Curtiss-Wright Corporation

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INTERLOCUTORY ORDERS, ETC. 999 CURTISS-WRIGHT CORPORATION Docket 8703. Order and Opin-ion, Sept. , 1,967 Order denying appeal from hearing examiner s ruling denying complaint counsel' s request for additional cost data. ORDER AND OPINION DENYING INTERLOCUTORY Appeals This matter is before the Commission upon respondent' s appeal filed July 12, 1967, from the hearing examiner s order of June 12 1967, to the extent it grants complaint counsel's motion to produce documents, and upon complaint counsel' s direct appeal, filed June 20, 1967, from the same order of the examiner to the extent it denies their requests; the respective answers of the parties, and respondent' s reply to complaint counsel's answer. Respondent sought, and was granted on July 3, 1967, permission to fie an interlocutory appeal in accordance with 9 3.20 of the Commission s Rules of Practice effective August 1 , 1963 (the rules applicable at the time of the order and the appeal). Complaint counsel failed to seek permission for their appeal as required by the aforementioned rule; however, in view of our disposition of their appeal, it wil be unnecessary to rule directly upon such question.

The request for the production of documents, ultimately modified, and the respective positions of both parties were thoroughly considered by the hearing examiner during thc course of three prehearing conference sessions. The examiner was successful in substantially narrowing the original specifications by compromise and otherwise.

The modified request is in two parts. The first covers specific sale and price data for the years 1960 through 1963. As to this, the examiner decided that the material already supplied by respondent and the reasonable inferences which can be drawn therefrom gave complaint counsel adequate information for the purposes stated in their motion. We approve of the examiner s disposition of this part of the request and, accordingly, we will deny complaint counsel' s appeal.

In the second part of the request as revised, complaint counsel seek records on aircraft engine parts covering the years 1960- 1963, showing engineering costs and general and administrative costs, and the cost of parts purchased finished and certain data on profits on the sale of such parts. Complaint counsel during the pre-hearing conferencc withdrew that part of the request dealing with standard factory costs. The examiner found that complaint counsel alrcady had substantial information with respect to the charges but the documents here sought are needed to "round out, extend or supply further details" that a real or actual need for them had been demonstrated and good cause shown. He observed that "there are indications that the information sought is, or has been, in respondent' s records in summary form or in some other form which was readily usable by respondent for its purposes and that "no basis is known by complaint counsel and none has been provided by counsel for respondent for describing the information more precisely than the specifications set out. It is patent that cost data of the type requested in Part II of the modified order is relevant to the allegations of the complaint dealing with selling below cost or at unreasonably low prices. The examiner recognized "that they should be expected to constitute or contain evidence relevant to the suhject matter involved.' J' The respondent emphasized the burden they felt the motion to produce would put on them. The examiner, in denying Part I of the motion to produce has substantially reduced the burden on respondent. That portion of his order that does require production is explicitly designed to minimize the burden of compliance on respondent.

The examiner has considered each of the criteria appropriate to the question of production of documents under Section 3.11 of the Commission s prior rule here applicable. His order, sustaining in part and denying in part, the motion for production of documents should be sustained. The conduct of adjudicative proceedings is primarily the responsibility of the hearing examiner. An examiner s rulings on evidentiary or procedural matters arising in the course of such proceedings should not be reviewed or disturbed in the absence of unusual circumstances. Topps Chewin,g GUIY!., Inc. Docket No. 8463; Order issued July 2, 1963 r63 F. C. 2196J. Production of documents, like depositions, is part of the Commission s pre-trial discovery procedure. In the matter of discovery, the hearing examiner is gi yen broad discretion by the Commission Rules of Practice, and the Commission, except by a clear showing of an abuse of that discretion, will sustain the examiner in his rulings in such matters. American Bmke Shoe Company, Docket No. 8622; Order issued September 1, 1965 , Opinion of the Commission 168 F. C. 1169J.

