable.’’); Id. at 35463 (‘‘Savings that have been realized by consumers [from the Rule] are principally the result of reduction in the number of unsuccessful trips made to purchase items that are not in stock.’’). 54 Cosser, Dexter, Lewis, Wright, Ickes, Heiser, Cummings, John K, Rasley. 55 Cummings, Boyd, Thorson, Ickes. VerDate Sep<11>2014 14:24 Nov 24, 2014 Jkt 235001 [FR Doc. 2014–27798 Filed 11–24–14; 8:45 am] BILLING CODE 6750–01–P DEPARTMENT OF ENERGY Federal Energy Regulatory Commission 18 CFR Parts 2, 157, and 380 [Docket No. RM12–11–002; Order No. 790–A] For the reasons described above, the Commission has determined to retain the current Retail Food Store Advertising and Marketing Practices Rule, issue a Rule amendment correcting a typographical error,57 and cease publishing dissents to the Rule’s previous amendment.58 Revisions to Auxiliary Installations, Replacement Facilities, and Siting and Maintenance Regulations List of Subjects in 16 CFR Part 424 SUMMARY: Advertising, Foods, Trade practices. For the reasons set forth in the preamble, the Federal Trade Commission amends 16 CFR part 424, as follows: PART 424—RETAIL FOOD STORE ADVERTISING AND MARKETING PRACTICES 1. The authority citation for part 424 is revised to read as follows: ■ Authority: 15 U.S.C. 41–58. § 424.1 [Amended] 2. Amend § 424.1 by removing the words ‘‘In connection with the sale of offering for sale’’ and adding, in their place, the words ‘‘In connection with the sale or offering for sale’’. ■ § 424.2 50 16 By direction of the Commission. Donald S. Clark, Secretary. [Amended] 3. Remove the two statements that follow the text of § 424.2(d). ■ 56 Thorson proposed amending the Rule to require retail food stores to ‘‘duplicate conditions at the time of the sale . . .’’ Thorson at 1. 57 Section 553 of the Administrative Procedure Act, 5 U.S.C. 553(b)(3)(B), provides that, when an agency for good cause finds that notice and public procedure are impracticable, unnecessary, or contrary to the public interest, the agency may issue a final rule without providing notice and an opportunity for public comment. The Commission has determined that there is good cause for making this technical correction final without prior opportunity for comment, because this is merely a technical change to correct a typographical error and is not a substantive change. 58 This will harmonize the Rule with the Commission’s normal practice, which is not to publish dissents in the Code of Federal Regulations. The dissents will remain available to the public at 54 FR 35468. PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 Federal Energy Regulatory Commission, Energy. ACTION: Final rule; order on rehearing and clarification. AGENCY: On rehearing, the Federal Energy Regulatory Commission (Commission) reaffirms its basic determinations in Order No. 790 and modifies and clarifies certain aspects of the Final Rule. Order No. 790 amended the Commission’s regulations to clarify that auxiliary installations added to existing or proposed interstate transmission facilities under the Commission’s regulations must be located within the authorized right-ofway or site for existing facilities or the right-of-way or site to be used for facilities proposed in a pending application for case-specific certificate authority or in a prior notice filing under the Commission’s blanket certificate regulations, and use only the same temporary work space that was or will be used to construct the existing or proposed facilities. Order No. 790 also codified the common industry practice of notifying landowners prior to coming onto their property to undertake projects, or certain replacements, or certain maintenance activities. DATES: This rule is effective January 26, 2015. FOR FURTHER INFORMATION CONTACT: Katherine Liberty, Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, (202) 502– 6491, katherine.liberty@ferc.gov. Gordon Wagner, Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, (202) 502– 8947, gordon.wagner@ferc.gov. Howard Wheeler, Office of Energy Projects, Federal Energy Regulatory Commission, 888 First Street NE., E:\FR\FM\25NOR1.SGM 25NOR1

Agencies

[Federal Register Volume 79, Number 227 (Tuesday, November 25, 2014)]
[Rules and Regulations]
[Pages 70053-70056]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-27798]



========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 
Prices of new books are listed in the first FEDERAL REGISTER issue of each 
week.

