[Federal Register: March 5, 2002 (Volume 67, Number 43)]
[Rules and Regulations]               
[Page 9919-9923]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05mr02-3]                         

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FEDERAL TRADE COMMISSION

16 CFR Part 20

 
Guides for the Rebuilt, Reconditioned, and Other Used Automobile 
Parts Industry

AGENCY: Federal Trade Commission.

ACTION: Final rule.

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SUMMARY: The Commission has completed its review of the Guides for the 
Rebuilt, Reconditioned and Other Used Automobile Parts Industry (``Used 
Auto Parts Guides'' or ``Guides'') and has determined to retain the 
Guides with updated language and minor revisions.

EFFECTIVE DATE: March 5, 2002.

ADDRESSES: Requests for copies of this document should be sent to the

[[Page 9920]]

Consumer Response Center, Room 130, Federal Trade Commission, 600 
Pennsylvania Ave., NW, Washington, DC 20580. The document is available 
on the Internet at the Commission's website http://www.ftc.gov>

FOR FURTHER INFORMATION CONTACT: David Plottner, Investigator, Federal 
Trade Commission, 1111 Superior Avenue, Suite 200, Cleveland, Ohio 
44114, telephone number (216) 263-3409, e-mail dplottner@ftc.gov>.

SUPPLEMENTARY INFORMATION:

Introduction

    The Used Auto Parts Guides address claims for automotive parts and 
assemblies that have been used or contain used parts. These parts or 
assemblies may have been rebuilt, repaired, reconditioned, etc., since 
they were last used, and may have been repainted and repackaged in such 
a way that they could easily be confused with new products. Even used 
parts that have not been rebuilt are usually cleaned and sometimes 
repainted before being marketed. The Guides suggest that junk yards, 
rebuilders, auto parts stores, service garages and others in the 
distribution chain for these parts or assemblies not mislead purchasers 
about the prior use and/or the reconstructed nature of the parts and 
the identity of the rebuilder.
    Rebuilt auto parts account for a significant portion of the total 
automobile replacement parts market. One large retailer/distributor 
commenting on the Guides reported that such parts account for 20% of 
its retail sales dollars. Some replacement components, alternators and 
power steering pumps, for example, are nearly always rebuilt because of 
the significant cost savings over new parts.
    The Guides provide advice regarding the manner in which those who 
sell used automobile parts can avoid unfair or deceptive acts or 
practices that may violate section 5 of the Federal Trade Commission 
Act (``FTC Act''), 15 U.S.C. 45. The Guides define industry products 
broadly to include not only used parts for automobiles, but also used 
parts and assemblies containing used parts for trucks, tractors, 
motorcycles and other similar self-propelled vehicles. Industry members 
are those who sell or distribute any of these parts. The Used Auto 
Parts Guides advise that industry members not:
    (1) Deceive purchasers about the previous use of products;
    (2) deceive purchasers about the identity of the rebuilder, 
remanufacturer, reconditioner or reliner;
    (3) misrepresent the condition of products and misuse the terms 
``rebuilt,'' ``factory rebuilt,'' ``remanufactured,'' or other similar 
terms.

II. Regulatory Review of the Guides

    As part of its program to review current rules and guides, the 
Commission published in the Federal Register in 1998, a notice seeking 
comments about the regulatory and economic costs and benefits of the 
Guides (63 FR 17132 (Apr. 8, 1998)). Eight written comments were 
received.\1\ Seven comments favored keeping the Guides; one favored 
rescinding the Guides.
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    \1\ AutoZone, a retailer/distributor; CarQuest, a retailer/
distributor; five trade groups speaking as one: the Automotive Parts 
and Accessories Association (APAA), the Automotive Service Industry 
Association (ASIA), the Automotive Parts Rebuilders Association 
(APRA), the Automotive Engine Rebuilders Association (AERA), and the 
Heavy Duty Distribution Association (HDDA); Charles P. Schwartz, 
Jr., an individual who is a former APRA chairman; the late United 
States Senator John Chafee; Consumers Union, a national consumer 
group; and, commenting as one, the state Attorneys General of 
Connecticut, Illinois, Iowa, Nevada, New York, Pennsylvania, and 
Tennessee. These comments have been placed on the public record as 
Document Nos. B2365600001-008, respectively, and are available for 
inspection and copying at the Federal Trade Commission, Consumer 
Response Center, Room 130, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580.
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    The comments in favor of retaining the Guides stated that the 
Guides provide clear guidance to industry members to assist them in 
determining what disclosures they should make to consumers about used, 
rebuilt and reconditioned automobile parts and assemblies, and how to 
make them in a consistent manner. Those who rebuild industry products 
especially supported retaining the Guides' clear definitions for the 
terms ``rebuilt'' and ``remanufactured.'' The state Attorneys General 
supported retaining the Guides because they clearly advise industry of 
the disclosures necessary to prevent or reduce the incidence of 
fraudulent activity such as charging unknowing consumers for new parts 
when the parts are used or rebuilt, and to enable consumers to make 
informed, cost efficient decisions. The one commenter supporting 
rescinding the Guides, AutoZone, stated that the Guides are duplicative 
of state law--statutory, regulatory and common--and are no longer 
needed, especially in light of the written warranties that now often 
accompany rebuilt parts, assuring their quality.

