Mobile Home Sales and Service Proposed Trade Regulation Rule Notice is hereby given that the Federal Trade Commission, pursuant to the Federal Trade Commission Act, as

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FEDERAL REGISTER, VOL. 40, NO. 104— THURSDAY, M AY 29, 1975

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23334 PROPOSED RULES FEDERAL TRADE COMMISSION [ 16 CFR Part 441 ] MOBILE HOME SALES AND SERVICE Proposed Trade Regulation Rule Notice is hereby given that the Fed­ eral Trade Commission, pursuant to the Federal Trade Commission Act, as amended, 15 U.S.C. 41, et seq., the provi­ sions of Part 1, Subpart B of the Com­ mission’s Procedures and Rules of Prac­ tice, 16 CFR 1.7, et seq., and § 553 of Subchapter II, Chapter 5, Title 5, U.S. Code (Administrative Procedure), has initiated a proceeding for the promulga­ tion of a Trade Regulation Rule concern­ ing mobile home sales and service. Accordingly, the Commission proposes the following Trade Regulation Rule and to amend 'Subchapter D, Trade Regula­ tion Rules, Chapter 1 of 16 CFR by add­ ing a new Part 441.

Sec.

441.1 Definitions.

441.2 Warranty performance systems. 441.3 Warrantor reliance on third parties. 441.4 Written warranties and other related documents.

441.5 Disclaimers, limitations, and exclu­ sions.

441.6 Prohibited conditions precedent. 441.7 Dimensions of mobile homes. 441.8 Labels, seals, or certifications. Au th o r ity: 38 Stat. 717, as amended (15 U.S.C. 41, et seq.).

§ 441.1 Definitions.

For the purpose of this part, the fol­ lowing terms and definitions shall apply: (a) “Consumer” shall refer to a buyer (other than for purposes of resale) of a mobile home which is used or bought for use primarily as a place of residence, any person to whom such mobile home is transferred during the duration of an implied or written warranty applicable to the mobile home, and any other per­ son who is entitled under the terms of such warranty or under applicable Fed­ eral or State law to enforce against the warrantor the obligations of the war­ ranty.

(b) “Mobile home” refers to a struc­ ture, transportable in one or more sec­ tions, which is eight body feet or more in width and is thirty-two body feet or more in length, and which is built on a permanent chassis and designed to be used as a dwelling with or without a per­ manent foundation when connected to the required utilities, and includes the plumbing, heating, air-conditioning, and electrical systems contained therein. (c) “Defect” refers to any non-con­ formity in the performance, construc­ tion, components, or material of a mobile home that renders the home or any part thereof not in accordance with the obli­ gations under the contract of sale or not fit for the ordinary use for which it was intended.

(d) “Written warranty” refers to : (1) Any written affirmation of fact or written promise made in connection with the retail sale of a mobile home by a warrantor to a consumer which relates to the nature of the material or work­ manship and affirms or promises that such material or workmanship is defect free or will meet, a specified level of per­ formance over a specified period of time, or (2) Any undertaking in writing in con­ nection with the sale by a warrantor of a mobile home to refund, repair, replace or take other remedial action with re­ spect to such mobile home in the event that such mobile home fails to meet the specifications set forth in the undertak­ ing, which written affirmation, promise or undertaking becomes part of the basis for the bargain between a warrantor and a consumer of such mobile home. (e) “Implied warranty” refers to an implied warranty arising under State law as modified, if at all, under Federal law.

(f) “Warrantor” refers to a corpora­ tion, a partnership, or other person en­ gaged in the manufacture* wholesale or retail sale, offering for wholesale or re­ tail sale, distribution, financing, or serv­ icing of mobile homes produced or sold primarily for use by consumers, who gives or offers a written warranty or who is or may 6e obligated under an implied warranty.

(g) “Manufacturer” refers to any cor­ poration, partnership, or person engaged in the manufacture, assembly, and wholesale sale of mobile homes, includ­ ing any corporation, partnership, or per­ son engaged in importing mobile homes for resale.

(h) “Corporate headquarters” refers to the location where the offices of the most senior officers in the hierarchy of a manufacturer’s enterprise are located and/or where responsibility for manage­ ment of the enterprise on a company­ wide basis is generally exercised; (i) “Authorized dealer” refers to a business enterprise, including but not necessarily limited to a corporation, a partnership, and an individual pro­ prietor, neither owned nor controlled by a manufacturer, formed for the pur­ pose of selling and servicing products, in­ cluding but not limited to new mobile homes, from one or more established and recognizable locations, and which is authorized and approved by one or more manufacturers to buy and sell to consumers new mobile homes produced by said manufacturers.

(j ) “Tender of possession” refers to the time when the mobile home has been properly set up at the consumer’s home site and all necessary documents and keys are transferred to the consumer or the consumer’s representative to enable the consumer to exercise the right to take possession and to complete deliv­ ery. Provided, however, That in cases where the initial set up of the home was arranged by the consumer and not by or through the manufacturer or author­ ized dealer, “tender of possession” re­ fers to the time when all necessary docu­ ments and keys are transferred to the consumer or the consumer’s representa­ tive to enable the consumer to exercise the right to take possession and to com­ plete delivery.

(k) “Home site” refers to a plot of land designated by the consumer as the location where the mobile home is to be set up or the location where the mobile home has in fact been set up. (l) “Set up” refers to the operation whereby a mobile home is installed, lev­ eled, and tied down on a permanent foundation of cinder blocks, cement piers, steel horses, or the like which properly distribute and support its weight. In the case of double-wide and triple-wide homes, “set up” includes the assembly of the two or more units of the mobile home and the sealing of the seams. “Set up” may also include the connection of certain utilities in accord­ ance with local law.

