Agency Information Collection Activities; Comment Request

AGENCY:

Federal Trade Commission (“Commission” or “FTC”).

ACTION:

Notice.

SUMMARY:

The FTC intends to conduct consumer research to examine the effectiveness of the FTC's current energy labeling requirements for consumer products and obtain information about alternatives to those labels. This activity is part of the Commission's efforts to examine the current labeling program, as required by section 137 of the Energy Policy Act of 2005 (Pub. L. 109-58). The information collection requirements described below will be submitted to the Office of Management and Budget (“OMB”) for review, as required by the Paperwork Reduction Act (“PRA”) (44 U.S.C. 3501-3520).

DATES:

Comments must be received on or before July 24, 2006.

ADDRESSES:

Interested parties are invited to submit written comments. Comments should refer to “Appliance Labeling Research: No. P064200” to facilitate the organization of comments. A comment filed in paper form should include this reference both in the text and on the envelope and should be mailed or delivered, with two complete copies, to the following address: Federal Trade Commission/Office of the Secretary, Room H-135 (Annex J), 600 Pennsylvania Avenue, NW., Washington, DC 20580. Because paper mail in the Washington area and at the Commission is subject to delay, please consider submitting your comments in electronic form, as prescribed below. However, if the comment contains any material for which confidential treatment is requested, the comment must be filed in paper form, and the first page of the document must be clearly labeled “Confidential.” The FTC is requesting that any comment filed in paper form be sent by courier or overnight service, if possible.

Comments filed in electronic form should be submitted by clicking on the following Weblink: https://secure.commentworks.com/FTC-ApplianceResearch and following the instructions on the Web-based form. To ensure that the Commission considers an electronic comment, you must file it on the web-based form at the https://secure.commentworks.com/FTC-ApplianceResearch weblink. If this notice appears at http://www.regulations.gov , you may also file an electronic comment through that Web site. The Commission will consider all comments that regulations.gov forwards to it.

Comments should also be submitted to: Office of Management and Budget, Attention: Desk Officer for the Federal Trade Commission. Comments should be submitted via facsimile to (202) 395-6974 because U.S. Postal Mail is subject to lengthy delays due to heightened security precautions.

The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. All timely and responsive public comments will be considered by the Commission and will be available to the public on the FTC Web site, to the extent practicable, at http://www.ftc.gov . As a matter of discretion, the FTC makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC Web site. More information, including routine uses permitted by the Privacy Act, may be found in the FTC's privacy policy at http://www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT:

Requests for additional information should be addressed to Hampton Newsome, Attorney, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 326-2889.

SUPPLEMENTARY INFORMATION:

Section 324 of the Energy Policy and Conservation Act of 1975 (“EPCA”), 42 U.S.C. 6291-6309, requires the Commission to prescribe labeling rules for the disclosure of estimated annual energy cost or alternative energy consumption information for a variety of products covered by the statute, including home appliances (e.g., refrigerators, dishwashers, air conditioners, and furnaces), lighting, and plumbing products. The Commission's Appliance Labeling Rule (“Rule”), 16 CFR part 305, implements these requirements by directing manufacturers to disclose energy information about major household appliances. This information enables consumers to compare the energy use or efficiency and operating costs of competing models. When initially published in 1979, the Rule applied to eight appliance categories: Refrigerators, refrigerator-freezers, freezers, dishwashers, water heaters, clothes washers, room air conditioners, and furnaces. Since then, the Commission has expanded the Rule's coverage to include central air conditioners, heat pumps, fluorescent lamp ballasts, plumbing products, lighting products, pool heaters, and some other types of water heaters.

Section 137 of the Energy Policy Act of 2005 amends the EPCA (42 U.S.C. 6294(a)(2)) to require the Commission to initiate a rulemaking to consider “the effectiveness of the consumer products labeling program in assisting consumers in making purchasing decisions and improving energy efficiency.” As part of this effort, the EPCA directs the Commission to consider “changes to the labeling rules (including categorical labeling) that would improve the effectiveness of consumer product labels.”

On November 2, 2005, the Commission published an Advance Notice of Proposed Rulemaking (“ANPR”) seeking comments on the effectiveness of the FTC's energy labeling regulations for consumer products. 70 FR 66307 (November 2, 2005). In that Notice, the Commission stated that the American Council for an Energy Efficient Environment (“ACEEE”) released a report in 2002 summarizing its research on the EnergyGuide label's efficacy and on alternative formats and graphical elements for the label. More recently, the Association of Home Appliance Manufacturers (“AHAM”) conducted research that also examined the current label and alternatives. The conclusions reached by AHAM and ACEEE are not in accord. As part of the ongoing rulemaking proceeding concerning the effectiveness of the FTC's energy labeling regulations, the FTC proposes to conduct its own consumer research related to the existing label requirements and possible alternatives.

