Advisory opinion letter to Mr. Tosin

Dear Mr. Tosin:

Under Paragraph 1.1 of the Procedures and Rules of Practice of the Federal Trade Commission, permission is granted for any person,

aes partnership, or. corporation. to’ request an advisory opinion from the -Commission with respect to a course of. action which the requesting party proposes to pursue. Pursuant to this’ provision, the Carpet and ‘Rug Institute, a trade association for the carpet and rug industry, whose members manufacture approximately 95% of the carpets and rugs produced in the United States, hereby requests the advice-of the . Commission on the acceptability i in whole or in part’ of “A Proposed Quality: Certification Program for the Carpet Tndustry”; a copy ‘of --which is enclosed herewith.

“In compliance with Paragraph L 9, we hereby affirmatively: state a that the proposed program (1) is:tentative in form, (2) is not currently being followed, and (3) is not the subject of any: pending Anvestigation or other. proéééding by the Commission. ‘There i is, how-:: ever, involvement by another agency of the Government i in that this proposed program has been. developed at the request of and under the. guidance of the Architectural and Engineering Division, Federal Housing Administration, Pepartihent at Housing and Urban Devel- % - opment.

“At the suggestion of FHA, we have consulted with two ‘obbiek organi: a zations who currently administer industry certification programs—the _ Architectural Aluminum Manufacturers Association. and National . Particleboard Association—and ‘to: the ‘extent practicable have Pate terned our proposed program after theirs.

In developing this proposed program, we have been guided. by various recommendations and principles published by the Commission in (1) previous advisory opinions on the subject of: industry. certification programs, and (2) Chairman Kirkpatrick’s speech of January 28 to the New. York State Bar Association. We feel that we have met the guidelines set forth i in these documents.

~~ Following is an individual discussion. of each of these points and i its applicability to our proposed program :

1. “. . the actual or likely effect of.a particilar program will usually. be ‘detetiminative; and the best of intentions will not : legitimize a means of self regulation which has a dampening ‘tipact upon competition.” (Kirkpatrick, M. W., speech to NY. State Bar “Assn., 1/28/71) The proposed program, embodying a classification system, whereby ‘standards are established for five separate levels of quality, should’ allow ample competition within and between these classes. Further‘more, 4 large aspect of the competition among individual carpets and rugs is attributable to esthetic differences, which are not controlled by ie certification program.

; “Due © process requirements . aliould” be scrupulously ob: served ” (id.)

Paragraph 26 (a) of the proposed License Agreement outlines the procedure to be followed in instances where non-compliance with the program requires exclusion from the program or de-certification of an individual product. This procedure includes the right of appeal from the Administrator’s decision to an impartial Hearing Officer selected from a panel of technically qualified persons who are not connected with the industry. It is still not clear, because of pending investigations as to availability of other sources, whether the physical policing of compliance prior to the right of appeal will be handled directly by employees of the Carpet and Rug Institute or will be handled by some independent agency which is equipped to make the inspections and to administer the policing features of the program. It is the preference of the Carpet and Rug Institute to use an outside agency, but as of this moment the availability of such agency is somewhat questionable. 3. “The program should avoid exclusionary or coercive tactics or effects . . .” (¢bzd.) Three mechanisms are used in the proposed program for enforcement of compliance: (1) removal of product listing from Directory of Certified Products; (2) withdrawal of right to affix certification label and/or imprint; and (3) exclusion from program by termination of licensing agreement. While Chairman Kirkpatrick cautions that any enforcement mechanism could be considered “the private assumption of public power”, it is also obvious that no certification could succeed without some sanctions against the transgressor, and the steps proposed in the CRI program would seem to be the absolute practical minimum.

4. “The program should be based on clearly defined standards . . . (ibid. ) CRI Standard No. 1 (pp 21-33) was developed to provide a definitive statement of the quality levels necessary in carpet for consumer and commercial use.

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5. “The standards should be . . . related to the legitimate purpose for which the program exists . . . sufficiently general to avoid unessential restraints on... imagination and freedom; but sufficiently precise to insure objectivity in their application and impartiality in their enforcement.” (ibzd.) CRI Standard No. 1, and in fact the entire Certification program, was developed in response to suggestions from the Federal Housing Administration. The standards, therefore, reflect primarily the needs of FHA for a definition of the qualities of carpet.acceptable for FHA financing, and secondarily the need of the ordinary consumer for information upon which she can make an informed choice among the varieties and qualities of carpet available to her on the market.