(m) “Normal course of business” re­ fers to the usual or regular manner of operation of the business enterprise in question under ordinary conditions. “Normal course of business” does not in­ clude:

(1) Conditions under which abnormal demands are made upon service capa­ bilities as the result of natural disasters, or other acts of God or the government, or any other event beyond the control of the warrantor and, where applicable, its authorized dealers or other third par­ ties which places an unusually large de­ mand upon service facilities; and (2) Events such as disasters,' strikes, acts of the government, instances of force majeure or other occurrences which are beyond the control of the warrantor and, where applicable, its au­ thorized dealers and other third parties which prevent the warrantor and, where applicable, its authorized dealers or other third parties from responding to service requests within the time periods stated herein; and (3) Slight omissions or deviations from the provisions of this part which are inadvertent, unintentional, and are not due to bad faith.

§ 441.2 Warranty performance systems. In connection with the manufacture, sale, offering for sale, distribution, and service of mobile homes produced or sold primarily for use by consumers in com­ merce, as “commerce” is defined in the Federal Trade Commission Act, it is an unfair or deceptive act or practice with­ in the meaning of section 5 of that Act for a corporation, partnership, person, or other business entity to offer or other­ wise provide, any written or implied war­ ranty unless the warrantor establishes and maintains a regular and effective warranty performance system which is designed to assure that each consumer of mobile homes so warranted will receive full performance of all such warranty obligations either directly or by action through its authorized dealers or other third parties within the time period re­ quirements set forth hereinbelow and unless the warrantor performs all of its obligations under such warranty within such time period requirements. An effec­ tive warranty performance system which is designed to assure that each, consumer of a mobile home receives full perform­ ance of the warrantor’s obligations under the warranty shall incorporate but not necessarily be limited to the following: FEDERAL REGISTER, VOL. 40, NO. 104— THURSDAY, M AY 29, 1975

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PROPOSED RULES 23335 (a) The warrantor shall perform war­ ranty service and repair obligations aris­ ing subsequent to the tender of posses­ sion of the home to the consumer by the warrantor, either directly or through an authorized dealer or other third parties at the site of the mobile home. (b) The warrantor shall, directly or through an authorized dealer or other third parties, in the normal course of business, commence all warranty service or repair of defects giving rise to a con­ dition which aifects the safety of a mobile home or renders it substantially uninhabitable as soon as possible but in no event later than three business days following receipt of notice of such a defect by the warrantor from the retail purchaser or two business days following notice of the determination by the war­ rantor’s authorized dealer or other third parties to rely upon the warrantor to perform or to complete service or repairs requested by-consumers , with respect to such defects. Such repairs are to be com­ pleted expeditiously.

(c) The warrantor shall, directly or through an authorized dealer or other third parties, in the normal course of business, respond to notice of the need for service and repairs of warranty defects other than those set forth in paragraph (b) of this section, within a reasonable time not to exceed seven busi­ ness days of receipt of notice of such defects by the warrantor, its authorized dealer or other third parties, and com­ plete such service or repairs within a rea­ sonable time not to exceed thirty days following said receipt of notice. (d) The warrantor shall assure that in the event of a bona fide dispute be­ tween the warrantor or its dealers and a consumer pursuant to § 441.3(f) of this part, as to whether the defect (s) com­ plained of by the consumer are or are not covered by an applicable warranty, then: In the event it is determined that warranty service or repair is required, which determination shall be made promptly, the warrantor shall be allowed, notwithstanding the provisions of para­ graphs (b) and (c) of this section with respect to the time allowances for re­ pairs, in the normal course of business, from the date of notification of the dis­ pute as set forth in this paragraph (d) of this section, no more than three busi­ ness days in the case of defects referred to in paragraph (b) of this section to commence service or repair (such repairs to be completed expeditiously) and no more than thirty days in the case of de­ fects referred to in paragraph (c) of this section to complete service or repair. (e) The warrantor shall, either di­ rectly or through its authorized dealers or other third parties, in the normal course of business, inspect each mobile home at the home site prior to or at the time of tender of possession to the con­ sumer, to assure that the home is being delivered to such consumer free of all de­ fects which affect the safety of the mobile home or render it substantially unin­ habitable and that it is properly set up. (f) The warrantor shall, either di­ rectly or through its authorized dealers or other third parties, in the normal course of business, reinspect each mobile home within a reasonable time not to exceed 90 days after tender of posses­ sion of the home to the consumer to determine the existence of defects in the mobile home or problems relating to its setup, and to correct or arrange for the correction of defects within the scope of any applicable warranty, or improper setup and problems arising therefrom. (g) Results of the inspections required pursuant to paragraphs (e) and (f) of this section shall be set forth in a report or reports which, if performed by an au­ thorized dealer or other third party, shall be signed by said authorized dealer or other third party and shall be signed by the consumer or said consumer’s rep­ resentative indicating agreement with the information set forth therein. If no signature of the consumer or said con­ sumer’s representative appears on such a report, the authorized dealer or other third party shall certify that the neces­ sary inspections and repairs were in fact accomplished and state in writing the reason for the absence of the signature of the consumer or said consumer’s rep­ resentative to the best of the authorized dealer’s or other third party’s knowledge and belief. Notwithstanding the provi­ sions of paragraphs (e) and (f) of this section, in the event that the initial set­ up of the mobile home is not provided by or arranged through the warrantor or the warrantor’s authorized dealer but is arranged independently by thè consumer of such mobile home, there shall be no obligation to make those portions of the inspections described in paragraphs (e) and (f ) of this section which cannot be accomplished prior to the initial setup. (h) The warrantor shall, in the nor­ mal course of business, obtain informa­ tion as to the date of purchase and the name and address of the consumer of each of its mobile homes and shall main­ tain adequate records of the information so ascertained.