========================================================================


Federal Register / Vol. 79, No. 227 / Tuesday, November 25, 2014 / 
Rules and Regulations

[[Page 70053]]



FEDERAL TRADE COMMISSION

16 CFR Part 424


Retail Food Store Advertising and Marketing Practices Rule

AGENCY: Federal Trade Commission (``Commission'' or ``FTC'').

ACTION: Final rule.

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SUMMARY: The FTC has completed its regulatory review of its Retail Food 
Store Advertising and Marketing Practices Rule (``Unavailability Rule'' 
or ``Rule''). After reviewing public comments regarding the Rule's 
overall costs, benefits, and regulatory and economic impact, the 
Commission retains the Rule. The Commission, however, takes this 
opportunity to issue guidance concerning the Rule's coverage. The 
Commission also corrects a typographical error, and ceases to publish 
dissents to the Rule's previous amendment.

DATES: This action is effective on December 10, 2014.

ADDRESSES: This document is available on the Internet at the 
Commission's Web site, www.ftc.gov. Relevant portions of this 
proceeding, including the public comments received in response to the 
Advance Notice of Proposed Rulemaking, are available at: http://www.ftc.gov/policy/public-comments/initiative-387 and the related News 
Release is available at: http://www.ftc.gov/opa/2011/08/retailfood.shtm.

FOR FURTHER INFORMATION CONTACT: Jock Chung, (202) 326-2984, Attorney, 
Division of Enforcement, Bureau of Consumer Protection, Federal Trade 
Commission, 600 Pennsylvania Avenue NW., CC-9528, Washington, DC 20580.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Unavailability Rule prohibits retail food stores \1\ from 
advertising prices for food, grocery products, or other merchandise 
unless those stores have the advertised products in stock and readily 
available at, or below, the advertised prices. The Commission issued 
the Rule in 1971 to prevent unavailability and overpricing of 
advertised items.\2\ The Rule was based upon extensive research finding 
that retail food stores frequently did not make food readily available 
at advertised prices.
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    \1\ Retail food stores are stores that advertise food prices and 
sell more than incidental or minimal amounts of food. Federal Trade 
Commission: Part 424--Retail Food Store Advertising and Marketing 
Practices, 36 FR 8777 at 8781 (May 13, 1971) (``Rule 
Promulgation'').
    \2\ Id.
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    In 1989, the Commission amended the Rule.\3\ These amendments 
provide an exception where ``the advertisement clearly and adequately 
discloses that supplies of the advertised products are limited or the 
advertised products are available only at some outlets.'' Furthermore, 
these amendments provide four defenses: Retail food stores do not 
violate the Rule if they (a) order advertised products early enough and 
in sufficient quantities to meet ``reasonably anticipated demand,'' (b) 
issue rainchecks for the advertised products, (c) offer comparable 
products at comparable prices to the advertised products, or (d) offer 
other compensation at least equal to the advertised value. These 
amendments eliminated the costs of excessive overstocking, which were 
passed on to consumers and greatly exceeded any benefits to 
consumers,\4\ while minimizing consumer losses associated with wasted 
trips to retail food stores.\5\
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    \3\ Federal Trade Commission: Amendment to Trade Regulation Rule 
Concerning Retail Food Store Advertising and Marketing Practices: 
Final Amendments to Trade Regulation Rule, 54 FR 35456 (Aug. 28, 
1989) (``Rule Amendment'').
    \4\ Excessive overstocking caused retail food stores to carry 
excess inventory, including perishables, and to incur monitoring, 
recordkeeping, legal and survey costs, and indirect costs to 
document Rule compliance. Id. at 35460-35461. The record indicated 
that the costs imposed by the original rule exceeded benefits by 
ratios from over 2\1/2\ to one to nearly eight to one. Id. at 35461.
    \5\ Id. at 35459.
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II. Regulatory Review