The FTC's proposed research design builds on the findings and strategies of prior research and on the comments received during the rulemaking proceeding. For example, similar to prior research by ACEEE, the FTC research will include questions designed to understand how well consumers comprehend information presented in different labeling formats. Similar to the research conducted by AHAM, the FTC's proposed study will involve an Internet panel. While the project will build on this prior work, the FTC's proposed study will address several issues not raised in the prior studies and will also consider a label design not addressed in detail by ACEEE or AHAM.

On March 15, 2006 (71 FR 13398), the FTC published a Federal Register Notice seeking comments from the public concerning the FTC's proposal to conduct consumer research to examine the effectiveness of the FTC's current energy labeling requirements for consumer products and obtain information about alternatives to those labels. No comments were received in response to that Notice. Nonetheless, several comments received as part of the FTC's Energy Labeling Public Workshop held on May 3, 2006, see 71 FR 18023 (April 10, 2006), address the FTC's proposed consumer research for energy labels. The issues raised in such comments are discussed below under the applicable subheadings.

Pursuant to the OMB regulations that implement the PRA (5 CFR part 1320), the FTC is providing this second opportunity for public comment while requesting that OMB grant clearance for the proposed consumer research. All comments should be filed as prescribed in the ADDRESSES section above, and must be received on or before July 24, 2006.

I. Description of the Collection of Information and Proposed Use

The FTC proposes to collect information from consumers in order to gather data on the effectiveness of current energy labels and possible alternative label designs. The proposed research study will involve a sample of 3,000 individuals who are at least 18 years old and are likely or recent major appliance (e.g., refrigerator or dishwasher) purchasers. A nationwide Internet panel will be used to identify potential respondents and the questionnaire will be administered online. All information will be collected on a voluntary basis.

Subject to OMB approval, the FTC has contracted with Harris Interactive, a consumer research firm that has substantial experience assessing consumer communications using the Internet and other alternative protocols. The contractor will first identify respondents using any relevant pre-existing data in its Internet panel database and any necessary additional screening questions. The screener questions will be designed to ensure that the demographic composition of the sample reasonably matches that of the target population. Allowing for non-response, the screener questions will be asked of approximately 20,000 consumers, as screening that number should enable the FTC to reach its target sample size of 3,000 individuals. In addition, the FTC will pretest the study on 300 individuals to ensure that all questions are easily understood. The pretest participants will be drawn from the sample population.

Respondents will be randomly assigned to one of approximately eight to ten label conditions using a number of different label designs. For example, one group of respondents will view the current EnergyGuide label for four refrigerators with different energy characteristics, whereas, a different group of respondents will view a categorical version of the label for the same refrigerators. Respondents will then answer a series of objective questions about the characteristics of the products described in the labels. Respondents will be asked, for example, to rank the refrigerators in terms of annual operating costs, annual energy use, and energy efficiency. In addition, respondents will likely answer questions about the magnitude of cost, efficiency, or energy use differences between different models and about any differences in product quality communicated by the labels. The proportion of consumers who correctly answer such questions for each condition will be tallied. If there are differences in accuracy rates between label conditions, the direction and statistical significance of these differences will aid FTC staff in assessing whether one type of label design is more comprehensible to consumers than alternative designs.

The proposed study will also include label conditions with the ENERGY STAR logo, i.e., some groups of respondents will view labels bearing the ENERGY STAR logo and some other groups will view the same label without the ENERGY STAR logo. In addition to answering the same questions posed for other label sets (described above), respondents that view the ENERGY STAR label conditions will answer questions about which model or models in the set qualify for ENERGY STAR and the location of the ENERGY STAR logo on the label. The FTC's regulations currently allow manufacturers to place the ENERGY STAR logo on the EnergyGuide label of qualified products (see 16 CFR 305.19). The collection of this information will allow the FTC staff to gather information about the impacts various label designs have on consumer comprehension of energy performance information when labels bear the ENERGY STAR logo.

The proposed study will also include a control no-label (pure information) condition. For this condition, respondents will view information about appliances, but the information would not be in a label format. The purpose of this condition will be to explore what information is likely to be most useful to consumers outside of the EnergyGuide labeling context. Finally, the research study will also likely include a refrigerator condition that combines all full-size refrigerators into one category (i.e., eliminates separate ranges of comparability for configurations such as side-by-side doors and bottom-mounted freezers). This condition will allow the FTC staff to explore the possible effect of changing the current refrigerator categorization system.