(i) Where the warrantor chooses to delegate, assign, contract, or otherwise rely on a continuing basis upon any au­ thorized dealers or any third parties not employees of the warrantor to satisfy the obligations assumed by the warrantor under any warranty, whether written or implied by law, then the warrantor shall assure that if a dispute or disagreement should arise between the warrantor and one or more of ita authorized dealers or other third parties as to which of them is to incur any such obligation, burden, or responsibility or is to correct a mal­ function related or alleged to relate to the set up of the warrantor’s mobile homes, any and all necessary repairs or other corrective action will be ex­ peditiously accomplished, regardless of whether the dispute or disagreement has been resolved. Nothing in this section shall be construed to preclude a war­ rantor from replacing a mobile home, refunding the purchase price or taking any other remedial action with respect to the mobile home which is within the scope of the terms of the written or implied warranty applicable to such mobile home; Provided, however, That such a refund, replacement or other remedial action with respect to a mobile home shall be delivered to the consumer within a reasonable time, taking into account the individual circumstances of each case, but in no event later than thirty days following the receipt of no­ tice of the defect for which the remedy is provided.

§ 4 4 1 .3 W a rra n to r re lia n ce o n th ird p artie s.

In connection with the manufacture, sale, offering for sale, distribution, and service of mobile homes produced or sold primarily for use by consumers in com­ merce, as “commerce” is defined in the Federal Trade Commission Act, it is an unfair or deceptive act or practice within the meaning of section 5 of that Act for a mobile home manufacturer who is a warrantor to delegate, assign, contract with, or otherwise rely on a continuing basis upon any authorized dealers or any other third parties who are not employees of said manufacturer to: First, determine whether any mobile home constructed by the manufacturer contains any defects which are within the scope of any written or implied war­ ranty or whether any such mobile home otherwise requires remedial action pur­ suant to any such warranty; second, notify the manufacturer of the existence of any such defects or need for remedial action pursuant to the aforesaid war­ ranties; or third, perform any repairs or otherwise provide services in satisfac­ tion of any warranty obligations in­ curred by the manufacturer, if the man­ ufacturer shall fail to:

(a) Enter into a written service agreement with each such person de­ siring to be authorized to assume the re­ sponsibility of satisfying the manufac­ turer’s mobile home warranty obliga­ tions on a continuing basis which sets forth the respective warranty service ob­ ligations to be discharged by the manu­ facturer and by the authorized dealer or other third party. Mobile home manufacturers who extend a warranty, express or implied, and rely upon au­ thorized dealers or other persons not employees of said manufacturers to per­ form their warranty obligations shall re­ quire all such dealers and other persons to execute such agreements described herein within 180 days of the effective date of this part as a condition prece­ dent to the manufacturer continuing the aforesaid delegation, assignment, con­ tractual relationship or reliance subse­ quent to the 180th day following the ef­ fective date of this part. Dealers or the other third parties upon whom the manufacturer commences to rely, dele­ gate, assign, or contract with as afore­ said after the effective date of the part shall execute such agreements prior to or at the time of said delegation, assign­ ment, contracting, or reliance. Such agreements shall include but not neces­ sarily be limited to:

(1) A clear and accurate description of the scope of those duties, burdens and responsibilities to be borne by the manu- FEDERAL REGISTER, VOL. 40, NO. 104— THURSDAY, M AY 29, 1975

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23336 PROPOSED RULES facturer and those to be borne by au­ thorized dealers or other third parties as aforesaid and a statement as to the al­ location of responsibility for the proper set up of mobile homes constructed by the manufacturer;

(2) The requirement that the au­ thorized dealer or other third party as aforesaid shall, in the normal course of business, commence all warranty serv­ ice or repair of defects which become necessary as a result of a condition which affects the safety of the mobile home or renders it substantially unin­ habitable, as soon as possible but not later than three business days following receipt of notice of such defects or con­ dition by the authorized dealer or other third party, and shall complete such service or repairs expeditiously. In those cases in which the authorized dealer or other party determines to rely upon the manufacturer to perform or to complete service or repairs requested by con­ sumers on such defects, such determina­ tion shall be made and communicated to the manufacturer immediately upon such determination but no later than two business days following receipt of notice of such defect from the consumer; (3) The requirement that except as set forth in paragraph (a) (2) of this section the authorized dealer or other third party as aforesaid must respond to a request for warranty repairs or service within seven business days of the receipt of notice and must complete all such warranty service or repairs within a reasonable time, not to exceed thirty days in the normal course of business, following receipt of notice of such condi­ tion by such authorized dealer or other third party. In those cases in which the authorized dealer or other third party determines to rely upon the manufac­ turer to perform or to complete such service or repairs requested by the con­ sumer, such determination shall be made and communicated to the manu­ facturer as soon as possible but no later than five business days following receipt of notice from the consumer; (4) The requirement that the au­ thorized dealer or other third party as aforesaid must, in the normal course of business, inspect each mobile home at the home site prior to or at the time of tender of possession to the consumer to assure that the home is being delivered to such consumer free of all defects which affect the safety of the home or render it substantially uninhabitable and that it is properly set up. Such an inspection shall be reported in written form to the manufacturer as described in paragraph (a) (6) of this section; (5) The requirement that the author­ ized dealer or other third party as afore­ said must, in the normal course of busi­ ness, reinspect each of the mobile homes constructed by the manufacturer at a reasonable time not to exceed 90 days following tender of possession of the home to the consumer to determine the existence of any defects in the mobile home or an improper set up or problems arising therefrom, and to correct or ar­ range for the correction of any such conditions. Such a reinspection shall be reported in written form to the manu­ facturer as described in paragraph (a) (6) of this section;