    The Commission reviews its rules and guides periodically to seek 
information about their costs and benefits, as well as their regulatory 
and economic impact. This information assists the Commission in 
identifying rules and guides that warrant modification or rescission.
    Pursuant to this process, on August 18, 2011, the Commission sought 
comment on whether there is a continuing need for the Unavailability 
Rule.\6\ The Commission also invited comments suggesting modifications 
to the Rule.\7\ Additionally the Commission sought specific comments 
and evidence concerning whether it should broaden the Rule to include 
stores not currently covered by the Rule, such as drugstores, 
department stores, or electronics retailers.\8\
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    \6\ Federal Trade Commission: Retail Food Store Advertising and 
Marketing Practices Rule: Advance Notice of Proposed Rulemaking; 
Request For Public Comment, 76 FR 51308 (Aug. 18, 2011) (``Request 
for Public Comment'').
    \7\ Id.
    \8\ Id.
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III. Regulatory Review Comments

    The Commission received comments from two organizations and fifty 
individuals.\9\ The Food Marketing Institute (``FMI'') identifies 
itself as a national trade association with 1,500 members, consisting 
of food retailers and wholesalers, in the United States and other 
countries.\10\ FMI states that its members operate 26,000 retail food 
stores and 14,000 pharmacies, make three-quarters of all retail food 
store sales in the United States, and have combined annual sales of 
$680 billion.\11\ The Heritage Foundation (``HF'') describes itself as 
a nonprofit corporation with a mission ``to formulate and promote 
conservative public policies . . .''
---------------------------------------------------------------------------

    \9\ All comments are available at: http://www.ftc.gov/policy/public-comments/initiative-387. This document cites to these 
comments by indicating the surname or short form for the commenter, 
e.g., ``FMI'' for the Food Marketing Institute, and, for comments of 
more than one page, the page of the comment unless the citation 
refers to the entire comment. Cites to ``John K'' reference the 
comment signed in that way.
    \10\ FMI at 1.
    \11\ Id.
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    Forty-eight individuals explicitly or implicitly supported the Rule 
by relating personal benefits from retail food store rainchecks.\12\ 
For example,

[[Page 70054]]

one commenter stated that he accumulated 50 rainchecks in a 6-month 
period due to stockouts.\13\
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    \12\ Hawthorne, DeWitt, Cosser, Dexter, Lewis, Marshall, 
Thompson, Ash, Herman, Hellmueller, Wright, Ickes, Gregory, Harris, 
Heiser, Nealy, Haass, Skaggs, Pritchard, Goodman, Frame, Cummings, 
DelSole, Wheat, Marino, John K, Rasley, Bacher, Samuel, Purcell, 
Dickey, Crofoot, Sinex, Aikins, Anonymous/Mad in Miami, Thorson, 
Angelo, Bates, Burleson, Boyd, Black, Marcuse, Steenhoven, Gettz, 
Millison, Nardo, Rose, and Doyal.
    \13\ Angelo.
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    Two individual commenters joined the organizational commenters in 
questioning whether the Commission should retain the Rule.\14\ FMI 
commented that the Rule is unnecessary because competition forces 
retail food stores to avoid stockouts and to compensate customers even 
without the Rule.\15\ Nonetheless, FMI stated that the Rule imposes no 
significant costs on retail food stores. FMI also cautioned that if the 
Commission retains the Rule, it should keep the 1989 amendments to 
avoid the costs eliminated by those amendments.
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    \14\ FMI, HF, Lunsford, Fitzsimmons.
    \15\ FMI commented that it did not believe that there is a 
continuing need for the rule because competitive pressures induce 
retailers to respond to the needs of their customers, and ``[t]here 
is no incentive for grocery retailers to engage in the types of 
activity the Unavailability Rule was intended to address.'' FMI at 
2-4.
---------------------------------------------------------------------------

    HF recommended repealing the Rule, arguing increased competition 
should protect consumers.\16\ In support of this argument, it asserted 
that the number of grocery stores in America has grown substantially 
since the Rule was amended in 1989, noting that today there are 92,300 
grocery stores nationwide and that large chains run thousands of stores 
each. It did not provide data on the number of stores in 1989. HF also 
stated that the number of farmers' markets increased between 1994 and 
2011. Finally HF commented that state regulation is adequate to protect 
consumers where competitive pressure is insufficient.
---------------------------------------------------------------------------