In addition to comprehension questions, respondents will be asked questions about their prior experience using EnergyGuide labels in order to assess how useful the current labels have been and to assess how prior experience might impact accuracy rates. Respondents will also be asked general questions about the perceived usefulness of certain types of energy-related information to assess whether labels that feature certain types of information, such as energy usage measured in kWh, categorical measures of energy efficiency, or operating costs, are likely to be useful.

In sum, the label designs will include the current EnergyGuide label design (the control label), a revised version of the current design using a continuous bar graph, a categorical “five-star” label, and a fourth label prominently featuring operating costs (see Figures 1 and 2 at the end of this Notice). The research will also include a version of each label including the ENERGY STAR logo. Thus, the eight primary treatments include: (1) The current label with and without the ENERGY STAR logo, (2) the modified version of the current label with and without the ENERGY STAR logo, (3) the categorical label with and without the ENERGY STAR logo, and (4) the label featuring operating costs with and without the ENERGY STAR logo. The two other treatments that are likely to be used include the no label (pure information) condition and a condition collapsing all of the full size refrigerators into one category.

As discussed above, after being randomly assigned to a condition, respondents will view one type of label format and be given shopping scenarios for two products (e.g., dishwashers and refrigerators). The order of the scenarios will be rotated. The design of the proposed study will allow for approximately 300 respondents per cell.

II. Labels for the Consumer Research

As discussed above, the FTC plans to present research participants with labels from several hypothetical refrigerator-freezer models and dishwasher models for each specific label design category. The respondents will then answer a series of questions about these models. For example, respondents viewing categorical label designs will see four categorical-type labels representing different models with varying energy performance attributes. The staff plans to use labels that are representative of models on the market but do not necessarily reflect the attributes of actual products. The data that the staff plans to use for these various labels are as follows:

In calculating the operating costs for these models, the FTC staff used the Department of Energy (“DOE”) 2006 Representative Average Unit Costs of $0.0981 per kWh for electricity and $1.415 per therm for natural gas. All dishwasher models are standard-size units. All refrigerator-freezer models feature side-by-side door configurations with through-the-door ice service. The volume of each refrigerator model is assumed to be 23 cubic feet and the adjusted volume for each is assumed to be 27.7 cubic feet. The applicable range of comparability for these refrigerator models is 539 to 698 kWh/yr (see 16 CFR 305, Appendix A8). Models C and D for both appliance categories qualify as ENERGY STAR models.

The system for assigning categorical stars to these models stems from a comparison of the model's energy performance to DOE minimum standards expressed as a percentage above that standard. The FTC staff has developed these categories for the limited purpose of drafting a small number of labels for use in the consumer research. Nevertheless, the staff has considered models currently available on the market in creating these designations. See http://www.ftc.gov/appliancedata . For dishwashers, the categories are as follows: 0 to 9.99 % = 1 star; 10 to 19.99% = 2 stars; 20 to 24.99% = 3 stars; 25 to 29.9% = 4 stars; and 30% and over = 5 stars. For refrigerators, the categories are: 0 to 4.99% = 1 star; 5 to 9.99% = 2 stars; 10 to 14.99% = 3 stars; 15% to 19.99 % = 4 stars; and 20% or greater = 5 stars. ENERGY STAR models correspond to four or five stars under this categorical system.

III. Public Comments

As noted above, the FTC did not receive any comments in response to its March 15, 2005 Federal Register Notice related to the Paperwork Reduction Act. However, as part of the FTC's Energy Labeling Workshop held on May 3, 2006, the Commission invited and received written comments. Several of these comments directly addressed the FTC's proposed consumer research for energy labels and are discussed below.

A. ENERGY STAR and Consumer Research

Comment: The Consortium on Energy Efficiency (“CEE”) urged the FTC to consider the impact that a categorical label would have on consumer understanding of ENERGY STAR. For example, CEE suggested that, in analyzing a categorical label design, the FTC should consider the consumer impacts of equating the ENERGY STAR level consistently with a category 4 (i.e., 4 stars). CEE asked about the impacts of setting different ENERGY STAR categories for different products (e.g., ENERGY STAR is equivalent to category 3 or higher for clothes washers and category 4 or higher for dishwashers). CEE also suggested that the FTC research address the fact that ENERGY STAR does not apply to all products bearing an EnergyGuide label (e.g., water heaters). Finally, CEE urged the FTC to explore how a revised EnergyGuide label would impact voluntary efficiency programs, such as those administered by CEE members.