(6) The requirement that the author­ ized dealer or other third party as afore­ said in the normal course of business provide the manufacturer with written reports which document the results of the inspections set forth in paragraphs (a) (4) and (5) of this section. The sig­ nature of the consumer or the consumer’s representative thereon shall be required as certification that the inspections and repairs alleged therein to have been com­ pleted were in fact accomplished to the best of his or her knowledge and belief. Provided, however, That if the signature of the consumer or the consumer’s rep­ resentative cannot be obtained, the au­ thorized dealer or other third party shall so state in writing in the report and shall also state the reasons for the absence of the required signature to the best of his or her knowledge and belief. Not­ withstanding the provisions of para­ graphs (a) (4) and (5) of this section, in cases where the initial set up of the mobile home was not provided by or arranged through the warrantor or the warrantor’s authorized dealer but was arranged independently by the consumer of such mobile home, there shall be no obligation to make those portions of the inspections described in paragraphs (a) (4) and (5) of this section which cannot be accomplished prior to the initial set up of the mobile home;

(7) The requirement that the author­ ized dealer or other third party as afore­ said establish and maintain, or contract for the services of personnel and facilities which are capable of providing all neces­ sary warranty repairs and service within the time period requirements set forth in paragraphs (a) (2) and (3) of this sec­ tion in the normal course of business. (8) A statement that the manufac­ turer shall have the right to withdraw authorization from authorized dealers and other third parties as aforesaid who fail to meet their responsibilities under the written service agreement as set forth herein;

(9) A provision providing for the dis­ position of the manufacturer’s continu­ ing obligation, subsequent to the time that authorization has been withdrawn, to perform warranty service on mobile homes sold by the dealer until such time as the terms of all warranties outstand­ ing on such homes have expired. (b) Fully scrutinize and evaluate the number of personnel, level of expertise, and adequacy of facilities and equipment of such parties desiring to be authorized to perform warranty obligations in­ curred by the manufacturer on a con­ tinuing basis with respect to their ability to capably perform all necessary war­ ranty service, repairs, and set up of said manufacturer’s mobile homes within the standards to be set forth in the agree­ ment prior to the authorization of a dealer or reliance upon any other third party as aforesaid. A check of credit references and other evidence of the financial standing of the dealer is not by itself sufficient to comply with the requirements of this paragraph. If a prospective authorized dealer chooses to rely on an outside service agency with respect to set ups, warranty repairs and service, the manufacturer shall satisfy itself as to t*he capability of said agency to perform adequate set ups and service through a regular procedure capable of providing a true and objective assessment of such agency’s set up, repair, and serv­ ice capability.

(c) Establish a regular procedure for the effective ongoing evaluation of the manner in which authorized dealers or other third parties as aforesaid main­ tain their service and set up capability and the_ manner in which they perform such warranty and set up responsibilities. Such a procedure shall include but not necessarily be limited to the dissemina­ tion of a questionnaire to all consumers who purchase the manufacturer’s mo­ bile homes at retail within 60 to 120 days subsequent to the date of tender of possession of the home to the consumer but in no event prior to ten days follow­ ing reinspection of the home which in­ quiries as to the following: (1) The existence of any defects in said mobile homes within the scope of the manufacturer’s written warranty and any warranties implied by law or of an improper set up or any problems arising therefrom;

(2) The name of the person, if any, Whom the mobile home consumer notified as to the existence of said defects or set up problems;

(3) The identity of any person who sought to service or repair any such de­ fects or set up problems; (4) Whether such defects or set up problems were fully repaired, the period of time required to effect such repairs, and the identity of the parties who ac­ complished such repairs; (5) Whether the consumer is satisfied with the promptness and quality of the repairs made on his or her home to date. Such questionnaire shall be sent in the form of a pre-paid self-addressed post­ card or a letter containing a pre-paid self-addressed envelope. Such a proce­ dure shall also include regular periodic visits by one or more employees of the manufacturer to review the service facil­ ities and personnel maintained by the authorized dealer or other third party. Such a visit and review shall be imme­ diately initiated by the manufacturer upon the receipt of an unreasonable number of meritorious complaints or unsatisfactory reports, questionnaires or other similar communications from con­ sumers. The manufacturer shall forth­ with terminate its authorization of and reliance on authorized dealers or other third parties who fail to meet the re­ sponsibilities and standards set by the manufacturer pursuant to the written service agreement and this part. (d) Assure that the person or persons to whom responsibility for supervising and assuring the implementation of the manufacturer’s warranty service pro­ gram is delegated shall make periodic reports at least on a monthly basis to the FEDERAL REGISTER, VOL. 40, NO. 104— THURSDAY, M AY 29, 1975

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PROPOSED RULES 23337 manufacturer’s responsible officers. Such reports shall include but not necessarily be limited to current information con­ cerning:

(1) The current cost to the manufac­ turer of warranty service; (2) The incidence and nature of fre­ quently recurring defects and of defects which have been determined to deleteriously affect the health and safety of the occupants of mobile homes containing such defects;

(3) Those measures undertaken in re­ sponse to reports of defects described in paragraph (d) (2) of this section includ­ ing but not necessarily limited to mod­ ification in production and design of the manufacturer’s mobile homes; (4) Analysis of the manner in which the manufacturer’s employees, author­ ized dealers and other third parties are performing their warranty and set up reseponsibilities.

(e) With respect to manufacturers who produce in excess of 5,000 mobile homes annually, vest the direct administration of such manufacturer’s warranty serv­ ice program at the corporate headquar­ ters level and the responsibility for su­ pervising and assuring the implementa­ tion of the warranty service program in only those corporate officials who have no direct responsibilities on a day-to-day basis for the sale of the manufacturer’s mobile homes.