III. Determination To Retain the Guides

    The Commission has determined to retain the Guides for the 
following reasons. First, the Guides are based on well-established 
legal and policy grounds. Many prior Commission cases hold that used 
articles restored to the appearance of new require an affirmative 
disclosure of prior use. A 1969 Commission Enforcement Policy Statement 
(34 FR 176) reiterates this principle.
    In recent actions, the Commission has continued to protect 
consumers from sellers passing off used goods as new. For example, the 
Commission recently announced two consent orders against mattress 
retailers who claimed that their new-looking used mattresses were all 
new, but for the springs, when in fact, they were entirely used 
mattresses but for their new outer covers.\2\ In addition, when the 
Commission amended the Guides for Environmental Marketing in 1998 to 
allow sellers to use the term ``recycled content'' to described used 
and reconditioned products, not just products made from recycled raw 
material, it cautioned that for products that contained used or 
reconditioned materials, a recycled content claim should be adequately 
qualified to avoid consumer deception (i.e., generally, recycled alone 
is insufficient; used or reconditioned materials must be so 
identified). 16 CFR 260.7(e) and Example 12.
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    \2\ See FTC Press Release, Consumers Can Rest Easy Following FTC 
Settlements with Two Used Mattress Resellers (June 14, 2000).
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    Second, various states also prohibit misrepresenting used 
merchandise as new, either by specific statute or by common law, and 
some rely on the Commission's Guides to complement their laws and 
enhance their enforcement efforts.\3\ For example, some states have 
statutes or regulations requiring automobile service garages and 
mechanics to inform a vehicle owner whenever a used part is installed 
during the course of a repair.\4\ The garages and other mechanics need 
information from their vendors regarding prior use or refurbishing to 
be able to comply with these requirements. The Guides provide members 
of the rebuilding industry with clear guidance that assists them in 
determining what disclosures regarding prior use or refurbishing they 
should make to consumers and other purchasers, including vendors who 
resell the products to consumers, and how they should make them in a 
consistent manner.
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    \3\ AutoZone, at 2.
    \4\ APRA/AERA, at 7.
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    Third, there are no private, industry-wide standards covering the 
use of terms such as ``rebuilt'' or ``remanufactured'' in the sale of 
used automobile parts generally. This

[[Page 9921]]

industry is not in a good position to set its own standards because 
there are many very small, ``mom and pop'' type rebuilding companies 
that are not members of the major industry trade associations. These 
associations, however, use the FTC Guides to educate and police 
industry members about potentially deceptive practices.
    It can be argued that if the Commission were to repeal these 
Guides, section 5, FTC Act would still protect the public from the 
deceptive practice of passing off used goods as new.\5\ However, should 
that happen, states and industry associations would lack a tool that 
they currently find helpful. Thus, on balance, these guides provide 
sufficient benefits that are not outweighed by costs to merit their 
retention.
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    \5\ Civil case law also tends to protect consumers. Champion 
Spark Plug Co. v. Sanders, 331 U.S. 125 (1947), a trademark 
infringement suit, held that Champion, a spark plug manufacturer, 
could not prohibit Sanders, a spark plug rebuilder, from marketing 
his rebuilt Champion spark plugs so long as he clearly labeled the 
products as having been rebuilt and clearly identified himself--not 
Champion--on the label as the rebuilder.
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IV. Determinations Regarding Revisions to the Guides

    A number of commenters suggested changes to the Guides, which are 
discussed below. The Commission has determined to update the list of 
commonly rebuilt used automobile parts contained in section 20.0 of the 
Guides and to clarify that the Guides apply to advertising in 
electronic format, such as on the Internet. In addition, the Commission 
has updated and streamlined certain language in the Guides to conform 
to current FTC practices.