    \16\ HF asserted that ``market competition clearly can police 
against any grocery businesses that advertise products that they do 
not have for sale at the advertised price.'' HF at 3.
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    Fitzsimmons recommended repealing the Rule generally while 
expanding it in ``food deserts.'' \17\ For areas other than food 
deserts, he argued market competition is sufficient to protect 
consumers. Fitzsimmons also recommended that the Commission expand the 
Rule to cover non-traditional retail food stores in food deserts, where 
competition is insufficient to protect consumers.
---------------------------------------------------------------------------

    \17\ Fitzsimmons recommended that the Rule define food deserts 
as low-income areas where the nearest grocery store is more than a 
mile away. Fitzsimmons at 3.
---------------------------------------------------------------------------

    Finally, Lunsford recommended repealing the Rule because market 
competition and state regulatory agencies adequately protect 
consumers.\18\
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    \18\ Lunsford argued that ``market competition should deter most 
business from deceptive practices.''
---------------------------------------------------------------------------

IV. Retention of the Unavailability Rule

    The Commission retains the rule in its existing form. To determine 
whether the Rule should be amended, repealed, or retained, the 
Commission has evaluated a number of factors, including the relative 
costs and benefits of the Rule and its effect on competition and 
consumer choice. The Commission has determined that the Rule imposes no 
significant costs on retail food stores, and it benefits consumers as 
there is evidence that market or state regulatory forces would not 
adequately protect consumers without the Rule. Given this record, the 
Commission has no basis to repeal or amend the Rule at this time.
    None of the comments identified any specific costs or burdens 
associated with complying with the Rule. To the contrary, FMI--which 
represents grocery companies and thus would have the clearest 
understanding of any burdens the Rule might impose--commented that it 
``does not believe the Rule imposes significant costs on retailers.'' 
\19\ Furthermore, even the comments that opposed retention favored the 
consumer-friendly practices required by the Rule, including 
restrictions on overpricing and unavailability.\20\ These comments 
simply opined that, even if the Rule were eliminated, market forces 
would result in the same arrangements the Rule requires. If this is 
true, the Rule cannot impose any significant cost.
---------------------------------------------------------------------------

    \19\ FMI at 5.
    \20\ FMI stated that stockouts hurt retailers because they 
increase costs while also decreasing customer satisfaction. Id. at 
3-4. HF stated that ``[n]o-one would condone the commercial conduct 
prohibited by the Unavailability Rule.'' HF at 2. Lunsford indicated 
that unavailability and overpricing are not ``honest business.'' 
Fitzsimmons proposed retaining and expanding the Rule for certain 
geographic areas to prevent ``predatory business practices.'' 
Fitzsimmons at 2-3. This support contrasts with the evidence that 
compliance with the Commission's original Rule was costly and 
wasteful. See Rule Amendment, 54 FR 35460-35462 (noting, for 
example, that retail food stores stocked excessive inventory and 
incurred monitoring and recordkeeping costs to comply with the 
original Rule).
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    Conversely, the record lacks factual support to conclude that 
market forces alone would be sufficient to protect consumers without 
the Rule.\21\ Although comments state that the number of grocery stores 
in America has increased, they do not provide any market analysis of 
the level of competition in this industry.\22\ The market may have many 
participants nationwide, but there is no indication that competition 
exists sufficient to preserve the benefits of the Rule for all, or even 
most, local markets throughout the country.
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    \21\ In American Financial Services Ass'n v. FTC, 767 F.2d 957, 
987-988 (D.C. Cir. 1985), the court found that it was not 
unreasonable for the Commission, in promulgating the Credit 
Practices Rule, to discount ``abstract or . . . theoretical 
arguments . . . which have little or no factual support in the 
record.''
    \22\ HF and Fitzsimmons comment that there are 92,300 grocery 
stores in America, but do not provide evidence that this number is 
above a threshold for a sufficiently competitive marketplace. HF at 
2, Fitzsimmons at 1.
---------------------------------------------------------------------------

    Two commenters that questioned the general need for the Rule 
asserted that there are geographic areas of lower food marketplace 
competition, and demographic groups with limited food shopping 
options.\23\ Thus, even if, as asserted, the national-level food 
marketplace were sufficiently competitive, the Rule would still be 
necessary to protect groups with limited food shopping options.
---------------------------------------------------------------------------