(f) Establish a uniform procedure for the systematic receipt and analysis and fair disposition of all complaints or dis­ putes which may arise between the afore­ said consumers of mobile homes con­ structed by the manufacturer and the manufacturer, its agents, assigns, suc­ cessors, or other third parties including but not necessarily limited to the manu­ facturer’s authorized'dealers, with re­ spect to any alleged warranty obligations of the manufacturer. Such a procedure shall incorporate but not necessarily be limited to:

(1) The prompt evaluation of and re­ sponse by the manufacturer, directly or by action through a third party, in the normal course of business, to all com­ plaints within a reasonable time not to exceed five business days after receipt of such complaints;

(2) With respect to manufacturers which produce in excess of 5,000 mobile homes annually, the designation of a single focal point within the corporation for the receipt, of consumer complaints regarding warranty repairs or set up programs;

(3) An effective mechanism for the fair and impartial resolution of disputes with respect to alleged warranty obliga­ tions. With respect to manufacturers which produce in excess of 5,000 mobile homes annually, the responsibility for re­ solving disputes through the above-de­ scribed mechanism shall be vested in only those personnel who are not respon­ sible for sales on a day-to-day basis; (4) An accurate and complete record keeping system regarding the nature and disposition of all such disputes and com­ plaints received by the manufacturer; (5) Periodic review and evaluation by the manufacturer as to the effectiveness of such procedures and correction of such procedures where necessary; (g) Maintain full and accurate rec­ ords and to periodically review such rec­ ords which shall disclose: (1) The date of receipt, the disposi­ tion, and the date of disposition of each request for warranty service (including any refusal of a request for service or repairs and the reasons for such refusal) received by the manufacturer; and (2) The results of the evaluations of service capacity provided for in para­ graph (c) of this section and the results of any action taken with respect thereto. § 4 4 1 .4 W ritte n w arran ties a n d o th e r re la te d d ocu m en ts. In connection with the manufacture, sale, offering for sale, distribution, and service of mobile homes produced or sold primarily for use by consumers in com­ merce, as “commerce” is defined in the Federal Trade Commission Act, it is an unfair or deceptive act or practice within the meaning of section 5 of that Act for a warrantor who chooses to disseminate a written warranty not to provide con­ sumers with a written warranty and other related documents which clearly and fully describe and effectively com­ municate to the consumer, in simple and readily understood language the manner in which the warrantor intends to pro­ vide for the performance of warranty obligations, including disclosure of any delegation of warranty responsibility to third parties; Provided, however, That disclosure of said delegation must be ac­ companied by additional disclosure that such delegation in no way relieves the warrantor of the ultimate responsibility to fulfill all warranty obligations. § 4 4 1 .5 D is cla im e rs , lim ita tio n s, a n d ex­ clu sio n s.

In connection with the manufacture, sale, offering for sale, distribution, and service of mobile homes produced or sold primarily for use by consumers in com­ merce, as “commerce” is defined in the Fédéral Trade Commission Act, it is an unfair or deceptive act or practice with­ in the meaning of section 5 of that Act to suffer or permit mobile homes to be sold either directly or by action through a third party, without any written or im­ plied warranties or limitations or exclu­ sions of liability under any warranty or to disseminate or cause the dissemina­ tion of any statement or representation which represents directly or by implica­ tion that any written or implied warranty has been limited or excluded unless the person or persons so representing have a reasonable basis, in the form of an opinion by legal counsel, that said dis­ claimer, limitations and exclusions are enforceable under governing Federal and State law, and clear and conspicuous notice of such “as is” sale or other dis­ claimer, limitation or exclusion is given to prospective consumers of their mobile homes prior to the execution of the con­ tract of retail purchase. Provided, how­ ever, That with respect to the “as is” sale of damaged, salvaged, demonstrator or repossessed mobile homes, the aforesaid opinion by legal counsel shall not be re­ quired. A clear and conspicuous notice of an “as is” sale shall contain the following language:

Notice The manufacturer of this mobile home sells It “as is” and refuses to assume any responsibility for defects. The purchaser of this mobile home must accept it with all de­ fects and take the entire risk, under con­ tract law, as to its condition. § 4 4 1 .6 P ro h ib ite d co n d itio n s preced en t. In connection with the manufacture, sale, offering for sale, distribution, and service of mobile homes produced or sold primarily for use by consumers in com­ merce, as “commerce” is defined in the Federal Trade Commission Act, it is an unfair or deceptive act or practice within the meaning of section 5 of that Act, not­ withstanding the provisions of § 441.4(g) for any warrantor of a mobile home to: (a) Disseminate a written warranty or any documents associated therewith which require or purport to require the return of the home or any defective part thereof to the location of its manufac­ ture as a condition precedent to obtain­ ing warranty repairs or service; (b) Disseminate a written warranty or any documents associated therewith which require or purport to require the return of a warranty card, owner’s regis­ tration card, or any similar document bearing certain information about the consumer or the retail purchase transac­ tion as a condition precedent to the vali­ dation of the warranty or as a condition precedent to the manufacturer’s obliga­ tion to perform warranty repairs and service on said consumer’s mobile home. § 4 4 1 .7 D im e n sio n s o f m o b ile h o m es. In connection with the manufacture, sale, offering for sale, distribution, and service of mobile homes produced or sold primarily for use by consumers in com­ merce, as “commerce” is defined in the Federal Trade Commission Act, it is an unfair or deceptive act or practice with­ in the meaning of section 5 of the Act for any manufacturer of mobile homes to disseminate or cause the dissemina­ tion of any representation or statement which represents, directly or by impli­ cation, the dimensions of mobile homes unless the actual dimensions of the mobile homes, from exterior wall to ex­ terior wall, and the dimensions of any tow hitch or other appendage, not part of said living space are clearly and con­ spicuously disclosed.