A. Further Defining the Standards Set Out in the Guides

    CarQuest and the state Attorneys General \6\ suggested that 
consumers might benefit from wider ranging and more specifically 
written standards describing the various levels of dismantling and 
reconstructing that take place in the industry. For example, the Guides 
use the terms ``rebuilt,'' and ``remanufactured'' interchangeably, but 
to some in the industry the term ``remanufactured'' denotes a higher 
level of reconstruction than does the term ``rebuilt.'' \7\ Similarly, 
``reconditioned,'' may connote a level somewhat lower than ``rebuilt,'' 
and ``refurbished'' might connote a product that has received very 
little use in the first place or little additional work before resale 
in the second. These commenters suggest that the Commission 
specifically define each of the terms used in the Guides. The state 
Attorneys General suggest further that the general procedure used in 
rebuilding or remanufacturing, etc. also be spelled out in label 
disclosures to consumers.
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    \6\ CarQuest, at 3; State Attorneys General, at 4.
    \7\ This distinction appears to be common in the industry. For 
example, Ford Motor Company's website cautions consumers that a 
rebuilt part merely has had its broken components repaired while a 
``remanufactured'' part has undergone a much more thorough 
reconstruction. Ford Motor Company Website, ``Genuine Parts. The 
Difference Between Remanufactured and Rebuilt'' (http://www/
ford.com/customerservice/genuine/versus.html, March 11, 1999) (copy 
on file at the Federal Trade Commission, East Central Regional 
Office).
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    The descriptive terms used in the Guides are fluid to accommodate 
the wide range of rebuilding that takes place. All commenters agree 
that the standard contained in the Guides seems to have worked well. In 
addition, the Commission has no substantive basis in the record of this 
review proceeding to define the terms differently or more precisely.The 
Commission, therefore, has determined not to revise the Guides to adopt 
more specific standards or procedures than those currently contained in 
the Guides. The Commission, on the other hand, welcomes industry-
sponsored measures to provide more information to consumers through 
voluntary standards specifying more precise terms, or defining meanings 
for the various terms, so long as those standards would not mislead 
consumers about the extent of prior use or the amount of reconstructing 
that has been done.

B. Modifying the Guides to Specifically Include Foreign Rebuilders

    Several commenters suggested that the Commission revise the Guides 
and take other actions to make clear that foreign rebuilders and 
importers of used auto parts, rebuilt and otherwise, are covered by the 
Guides.\8\ Some comments suggested that the Commission educate U.S. 
Customs officials about the Guides; others that the Commission require 
country-of-origin markings on foreign rebuilt parts packaged in boxes 
bearing the brand name of a United States distributor.
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    \8\ APRA/AERA, at 3, 4; Schwartz, at 3; Consumers Union, at 4.
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    The Commission has determined that it is not necessary to revise 
the Guides to address these concerns. First, the Commission has 
jurisdiction over entities conducting business in the United States 
regardless of the country of origin of the original new product or of 
the reconstructed or otherwise used product. The Guides, therefore, 
currently cover foreign rebuilders and importers of used auto parts who 
distribute or sell used auto parts in the United States. Second, the 
Commission's staff can ensure that the U.S. Customs Service is aware of 
the Guides; no revision to the Guides is required to do so. Finally, 
the Commission does not ordinarily require country of origin 
disclosures; it only prohibits false ``made in U.S.A.'' claims. 
Ordinarily the Commission will not consider a marketer's use of an 
American brand name or trademark, or the listing of a company's U.S. 
address in a nonprominent manner, without more, to constitute a U.S. 
origin claim.\9\
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    \9\ Enforcement Policy Statement on U.S. Origin Claims, 62 FR 
63756, at 63768 (1997).
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C. Requiring Original Equipment Manufacturers to Cooperate With 
Rebuilders