    \23\ HF at 3, Fitzsimmons at 2-3.
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    Further, there is evidence that even with the Rule, some stores do 
not respond to the current level of competition by avoiding stockouts 
and providing rainchecks or other compensation. Eleven commenters 
complained of difficulties obtaining rainchecks, or of inadequate 
rainchecks that, for example, expired before sale items were 
restocked.\24\ Thus, the weight of the evidence shows that market 
forces are not sufficient to ensure that retail food stores make useful 
rainchecks conveniently available.
---------------------------------------------------------------------------

    \24\ Dexter, Harris, Heiser, Haas, Pritchard, Cummings, Wheat, 
John K, Dickey, Crofoot, Burleson.
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    HF and Lunsford commented that state consumer protection agencies 
provide sufficient recourse when retailers deceptively advertise the 
availability of sale items.\25\ They did not, however, submit evidence 
about actions taken by state agencies. Notably, no state or local 
regulatory agencies submitted comments. The record, therefore, does not 
support the argument that state regulations supplant the continued need 
for the Rule.\26\
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    \25\ HF at 4 & n.14, Lunsford.
    \26\ The four state laws cited by HF do not establish that most 
states directly regulate retail food stare advertising. Indeed, one 
of those laws broadly prohibits unfair and deceptive practices but 
does not address specifically the advertising of sale items. Wash. 
Rev. Code Sec.  19.86.020.
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    Because the Rule does not impose significant costs, the practices 
it requires benefit consumers, \27\ and there is evidence that those 
practices would not continue in the absence of the Rule,

[[Page 70055]]

the Commission retains the Rule in its present form.
---------------------------------------------------------------------------

    \27\ Forty-eight consumer commenters supported continuing to 
require rainchecks.
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V. Coverage of the Unavailability Rule

    The Commission asked whether it should broaden the Rule's coverage 
beyond retail food stores.\28\ In response, thirty two comments \29\ 
favored extending coverage to include, for example, retail stores 
generally,\30\ Black Friday retailers,\31\ and electronics 
retailers.\32\ One comment favored expanding the Rule to include 
nontraditional food stores located in food deserts.\33\ None, however, 
provided evidence about the effects of amending the Rule's coverage, or 
evidence that the Rule's present coverage is inadequate. Therefore, the 
Commission is not proposing to extend the coverage of the Rule.
---------------------------------------------------------------------------

    \28\ Request for Public Comment, 76 FR at 51309.
    \29\ See Dexter, Lewis, Marshall, Thompson, Ash, Hellmueller, 
Wright, Ickes, Gregory, Harris, Heiser, Nealy, Skaggs, Pritchard, 
Frame, Cummings, DelSole, John K, Bacher, Samuel, Purcell, Crofoot, 
Sinex, Anonymous/Mad in Miami, Thorson, Bates, Burleson, Boyd, 
Steenhoven, Gettz, Rose, and Doyal. Several comments suggested 
amending the Rule to cover specific retailers. See Wright 
(Walgreens), Ickes (CVS, Rite-Aid, Target), Gregory (Target), Heiser 
(Target, Wal-Mart), Haas (Walgreens), Frame (CVS), Bates (Wal-Mart, 
Fred Myer), Gettz (Walgreens, CVS, Rite-Aid), and Rose (Walgreens, 
Wal-Mart, Target). The Commission declines to amend the Rule to name 
specific retailers because, among other things, their business 
models could change, taking them out of the ambit of the Rule.
    \30\ See Thompson, Ickes, and Harris.
    \31\ See Ash.
    \32\ See Wright, Heiser.
    \33\ Fitzsimmons.
---------------------------------------------------------------------------

    However, the Commission notes that the Rule is not limited to 
``traditional'' retail food stores. For example, supercenters, 
warehouse clubs, dollar stores, and drug stores increasingly offer food 
or grocery products and advertise discounts for these items. Such 
stores constitute a significant portion of the retail food marketplace. 
According to the U.S. Department of Agriculture, the proportion of 
American food sales for home consumption by nontraditional food 
retailers rose from 13.7 percent in 2000 to 21.5 percent in 2011.\34\ 
The Rule covers these types of stores.
---------------------------------------------------------------------------