§ 4 4 1 .8 L a b e ls , seals, o r ce rtifica tio n s. In connection with the manufacture, sale, offering for sale, distribution, and service of mobile homes produced or sold primarily for use by consumers in com­ merce, as “commerce” is defined in the Federal Trade Commission Act, it is an unfair or deceptive act or practice within the meaning of section 5 of that Act to use or disseminate any label, seal or certification which makes any repre­ sentation, directly or by implication, as to the compliance of the mobile homes with any standard, code or the like re- FEDERAL REGISTER, V O L 40, NO. 104— THURSDAY, M AY 29, 1975

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23338 PROPOSED RULES garding construction or performance characteristics without disclosing clearly, conspicuously and in close conjunction therewith exactly what said label, seal or certification means and what remedy, if any, is available to a consumer in the event that his or her mobile home is not in compliance with said code or standard. For example, a clear and conspicuous dis­ closure in close conjunction with a label, seal or certification attached to a mobile home which represents directly or by implication that the particular home is in full compliance with ANSI Standard A119.1 shall consist of the following: There is no assurance by the manufacturer that this mobile home complies with every requirement of ANSI Standard A119.1. If you believe that this mobile home is not in compliance with ANSI Standard A119.1, the manufacturer suggests that you consult your warranty for Instructions on obtaining nec­ essary corrective action. S tatement of R eason for the P roposed R ule It is the Commission’s purpose, in is­ suing this statement, to set forth its reason for proposing this Trade Regula­ tion Rule with sufficient particularity to allow informed comment. In this pro­ ceeding, it has been determined that meaningful comment by the public will be best facilitated by presenting (1) a statement describing the basic factual and legal premises upon which the Com­ mission has determined to propose the rule, and (2) a series of questions de­ signed to draw to the public’s attention matters which the Commission presently deems particularly pertinent and on which comment is especially solicited. The Commission emphasizes that neither the statement of factual and legal premises nor the questions should be interpreted as designating disputed issues of specific fact. Such designations shall be made by the Commission or its duly authorized presiding official pur­ suant to the Commission’s Rules of Prac­ tice.

S tatement Based upon the information gathered to date, the Commission has reason to believe that:

1. Mobile home warranty performance often does not conform to the represen­ tations of warrantors of mobile homes. 2. Substantial numbers of mobile home purchasers in need of warranty service are subjected to unreasonable delay or have never received adequate redress of their warranty problems due to the fail­ ure of mobile home warrantors to main­ tain adequate warranty performance systems reasonably designed to assure that each niobile home consumer re­ ceives full performance of warranty re­ pairs within a reasonable time. 3. The practices which contribute to the inadequate performance of mobile home warranty repairs and service in­ clude :

a.

The delegation by warrantors of sub­ stantial warranty responsibilities to mo­ bile home dealers and other third parties without sufficient safeguards to assure that both the warrantor and the party to which warranty responsibilities have been delegated understand and live up to their agreed upon obligations. b. The failure of warrantors to sys­ tematically scrutinize the ability of a dealer or other third party to perform warranty service and set up prior to the time that the dealer or other third party is delegated the responsibility of serv­ icing the warrantor’s mobile homes. c. The absence of a written service contract between warrantors and their authorized dealers or other third parties to define the scope of their respective re­ sponsibilities with respect to service and to make those duties legally enforceable. d. The lack of regular, monitoring of the actual performance of warranty service and set up by authorized dealers or other third parties after a warrantor has delegated the responsibility of serv­ icing its mobile homes to such parties. e. The failure of warrantors to main­ tain adequate staff or procedures for the systematic and fair resolution of war­ ranty-related complaints or disputes. f. The failure of warrantors or their authorized dealers or other third parties to respond to warranty requests within a reasonable time.

g. The delay of needed repairs until after the settlement of disputes between warrantors and their authorized dealers or other third parties as to which party is responsible for the repair in question. 4. Warrantors have disseminated mo­ bile home warranties which contain dis­ claimers, limitations, and exclusions of express and implied warranties in States where such disclaimers, limitations, and exclusions are unenforceable under gov­ erning State law.

5. Warrantors have disseminated mo­ bile home warranties which contain cer­ tain conditions precedent to warranty service which have the capacity or tend­ ency to mislead consumers as to the ex­ tent of their warranty coverage. 6. Manufacturers and others have uti­ lized representations in promotional ma­ terials of the length of mobile homes as a certain distance which includes three to four feet for the length of the tow hitch; such representations have the ca­ pacity or tendency to mislead consumers by inducing them to believe that the rep­ resented length dimension is the total distance between the outer front and rear walls of the mobile home, rather than the overall length of the mobile home including the tow hitch.

7. Manufacturers have utilized and displayed certification seals which rep­ resent either directly or by implication that a particular mobile home is in total compliance with certain construction codes or standards; such use of certifica­ tion seals has the capacity or tendency to mislead prospective purchasers as to the quality of the particular mobile home they are considering for purchase and has the capacity or tendency to mislead actual purchasers by inducing them to believe that their particular home is in compliance with the codes or standards. In addition, the Commission has reason to believe that mobile home consumers are inadequately informed as to what steps should be taken in order to obtain remedial action for defects in their homes which may in fact be code viola­ tions.