Discussion: The FTC consumer research will consider the impacts of various label designs on the ENERGY STAR logo. By testing whole groups of labels with and without the ENERGY STAR logo, the research should yield useful information about the effect that various label designs have on consumer comprehension when the designs are coupled with the ENERGY STAR logo. Respondents will also address questions specifically related to the ENERGY STAR logo. For the purposes of the research, the categorical label designs will equate ENERGY STAR with four and five star ratings. Given resource and time constraints, it is necessary for the FTC staff to manage the scope and detail of issues explored in the research. Although the FTC does not plan to address all the scenarios involving the ENERGY STAR logo suggested by CEE, FTC staff believes the planned research will provide useful information about the impacts of the various label designs viewed in conjunction with the ENERGY STAR logo. For similar reasons, the FTC does not plan to address the impact of revised label designs on voluntary efficiency programs in its consumer research. This is an important issue, however, and it is expected that stakeholders will provide their views on this issue as the rulemaking proceeding continues.

B. Purpose of Labeling Program

Comment: ACEEE indicated that the “FTC should make clear its interpretation of Congress's intent for the appliance labeling program prior to conducting research on the program.”

Discussion: In promulgating the Appliance Labeling Rule in 1979 (44 FR 66466 (November 19, 1979)), the Commission provided the following statement: “The primary purpose of the Commission's rule is to encourage consumers to comparison-shop for energy-efficient household appliances. By mandating a uniform disclosure scheme for energy consumption information, the rule will permit consumers to compare the energy efficiency of competing appliances and to weigh this attribute against other product features in making their purchasing decisions. If the labeling program works as expected, the availability of this new information should enhance consumer demand for appliances that save energy. In turn, competition should be generated among manufacturers to meet this demand by producing more energy-efficient appliances.” FTC staff believes this Commission statement provides sufficient guidance for the proposed consumer research.

C. Importance of Prior Research

Comment: Some commenters urged the FTC to build on prior research results in conducting the consumer research for this proceeding. In particular, ACEEE indicated that to “make the most of the time and resources available, any research conducted should build on the results of prior research on the EnergyGuide labeling program and the design of effective energy labels conducted in the U.S. and abroad.” In addition, ACEEE stated that any new EnergyGuide variations “must be tested alongside the primary alternatives identified in earlier research * * *.” Both CEE and ACEEE recommend that the FTC review existing domestic and international research before crafting its own research plan. CEE also requested that the FTC develop and publish a timeline that defines the necessary steps in this rulemaking.

Discussion: In developing the consumer research, the FTC staff has considered the prior work in this area including the ACEEE and AHAM research. This prior work has allowed the FTC to narrow its focus to a few specific label designs and several specific questions regarding those label designs. For example, the focus group work conducted by ACEEE has helped to identify concerns that the current label design is wordy, cluttered, and too complex. In addition, the FTC staff has chosen not to pursue several label designs that did not fare well in the ACEEE research such as speedometer and thermometer formats. Moreover, the FTC plans to include both the categorical star label and the revised bar-graph label in its research. These designs figured prominently in both the AHAM and ACEEE research.

The FTC will not conduct the planned consumer research until it receives clearance from the OMB under the Paperwork Reduction Act. The timing of such clearance is not certain. Once clearance is granted and the research is completed, the FTC staff will recommend proposed rule changes, if any, to the Commission. The Commission will issue a Federal Register Notice soliciting comment on any proposed rule changes. Congress has directed the Commission to issue any final amendments to the Rule by August 2007.

D. Nationally Representative Research

Comment: One commenter stated that the “sampling technique utilized in quantitative market research must allow the sample to be representative of the census (entire body) of the group being surveyed. In the case of appliance purchasers, the research must be ‘nationally representative,’ or represent the U.S. adult population.”

Discussion: As discussed above, the FTC has contracted with Harris Interactive to administer the study. The sample for the study will be drawn from Harris Interactive's existing Internet panel, which has more than 4 million members throughout the nation. The panel is derived from a variety of convenience sampling procedures, rather than true probability sampling techniques. The sample for this research will therefore not be nationally representative in the classic sense. However, Harris Interactive has studied the relationship between samples from its Internet panel and samples collected using more traditional probability sampling techniques. Based on these studies, Harris has developed procedures to ensure that differences between the results of Harris' Internet panel studies, and studies based on true probability samples of the nation, are minimized. More specifically, Harris has used a variety of techniques, including demographic weighting, propensity scoring, and quota sampling in order to obtain accurate projections of national sentiment based on samples drawn from its Internet panel. Accordingly, FTC staff will work with Harris to ensure that the sample is as representative of the nation as possible. At the same time, the FTC staff recognizes that there may be some limitations in the use of an Internet panel, rather than a national probability sample, and plans to discuss such issues in any analysis of the data and reports of the findings.