    \34\ ``Since the late 1990s, nontraditional retailers have 
steadily increased their relative share of food-at-home sales, 
compared with traditional retailers. Nontraditional stores' share of 
food-at-home sales increased from 13.7 percent in 2000 to 21.5 
percent in 2011 (traditional foodstores and nonstore food sales--
such as mail order, home delivery, and direct sales by farms, 
processors, and wholesalers--account for the remaining shares). Most 
of the growth in food sales is due to supercenters and warehouse 
club stores, whose sales more than doubled over the period. More 
recently, dollar stores--such as Dollar General and Family Dollar--
and drugstores--such as Rite Aid, CVS, and Walgreens--have increased 
sales by expanding retail food offerings.'' U.S. Dept. of 
Agriculture, Econ. Res. Serv., Retail Trends, February 5, 2014, 
available at http://www.ers.usda.gov/topics/food-markets-prices/retailing-wholesaling/retail-trends.aspx.
---------------------------------------------------------------------------

VI. Other Suggested Rule Changes

    In its request for public comments, the Commission invited 
suggested Rule changes. In response, comments suggested amending the 
Rule to:
    (1) Prohibit: (a) failure to conspicuously display advertised 
items, e.g., positioning products so that sale priced items are 
difficult to identify or locate, and (b) overpricing, e.g., scanning 
merchandise at full price rather than at the sale price; \35\
---------------------------------------------------------------------------

    \35\ Ash, Ickes, Sinex at 1, Black.
---------------------------------------------------------------------------

    (2) require retail food stores to provide rainchecks promptly upon 
demand; \36\ and
---------------------------------------------------------------------------

    \36\ Dexter, Heiser, Haass, Cummings, Pritchard, Dickey, 
Crofoot, Burleson.
---------------------------------------------------------------------------

    (3) require retail food stores to compensate consumers for 
consequential losses caused by unavailability.\37\
---------------------------------------------------------------------------

    \37\ Cummings, Boyd, Thorson, Ickes.
---------------------------------------------------------------------------

    As set forth below, the first and second suggestions are 
unnecessary because they are already encompassed by the Rule, and the 
Commission declines to propose the third because the record lacks 
evidence to support such a change.

A. Display of Advertised Items and Overpricing

    The Rule already prohibits failure to conspicuously display 
advertised items and overpricing. Consequently, no amendment is 
necessary to address concerns about these issues.\38\
---------------------------------------------------------------------------

    \38\ Ash, Ickes, Sinex at 1, Black.
---------------------------------------------------------------------------

    The Commission has entered two cease and desist orders against 
retail food stores solely for overpricing,\39\ and three for 
overpricing and unavailability.\40\ These orders demonstrate that 
merely stocking advertised items was not sufficient to comply with the 
original Rule.
---------------------------------------------------------------------------

    \39\ Fred Meyer, Inc., 87 F.T.C. 112, 115 (1976); Safeway 
Stores, Inc., 91 F.T.C. 975 (1978).
    \40\ Fisher Foods, Inc., 90 F.T.C. 473 (1977); The Kroger Co., 
90 F.T.C. 459 (1977); and Shop-Rite Foods, Inc., 90 F.T.C. 500 
(1977).
---------------------------------------------------------------------------

    The Commission amended the Rule in 1989 to eliminate explicit 
display and pricing requirements.\41\ At that time, however, the 
Commission stated ``the simple requirement that advertised items be 
`readily available to customers' implicitly includes a requirement that 
items be stocked in such a way that a reasonable consumer would not be 
precluded from obtaining them.'' \42\ The Commission further stated 
that the prohibition against overpricing ``is implicit in the 
requirement that products advertised for sale at a stated price be 
available.'' \43\ Consequently, the Rule already requires proper 
display and prohibits overpricing.\44\
---------------------------------------------------------------------------