    Two commenters \10\ suggested that original equipment manufacturers 
(``OEMs'') should be prohibited from limiting the ability of 
independent rebuilders to obtain parts for rebuilding and should be 
required to share product design specifications, which would enhance 
the efficiency of the rebuilding process. It also was suggested that 
the Commission prohibit OEMs from requiring rebuilders to grind off or 
otherwise remove model numbers, part numbers and other identifying 
information.\11\ These marks, according to two commenters, often help 
identify the application for that particular part.
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    \10\ Schwartz, at 3; CarQuest, at 4.
    \11\ Schwartz, at 4; APRA/AERA, at 6.
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    The Commission has determined not to revise the Guides to require 
the cooperation suggested by the comments. The Auto Parts Guides 
concern the disclosures regarding prior use or reconstruction of used 
automobile parts that are necessary to avoid misleading consumers. 
These other issues, while relevant to the marketplace for used 
automobile parts in general, have little to do with the disclosures 
suggested by the Guides.

D. Requiring Repair Facilities To Disclose the Installation of Used or 
Rebuilt Parts

    Three comments \12\ reiterated the suggestions of a 1995 National 
Association Of Attorneys-General Auto Repair Task Force that service 
technicians and repair garages should be required to disclose whenever 
used parts have been installed in a customer's vehicle. These comments 
suggested that

[[Page 9922]]

the Guides should be changed to more clearly reflect such 
recommendation.
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    \12\ Consumers Union, at 3; CarQuest, at 3; state Attorneys 
General at 3.
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    No modification of the Guides in this regard is necessary. The 
Guides already apply to all who sell or distribute industry products. 
Mechanics and service garages nearly always both sell and install the 
parts needed to repair a consumer's automobile and are therefore 
included under the Guides.

E. Updating the List of Commonly Rebuilt Auto Parts and Components

    Several commenters suggested that the list of commonly rebuilt 
automobile parts included in section 20.0 of the Guides should be 
updated to reflect modern practices. The Commission agrees and has 
revised the Guides accordingly.

F. Prohibiting the Use of the Word ``Recycled'' Alone To Describe 
Unreconstructed Used Auto Parts

    Three commenters suggested that the Commission should revise the 
Guides to make it clear that the term ``Recycled,'' by itself, is not 
adequate to disclose the used nature of used automobile parts which 
have received little or no reconstruction.
    The Commission has already responded to this issue in its 
Environmental Marketing Guides, 16 CFR part 260. Section 260.7(e) 
states that the word ``recycled,'' used by itself, cannot substitute 
for the words ``used,'' ``rebuilt,'' ``reconditioned,'' and other 
similar descriptors except when the environment in which the product is 
being offered for sale makes the used nature of the product clear, for 
example, a used part offered for sale at a junkyard. Therefore, a cross 
reference to the Environmental Marketing Guides has been added as a 
footnote to section 20.1(b) of the Used Auto Parts Guides.

List of Subjects in 16 CFR Part 20

    Advertising, Motor vehicles, Trade practices.

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

PART 20--GUIDES FOR THE REBUILT, RECONDITIONED AND OTHER USED 
AUTOMOBILE PARTS INDUSTRY

    1. The authority citation for 16 CFR part 20 is revised to read as 
follows:

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


    2. Section 20.0 is revised to read as follows:


Sec. 20.0  Scope and purpose of the guides.

    The Guides in this part apply to the manufacture, sale, 
distribution, marketing and advertising (including advertising in 
electronic format, such as on the Internet) of used parts and 
assemblies containing used parts designed for use in automobiles, 
trucks, motorcycles, tractors, or similar self-propelled vehicles 
whether or not such parts or assemblies have been reconstructed in any 
way (hereinafter ``industry products''). Such automotive parts and 
assemblies include, but are not limited to, anti-lock brake systems, 
air conditioners, alternators, armatures, air brakes, brake cylinders, 
ball bearings, brake shoes, heavy duty vacuum brakes, calipers, 
carburetors, cruise controls, cylinder heads, clutches, crankshafts, 
constant velocity joints, differentials, drive shafts, distributors, 
electronic control modules, engines, fan clutches, fuel injectors, fuel 
pumps, front wheel drive axles, generators, master cylinders, oil 
pumps, power brake units, power steering gears, power steering pumps, 
power window motors, rack and pinion steering units, rotors, starter 
drives, speedometers, solenoids, smog pumps, starters, stators, 
throttle body injectors, torque convertors, transmissions, turbo 
chargers, voltage regulators, windshield wiper motors, and water pumps. 
Tires are not included. (Tires are covered by the Tire Advertising and 
Labeling Guides, 16 CFR Part 228.)