E. Percentage Label and Cost Label

Comment: As part of its Energy Labeling Workshop, the FTC sought comment on an alternative label design that compared a model's energy efficiency to DOE minimum standards in the form of a percentage. See 71 FR 18023. Several workshop participants raised concerns that percentage information may be confusing to consumers, inadequately distinguish the energy efficiency of some products (such as water heaters), and create complications as DOE minimum standards change over time. Conversely, several workshop participants suggested that operating costs is a measure that is easy for consumers to understand. Indeed, one written comment suggested that the FTC consider such a label and provided an example.

Discussion: Given these concerns, FTC staff is not planning to use the percentage label design in its proposed consumer research. In lieu of testing the percentage label, FTC staff is planning to consider a design that focuses on operating cost as the primary descriptor (see Figures 1 and 2 at the end of this Notice). Unlike the current label design, which provides information on energy use for some products and energy efficiency for others, operating costs provide information that is consistent across all labels. At the same time, FTC staff recognizes that the cost information can create concerns if the fuel prices (e.g., national electricity rates or natural gas prices) used to calculate label information change frequently. Under the current Rule, the FTC changes the fuel costs only when the ranges for a particular product change. This means that the ranges (and thus the fuel rates) for most products change on an irregular basis (usually once every several years). At the Workshop, one participant suggested that the FTC change the underlying fuel costs used to calculate such information once every several years on a regular basis. Such an approach could minimize the potential problems associated with frequent fuel rate changes. FTC staff intends to consider this issue during the underlying rulemaking process.

F. Miscellaneous Comments

Comment: CEE suggested that the FTC consider whether consumers find certain elements of the categorical or continuous labels confusing or redundant. CEE also suggested that the FTC explore the consumer impacts of limiting the number of products that qualify for the highest rating for a categorical label system.

Discussion: The FTC's proposed research will ask consumers to conduct a series of tasks related to a group of labels. This should provide data about the effectiveness of the alternative labels, including whether they convey accurate information or cause confusion. Given resource and time constraints, the research will not directly address the impacts of limiting the number of products that qualify for the highest rating for a categorical system. Commenters may submit views on such impacts.

Comment: CEE asked whether the research would address the impacts on consumer comprehension of replacing annual operating cost information with lifecycle costs (which the FTC staff assumes to include factors such as emissions of air pollutants associated with a product's manufacture and use).

Discussion: The FTC staff does not plan to consider lifecycle cost in the consumer research. Under the EPCA (42 U.S.C. 6294), the disclosures on EnergyGuide labels must be derived from DOE test procedures. It is the FTC staff's understanding that such test procedures do not contain information about lifecycle costs such as emissions of air pollutants and carbon dioxide. Accordingly, the consumer research will focus on alternative label designs that contain information readily provided by existing DOE test procedures such as annual operating cost and electricity use.

IV. Estimated Hours Burden

As discussed above, allowing for non-response, screener questions will be asked of approximately 20,000 respondents in order to obtain the FTC's target sample size of 3,000 individuals who are at least 18 years old and are likely major appliance purchasers. FTC staff estimates that it will take consumers one minute to respond to the screener questions. Thus, the total burden related to the screener questions will be approximately 333 hours (20,000 respondents × 1 minute).

The FTC also intends to pretest the consumer questionnaires on approximately 300 respondents to ensure that all questions are easily understood. The FTC staff estimates that conducting the pretest will take approximately 20 minutes on average per person, resulting in a total of approximately 100 burden hours (300 respondents × 20 minutes). Although the target sample is 3,000 individuals, the procedures used by the contractor may yield responses from a slightly higher number of individuals. Accordingly, using a conservative estimate of 3,200 individuals, the FTC staff further estimates that participating in the study will require an additional 1067 hours as a whole (3,200 respondents × 20 minutes). Thus, the total burden hours for the proposed study will be approximately 1,500 hours (333 hours + 100 hours + 1067 hours).

V. Estimated Cost Burden

The cost per respondent should be negligible. Participation is voluntary and will not require start-up, capital, or labor expenditures by respondents.