    \41\ Paragraph 424.1(b)(1)(i) of the original Rule required that 
where advertised items are not readily available to customers, i.e., 
displayed for consumers, retail food stores provide ``clear and 
adequate notice that . . . items are in stock and may be obtained 
upon request.'' Rule Promulgation, 36 FR at 8781. Paragraph 
424.1(b)(2) of the original Rule prohibited any failure ``to make 
the advertised items conspicuously and readily available for sale at 
or below the advertised prices.'' Id.
    \42\ Federal Trade Commission: Retail Food Store Advertising and 
Marketing Practices: Notice of Proposed Rulemaking, 50 FR 43224 at 
43226 (Oct. 24, 1985) (``Notice of Proposed Rulemaking'').
    \43\ Paragraph 424.1 of the amended Rule. Id. at 43225.
    \44\ Moreover, advertising one price and charging a higher price 
is an unfair or deceptive act or practice in violation of Section 
5(a) of the FTC Act. See, e.g., Budget Rent-A-Car System, Inc., FTC 
Docket C-4212 (Jan. 2, 2008).
---------------------------------------------------------------------------

B. Rainchecks

    The raincheck defense, 16 CFR 424.2(b), provides that a store 
complies with the Rule if it offers consumers a ``raincheck'' when the 
advertised product is out of stock. Commenters requested two amendments 
to address barriers they have encountered in the market. First, they 
asked the FTC to require stores to provide rainchecks during a 
consumer's initial visit to a store.\45\ Second, they requested an 
amendment to prohibit rainchecks that expire before the store restocks 
the advertised merchandise.\46\ Because the Rule already prohibits 
these practices, there is no need for amendments.
---------------------------------------------------------------------------

    \45\ Heiser, Pritchard, Dickey, Crofoot, and Burleson stated 
that stores had made them wait excessive periods during a visit to 
receive a raincheck. Dexter, Heiser, Haass, and Cummings stated that 
stores had refused to provide rainchecks prior to the final date of 
sales.
    \46\ Dexter, Harris, Wheat. John K recommended that the 
Commission amend the Rule to require rainchecks with no expiration 
date. The Commission does not have evidence on the costs or benefits 
of such an amendment, and therefore declines to propose it at this 
time.
---------------------------------------------------------------------------

    The raincheck defense only provides protection if the store 
``offers'' a raincheck at the time a consumer attempts to purchase the 
sale item.\47\ By definition, a raincheck is a guarantee to sell an 
item in the future at its current advertised price.\48\ If, at the time 
of the violation,\49\ a store promises to offer a raincheck in the 
future, it has merely promised to make the requisite offer at a future 
date. It has failed to offer a

[[Page 70056]]

raincheck at all, and the defense is not available to it.\50\
---------------------------------------------------------------------------

    \47\ 16 CFR 424.2(b)
    \48\ Rain Check Definition, Oxford Dictionaries, http://www.oxforddictionaries.com/us/definition/american_english/rain-check 
(last visited Nov. 12, 2014).
    \49\ The violation occurs when a store advertises a sale price 
for an item but does not have it in stock and readily available for 
consumers during the advertised sale period. 16 CFR 424.1.
    \50\ 16 CFR 424.1.
---------------------------------------------------------------------------

    Similarly, a store that offers a ``raincheck'' that expires before 
the store restocks the advertised item cannot use the defense. The 
raincheck must provide ``compensation equal to that of the advertised 
savings.'' \51\ A raincheck that expires before consumers can use it 
has no value, much less value equal to the advertised savings. 
Therefore, it is not a ``raincheck'' at all.
---------------------------------------------------------------------------

    \51\ Rule Amendment, 54 FR at 35463.
---------------------------------------------------------------------------

    These clear requirements are consistent with the purpose of the 
``raincheck'' defense.\52\ The defense protects consumers' ability to 
purchase items at advertised sale prices without ``needless 
transportation cost[s].'' \53\ Using a raincheck, a consumer can 
purchase an item at the sale price during the consumer's next trip to 
the store, thereby avoiding extra travel time or expenses. Failing to 
offer rainchecks at the time it cannot make advertised products readily 
available to consumers, such as when a store refuses to provide 
rainchecks until a sale ends, would require consumers to make 
additional trips and pay extra travel costs, thereby undermining the 
purpose of the Rule.\54\
---------------------------------------------------------------------------

