NA TIONAL ASSOCIATION OF HOME BUILDERS By: Isl Charles P. McMahon F. Senior Staff Vice President Effect of…

NA TIONAL ASSOCIATION OF HOME BUILDERS By: Isl Charles P. McMahon

88 F.

Senior Staff Vice President

Effect of FTC's Trade Regulation Rule for Door-to-Door Sales on 28 C. ~ 3811, the home solicitation sales law for the District of Columbia (File No. 773 7002).

Opin'ion Letter

December 17, 1976 Dear Mr. Offen:

This is in response to your request of June 4, 1976, for an opinion by the Commission respecting the effect on 28 D. C. ~ 3811, the home solicitation sales law for the District of Columbia, of the Commission Trade Regulation Rule for Door-to-Door Sales. Specifically, you have asked: "Does the Commission contend that its trade regulation rule preempts a prior Act of Congress?"

Two previous opinions by the Commission involving the subject rule were concerned with the question of conflict between notice language prescribed under state or local law and that specified in the Rule. The first of those opinions, issued May 20, 1975, was in response to a request , issued May 4, 1976, was inby Melville W. Feldman. The second response to your request made on behalf of the Direct Selling Association. Among other issues, the latter opinion dealt with contract notice language, inconsistent with the Rule, prescribed in states that have adopted the Uniform Consumer Credit Code (UCCC). In both of those opinions the Commission premised its position on the like other principle that duly promulgated trade regulation rules, substantive federal administrative regulations, may operate to supersede conflicting state laws or municipal ordinances. The doctrine of preemption, deriving as it does from the Supremacy Clause of the Constitution, clearly has no application to conflicts that may arise between congressionally mandated federal administrative regulation, on the one hand, and a separate prior congressional Silver v. Ne~c York Stock Exchange 373 U. enactment, on the other. v. Waite 414 U. 341 (1963); cf. Merrill Lynch, PI~erce, Fe' nner Sm.,it, 117 (1973). In either situation a determination of the controlling intent of CongTess depends upon a careful examination of the indicated scope and purpose of each of the regulatory schemes in ostensible conflict. ADVISORY OPINIONS 1043

The subject Rule was issued under explicit authority delegated to the Commission by Congress to define and prevent unfair or deceptive acts or practices. That delegation, moreover, reflects Congress' plenary power over the District of Columbia in addition to congressional authority emanating from the Constitution s commerce clause. The subject Rule, intended to be nationwide in its application, need not be construed as subordinate to an earlier enactment by CongTess legislating locally for the District of Columbia. In the Commission view, uniform nationwide application was what \-vas contemplated by Congress, as well .as by the Commission, in the formulation and issuance by the agency of trade regulation rules. On the other hand, the earlier District of Columbia statute, insofar as the Commission can discern was intended to be local in scope, in like sense to enactments by a state or municipal government in legislating for state or local purposes. Accordingly, to the extent that the home solicitation law notice provisions of the District of Columbia Code do not provide consumers the full protection of the Commission s nationwide Rule, it is the Commission s view that the supervening congressional purpose is that local notice requirements , if inconsistent, should give way to the Commission s nationwide Rule. The Commission is unable to conclude that it was the intent of CongTess that the benefits of a nationwide trade regulation rule of this nature should not be equally accorded the citizens of the District of Columbia. The Commission does not regard 28 D. C. S 3816, captioned "Inconsistent laws: What la\\' governs " to have been intended by Congress to invalidate subsequent conflicting federal statutes or regulations nationwide applicability. Rather, the legislative history of this section appears to the Commission to reflect a purpose only to clarify the circumstances of repeal of any prior conflicting local laws for the District of Columbia touching the affected transactions or practices.

The Commission regards it as essential that buyers nationwide , in transactions subject to the Rule, not be misinformed of their rights under the Rule. Accordingly, so much of the notice language provided in Section 3811 of the District of Columbia Code as \vould misinform buyers of their rights under the Rule, in the Commission s view, should be deemed superseded by the notice language prescribed in the Rule. (Commission opinion of May 4, 1976, to DSA.) This would not include the contract notice heading specified in 28 D. C. ~ 3811 or the language, consistent with the Rule, that: "If you cancel, the seller may not keep any of your cash down payment:"

88 F.

By direction of the Commission.

Letter of Request

June 4 1976

Dear Secretary Tobin:

Thank you for responding to my advisory opinion request concerning the preemptive effect of the Commission s Trade Regulation Rule Concerning A Cooling-Off Period For Door-to-Door Sales. The purpose of this letter is to request an advisory opinion in regard to a statement contained in your May 20, 1976, letter which presents a continuing problem for those attempting to comply with conflicting laws and regulations in this area.

Specifically, the Commission stated that " all provisions of the body the UCCC form of notice are preempted by the requirements of the Commission s rule." Enclosed is a copy of Public Law 92--200, the District of Columbia Consumer Credit Protection Act of 1971. Please note that section 28-3811 of the Act is entitled "Home solicitation sales" and contains cooling-off language virtually identical to the body of the UCCC form of notice. DSA therefore requests an advisory opinion in response to the following question: Does the Commission contend that its trade regulation rule preempts a prior Act of Congress? If the answer to the question above is affirmative, it is apparent that the Commission believes that only the Commission s notice form may be used in the District of Columbia. However, if the answer is in the negative may companies then use the statutory notice language in the District of Columbia but would UCCC language still be unacceptable in all other jurisdictions? The question of preemptive effect of Federal regulatory agency rules and regulations is a matter of major concern to not only DSA, but to the entire business community. By making this advisory opinion request, DSA hopes not only to provide needed answers to questions facing our member firms, but to also focus the attention of the Commission and the Congress on the preemption issue and the problem of diverse and/or conflicting Federal, State and local law, and Federal State and local rules and regulations.

It took 23 months for the Commission to reply to our last advisory opinion request. DSA sincerely hopes that the Commission will be able to respond more expeditiously to this request. ADVISORY OPINIONS 1045

Thank you for your cooperation.
Very truly yours
/s/ Neil H. Offen
Senior Vice President
and Legal Counsel