    3. Section 20.1 is revised to read as follows:


Sec. 20.1  Deception generally.

    (a) It is unfair or deceptive to represent, directly or by 
implication, that any industry product or part of an industry product 
is new or unused when such is not the fact, or to misrepresent the 
current condition, or extent of previous use, reconstruction or repair 
of any industry product.
    (b) It is unfair or deceptive to offer for sale or sell any 
industry product unless a clear and conspicuous disclosure that such 
product has been used or contains used parts is made in advertising, 
sales promotional literature and invoices and on product packaging. 
Additionally, it is unfair or deceptive to offer for sale or to sell 
any rebuilt, remanufactured, reconditioned, or otherwise new-appearing 
industry product unless such disclosure using appropriate descriptive 
terms is made on the product itself with sufficient permanency to 
remain visible for a reasonable period of time after installation. 
Examples of appropriate descriptive terms include, but are not limited 
to ``Used,'' ``Secondhand,'' ``Repaired,'' ``Remanufactured,'' 
``Reconditioned,'' ``Rebuilt,'' or ``Relined.'' \1\ On invoices to the 
trade only, the disclosure may be made by use of any number, mark, or 
other symbol that is clearly understood by industry members as meaning 
that the products or parts identified on the invoices have been used.
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    \1\ If the term ``recycled'' is used, it should be used in a 
manner consistent with the requirements for that term set forth in 
the Guides for the Use of Environmental Marketing Claims, 16 CFR 
260.7(e).
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    (c) It is unfair or deceptive to place any means or instrumentality 
in the hands of others so that they may mislead consumers as to the 
previous use of industry products or parts.

    4. Section 20.2 revised to read as follows:


Sec. 20.2  Deception as to identity of rebuilder, remanufacturer, 
reconditioner or reliner.

    (a) It is unfair or deceptive to misrepresent the identity of the 
rebuilder, remanufacturer, reconditioner or reliner of an industry 
product.
    (b) In connection with the sale or offering for sale of an industry 
product, if the identity of the original manufacturer of the product, 
or the identity of the manufacturer for which the product was 
originally made, is revealed and the product was rebuilt, 
remanufactured, reconditioned or relined by someone else, it is unfair 
or deceptive to fail to disclose such fact wherever the original 
manufacturer is identified in advertising and sales promotional 
literature concerning the product, on the container in which the 
product is packed, and on the product, in close conjunction with, and 
of the same permanency and conspicuousness as, the disclosure of 
previous use of the product described by this section. Examples of such 
disclosures include:
    (1) Disclosure of the identity of the rebuilder:

Rebuilt by John Doe Co.

    (2) Disclosure that the product was rebuilt by an independent 
rebuilder:

Rebuilt by an Independent Rebuilder.

    (3) Disclosure that the product was rebuilt by someone other than 
the manufacturer so identified:

Rebuilt by other than XYZ Motors.

    (4) Disclosure that the product was rebuilt for the identified 
manufacturer, if such is the case:

Rebuilt for XYZ Motors.


    5. Section 20.3 is revised to read as follows:

[[Page 9923]]

Sec. 20.3  Misrepresentation of the terms ``rebuilt,'' ``factory 
rebuilt,'' ``remanufactured,'' etc.

    (a) It is unfair or deceptive to use the words ``Rebuilt,'' 
``Remanufactured,'' or words of similar import, to describe an industry 
product which, since it was last subjected to any use, has not been 
dismantled and reconstructed as necessary, all of its internal and 
external parts cleaned and made rust and corrosion free, all impaired, 
defective or substantially worn parts restored to a sound condition or 
replaced with new, rebuilt (in accord with the provisions of this 
paragraph) or unimpaired used parts, all missing parts replaced with 
new, rebuilt or unimpaired used parts, and such rewinding or machining 
and other operations performed as are necessary to put the industry 
product in sound working condition.
    (b) It is unfair or deceptive to represent an industry product as 
``Factory Rebuilt'' unless the product was rebuilt as described in 
paragraph (a) of this section at a factory generally engaged in the 
rebuilding of such products. (See also Sec. 20.2.)

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 02-5127 Filed 3-4-02; 8:45 am]
BILLING CODE 6750-01-M