    \52\ To the extent that there is any ambiguity about the meaning 
of ``raincheck,'' it is proper to interpret the term consistently 
with the purpose of the Rule. See Public Citizen v. U.S. Dept. of 
Justice, 491 U.S. 440, 455 (1989).
    \53\ Notice of Proposed Rulemaking, 50 FR at 43230. See also Id. 
at 43225 (``the Rule could produce benefits by saving shoppers an 
extra trip back to the same store or to another store to purchase 
the advertised item (the `trip gain').''); Rule Amendment, 54 FR at 
35459 (the Rule benefits consumers ``through the avoidance of trip 
losses (`the trip gain'), which are losses that result from the 
expense of wasted trips to retail outlets for advertised items that 
are unavailable.''); Id. at 35463 (``Savings that have been realized 
by consumers [from the Rule] are principally the result of reduction 
in the number of unsuccessful trips made to purchase items that are 
not in stock.'').
    \54\ Cosser, Dexter, Lewis, Wright, Ickes, Heiser, Cummings, 
John K, Rasley.
---------------------------------------------------------------------------

C. Consequential Costs From Unavailability

    Four comments noted that consumers may not realize all savings even 
when offered rainchecks or comparable merchandise under the defenses in 
paragraphs 424.2(b), (c), or (d) of the Rule.\55\ For example, 
promotions such as ``Register Rewards'' or coupon doubling may expire 
before consumers can use rainchecks, or manufacturers' coupons may not 
apply to similar products offered under the defense in 16 CFR 424.2(c). 
Therefore, these comments proposed amending the Rule to require retail 
food stores to compensate consumers for consequential costs caused by 
unavailability.\56\
---------------------------------------------------------------------------

    \55\ Cummings, Boyd, Thorson, Ickes.
    \56\ Thorson proposed amending the Rule to require retail food 
stores to ``duplicate conditions at the time of the sale . . .'' 
Thorson at 1.
---------------------------------------------------------------------------

    The record, however, does not contain evidence regarding the nature 
or extent of any such consequential losses. Nor does it contain 
evidence to support a factual determination regarding the potential 
costs or benefits of amending the Rule to require compensation for 
consequential costs from unavailability. Consequently, the Commission 
does not propose amending the Rule at this time to require compensation 
for consequential losses.

VII. Conclusion

    For the reasons described above, the Commission has determined to 
retain the current Retail Food Store Advertising and Marketing 
Practices Rule, issue a Rule amendment correcting a typographical 
error,\57\ and cease publishing dissents to the Rule's previous 
amendment.\58\
---------------------------------------------------------------------------

    \57\ Section 553 of the Administrative Procedure Act, 5 U.S.C. 
553(b)(3)(B), provides that, when an agency for good cause finds 
that notice and public procedure are impracticable, unnecessary, or 
contrary to the public interest, the agency may issue a final rule 
without providing notice and an opportunity for public comment. The 
Commission has determined that there is good cause for making this 
technical correction final without prior opportunity for comment, 
because this is merely a technical change to correct a typographical 
error and is not a substantive change.
    \58\ This will harmonize the Rule with the Commission's normal 
practice, which is not to publish dissents in the Code of Federal 
Regulations. The dissents will remain available to the public at 54 
FR 35468.
---------------------------------------------------------------------------

List of Subjects in 16 CFR Part 424

    Advertising, Foods, Trade practices.

    For the reasons set forth in the preamble, the Federal Trade 
Commission amends 16 CFR part 424, as follows:

PART 424--RETAIL FOOD STORE ADVERTISING AND MARKETING PRACTICES

0
1. The authority citation for part 424 is revised to read as follows:

    Authority: 15 U.S.C. 41-58.


Sec.  424.1  [Amended]

0
2. Amend Sec.  424.1 by removing the words ``In connection with the 
sale of offering for sale'' and adding, in their place, the words ``In 
connection with the sale or offering for sale''.


Sec.  424.2  [Amended]

0
3. Remove the two statements that follow the text of Sec.  424.2(d).

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2014-27798 Filed 11-24-14; 8:45 am]
BILLING CODE 6750-01-P