The Commission’s authority to pre­ scribe rules which define with specificity acts or practices which are unfair or deceptive acts or practices in or affecting commerce is set forth in section 18(a) (1) (B) of the Federal Trade Commission Act, as amended (15 U.S.C. 57(a)(1) (B) ). Such rules may include require­ ments prescribed for the purpose of pre­ venting such acts or practices. Accord­ ingly, it appears to the Commission that the relief which is now set forth in the various sections of the proposed rule is mandated by section 5 of the Federal Trade Commission Act because: 1. Those mobile home warrantors who fail to establish and maintain regular and effective warranty performance sys­ tems designed to assure that each con­ sumer of a mobile home that is war­ ranted will receive full performance of warranty service and repairs within a reasonable period of time (as delineated in the proposed rule) are engaging in un­ fair or deceptive acts or practices within the meaning of section 5 of the Fédérai Trade Commission Act (15 U.S.C. 45). 2. Certain acts and practices used in connection with mobile home warranty provisions and other associated docu­ ments should be prohibited or restricted in order to prevent deception as to the extent of warranty coverage in violation of section 5 of the Federal Trade Com­ mission Act (15 U.S.C. 45). 3. The use of descriptions of mobile home dimensions and the use of certifi­ cation seals which have the capacity or tendency to mislead consumers should be prohibited and, instead, such descrip­ tions of mobile home dimensions and such certification seals should be worded so that they are presented to consumers in a manner which will not be decep­ tive in violation of section 5 of the Fed­ eral Trade Commission Act (15 U.S.C. 45). * The Commission has determined that it has reason to believe the above state­ ments on the basis of information com­ piled during an extensive investigation of the manufacturing, advertising, sales and service practices engaged in by the mobile home industry. In the course of this investigation, the staff has received documentary evidence of these practices and has conducted interviews with con­ sumers; representatives of mobile home manufacturers, dealers, and trade asso­ ciations; Federal, State, and local offi­ cials; and other interested parties. The Commission has not adopted any of the findings or conclusions of the staff. All findings in this proceeding shall be based solely on materials in the rulemaking record.

The terms of the proposed rule differ in some respects from the terms which were made public in December 1974. The previous version of the proposed rule was not published in the F ederal R egister at that time due to the need to assess the impact of the Magnuson-Moss War- FEDERAL REGISTER, VOL. 40, NO. 104— THURSDAY, M AY 29, 1975

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PROPOSED RULES 23339 ranty—Federal Trade Commission Im­ provements Act (Pub. L. 93-637) on Com­ mission rulemaking procedures. The most significant difference between the two versions of the proposed ride is the dele­ tion of most of the provisions which ap­ peared in the December 1974 version which related to disclosures to be con­ tained in written mobile home warranties and other related documents. The Com­ mission has reason to believe that thè disclosure of the nature and extent of mobile home warranty coverage wiH, for the most part, be adequately treated by the warranty rules to be promulgated under section 102 of Title I of the Magnuson-Moss Warranty—Federal Trade Commission Improvements Act (15 U.S.C. 2302). In addition, several insubstantial language changes in § 441:1 (Definitions) of the proposed ride were made in order to assure that the language in that sec­ tion conforms, where applicable and ap­ propriate, to the language of 15 U.S.C. 2301 (Definitions) and of section 5402 (Definitions) of the National Mobile Home Construction and Safety Stand­ ards Act of 1974 (42 U.S.C. 5401, et sèq.). Finally, a provision has been added to § 441.2 (Warranty performance systems) in order to reflect the fact that under the Magnuson-Moss Act, a warranty may also provide for the replacement of the warranted mobile home, a refund of the purchase price or other remedial action with respect to the mobile home. Under this new provision of the proposed ride, a warrantor would be able to perform a promise under the warranty issued by that company to give a refund or to re­ place the home, but the proposed ride requires that the warrantor provide the chosen remedy within a reasonable time under the circumstances of the individ­ ual case but in no event later than thirty days after receipt of the notice of the defect for which the remedy is to be provided.

At the same time the December 1974 version of the proposed rule was made public, the Commission accepted four consent orders agreed to by mobile home manufacturers which provided for cer­ tain relief to past purchasers of those manufacturers’ mobde homes and for the elimination of certain alleged unfair and deceptive acts and practices. The Com­ mission, having reason to believe that such proceedings alone are inadequate to establish well defined standards of en­ forcement for the guidance of consum­ ers, mobile home manufacturers, and other interested parties, undertakes herewith to define with specificity some acts or practices which may be unfair or deceptive and to prescribe require­ ments for the purpose of preventing such acts or practices.

Questions 1.

In the accompanying Statement of Reason for the proposed rule the Com­ mission has outlined its tentative ap­ praisal of deception and unfairness in the context of mobile home sales and service. How prevalent are the chal­ lenged practices set forth in the State­ ment, and in what manner and context are such acts and practices unfair or deceptive? 2. Section 441.2 (b), (c), and (d) sets forth certain time standards for the commencement and completion of the repair of defects which affect the safety of a mobile home or render it substan­ tially uninhabitable, for the completion of other warranty repairs, for the re­ sponse to a notification by a consumer of a defect and for the resolution of dis­ putes with respect to warranty coverage. Are the respective time limits set forth in that section fair and workable? Would different time standards be more appro­ priate after potential consumer injury, feasibility, and cost to the warrantors are taken into account? Shtmld these time standards be waived or modified in situations governed by 42 U.S.C. 5414 (g) and (h), and if so how should this waiver or modification be accomplished? 3. Section 441.2(e) and 441.2(f) pres­ ently require warrantors to assure that mobile homes manufactured by them are inspected at the home site prior to or at the time of tender of possession to the consumer and to reinspect the home within 90 days to assure that the home is being delivered free of defects which affects the safety of the home or render it substantially uninhabitable and to see that the home is properly set up. Would this requirement adequately protect consumers from moving into seriously defective homes? Would such a pre-delivery inspection result in expedi­ tious repair (within the framework of the applicable requirements of the rule) of all defects discovered during the in­ spection? Would a reinspection of the home within 90 days assure that any settling of the home after the initial set up would be detected and corrected? Is the time standard contemplated by the 90 day limit sufficiently flexible to allow for both the discovery of most warranty problems and defects resulting from a faulty set up while still allowing for an expeditious follow up as to the satisfac­ tion of the consumer by the mobile home warrantor? 4. Section 441.3(c) presently requires warrantors who delegate warranty re­ sponsibilities tp authorized dealers or other third parties to establish a pro­ cedure for evaluating the effectiveness of the performance of warranty repairs by the authorized dealer or other third party, including the use of a consumer questionnaire to be sent to all retail pur­ chasers after the reinspection of their mobile homes (between 60 and 120 days after the date of purchase). Will this requirement result in a reliable, inex­ pensive, and useful audit of the perform­ ance of warranty repairs by authorized dealers and other third parties, and will it reveal whether the mobile home con­ sumers have received all necessary re­ pairs? If not, what alternative or sup­ plemental procedure would achieve these desired results? 5. Section 441.3(f) of the proposed rule requires the establishment by the war­ rantor of a procedure for resolving con­ sumer complaints and disputes (which may involve manufacturers, dealers, and other third parties) with respect to war­ ranty problems. This procedure would not come within the purview of section 110 of Title I of the Magnuson-Moss Warranty—Federal Trade Commission Improvements Act (15 U.S.C. 2310) be­ cause the rule presently contains no pro­ vision for a dispute settlement procedure operated independently of the parties in­ volved in the dispute. In light of section 110 of the Magnuson-Moss Act, is there an additional need in the case of mobile home warranty disputes for the proposed rule to set forth an effective mechanism, to be used in appropriate situations, for the independent, fair, and impartial ar­ bitration of disputes with respect to war­ ranty obligations? How might this ar­ bitration best be accomplished? 6. Section 441.3 (e) and (f) contains requirements which áre specifically not imposed upon mobile home manufac­ turers which produce fewer than 5,000 mobile homes annually. What is the economic effect of the rule on small busi­ ness? Should special allowances for smaller manufacturers be made with respect to other requirements and why? Is a production figure of 5,000 mobile homes on an annual basis a reasonable cut-off point or would another figure be more appropriate? If so, why? 7. The proposed rule does not at pres­ ent contain a requirement that the set up of a mobile home be subject to a war­ ranty. Should § 441.2 of the proposed rule include a provision which would address itself to the problems relating to set up that mobile home purchasers appear to experience? If so, should additional mea­ sures, including a requirement that all set ups be subject to a separate warranty, be included in the proposed rule? 8. The proposed rule does not at pres­ ent place any requirements directly upon retail dealers of mobile homes or other third parties except to the extent that such parties are warrantors within the meaning of the rule. In light of the ex­ pansion of the Commission’s jurisdiction to acts and practices “in or affecting commerce” as “commerce” is defined in the Federal Trade Commission Act, would it be useful and appropriate to in­ clude provisions directly relating to the performance of warranty repairs, service, and set ups by mobile home dealers and other third parties in the proposed rule? If so, what provisions would serve to best assure the regular, expeditious and ca­ pable performance of warranty repairs and mobile home set ups by dealers and other third parties? In addition to the above questions, the Commission desires, for each of the in­ dividual requirements contained in the proposed rule, comments oh: 1. Any benefits which flow from any acts or practices which would be pro­ scribed by the proposed rule; 2. Any detrimental effects which will result from the imposition of any re­ quirement of the proposed rule; and 3. The economic effect of the pro­ posed rule on consumers. The Commission wishes to know whether consumer injury associated with prac­ tices restricted by the rule or with the FEDERAL REGISTER, VOL. 40, NO. 104— THURSDAY, M AY 29, 1975

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23340 PROPOSED RULES failure to utilize practices required by the rule, may be eliminated without elimi­ nating the practices entirely, or without utilizing the practices required by the rule. That is, are there alternative and more desirable ways of attaining the results that the proposed rule seeks to achieve? Invitation to P ropose Issues of Specific Fact for Consideration in P ublic Hearings All interested persons are hereby given notice of opportunity to propose any disputed issues of specific fact, in contrast to legislative facts, which are material and necessary to resolve. The Commission, or its duly authorized pre­ siding official, shall, after reviewing sub­ missions hereunder, identify any such is­ sues in a notice which will be published in the Federal R egister. Such issues shall be considered in accordance with section 18(c) of the Federal Trade Com­ mission Act as amended by Public Law 93-637, and rules promulgated thereun­ der. Proposals shall be accepted until July 29, 1975, by the Special Assistant Director for Rulemaking, Federal Trade Commission, Washington, D.C. 20580. A proposal should be identified as a “Pro­ posal Identifying Issues of Specific Fact—Mobile Home Sales and Service,” and furnished, when feasible and not burdensome, in five copies. The times and places of public hearings will be set forth in a notice which will be published in the Federal R egister. Invitation to Comment on the P roposed R ule All interested persons are hereby noti­ fied that they may also submit to the Special Assistant Director for Rulemak­ ing, Federal Trade Commission, Wash­ ington, D.C. 20580, data, views or argu­ ments on any issue of fact, law or policy which may have some bearing upon the proposed rule. Written comments, other than proposals identifying issues of specific fact, will be accepted until ten days before commencement of public hearings, but at least until July 29,1975. To assure prompt consideration of a comment, it should be identified as a “Mobile Home Comment” and furnished, when feasible and not burdensome, in five copies.

Issued: May 29,1975.

By direction of the Commission. [seal] Charles A. T obin, Secretary.

[FR Doc.75-13681 Filed 5-28-75;8:45 a,m]