Neither complaint counsel nor counsel for respondent have demonstrated that the hearing examiner s ruling involves substantial rights and will materially aftect the final decision so that a determination of its correctness before the conclusion of the hearing wil better serve the interest of justice. Accordingly, INTERLOCUTORY ORDERS , ETC. 1001 It is ordered That the appeal of complaint counsel, filed June 20 1967, and the appeal of respondent, filed June 12, 1967, be and they hereby are, denied.

Commissioner Elman not concurring.

THER:vOCHEMICAL Products, INC., ET AL.

Docket 8725. Order, Sept. , 1967 Order granting respondents' request for leave to appeal from hearing examiner s denial of request for change of hearing dates, and hearing examiner directed to reschedule hearings. ORDER GRANTING REQUEST TO FILE INTERLOCUTORY Appeal AND DIRECTING HEARING EXAMINER TO RESCHEDULE HEARINGS This matter is before the Commission upon respondents' request filed August 23, J 967, for leave to appeal from the hearing examiner s order of August 16 , 1967, and complaint counsel's answer thereto filed August 24 , 1967. On August 9, 1967, we denied a similar motion by respondents.' It is from the subsequent order of August J 6, 1967, by the hearing examiner, denying respondents motion to change hearing dates ' that respondents wish to appeal. We have carefully reviewed respondents' request for leave to file an appeal and the hearing examiner s order of August 16. Upon review of this matter we note that hearings had originally been scheduled in the following manner:

August 15 to 16 Greensboro, a. K.C. 10.00 August 17 to 18 10 :00 a. Houston, Texas August 21 to 22 10 :00 a. Chicago, ilinois August 24 to 25 San 10 :00 a, Francisco, Calif. August 28 to 30 Los Angeles, California 10:00 a. Respondents' counsel seemed to agree to this schedule. " Subsequently, however, he moved 4 to reschedule these hearing dates on the ground that the proximity of the hearing dates and the remoteness of the hearing locations would require air travel which respondents' counsel desires to avoid. In deference thereto, the hearing dates were rescheduled to permit suffcient time to reach by ground travel the various locations at which hearings were to be held. After a number of additional postponements. complaint counsel on August 9 , 1967, moved to again reschedule the hearings, 1 H", pondents' request for leave to file an appeal from "xamincr s order fixjng hearing dates, August 7 , 1967.

2 Respondent,, ' answer to complaint (Jur. sei' s August 9 motion to reschedule healing, and motion to set aside examiner s order of A;Jgust 10. 1967 3T)' 4u.

4 ReSIJOndent's motion to re h€rl1Jle hearingii, July 28 , 1967 1002 FEDERAL TRADE COMMISSIO'- DECISIONS and the examiner, on August 10, 1967, entered an order adopting in toto the schedule proposed in complaint counsel's motion. Pursuant to that order, the hearings are now scheduled to be held as follows:

September 11 Los Angeles, California 10: 00 a. September 18 San Francisco, Calif. 10:00 a. September 25 Chicago, Illinois 10:00 a. October 2 Houston, Texas 10:00 a. October 9 Greensboro, N, 10:00 a. Complaint counsel' s motion of August 9, was not served on respondents' counsel until August 11 , 1967-the day after the examiner entered his order granting said motion. On August 15 , 1967, respondents moved to set aside the examiner s order of August 10 which motion was denied by the examiner on August 16, 1967, It is from the examiner s order of August 16, that respondents now request leave to appeal.

Respondents' counsel notes in his request that he is a sale practitioner and does not want to absent himself from his offce for a period of five weeks, which he claims would be necessary were he to adhere to the present hearing schedule by means of ground transportation. He requests that new hearing dates be fixed to afford him a minimum of two weeks at his own offce between the end of hearings at one location and the start of hearings at another.

As stated in our order of August 9, 1967, the hearing examiner is in the best position to reconcile the convenience of the parties with the necessity of bringing the proceeding to an expeditious conclusion. Absent unusual circumstances or a clear abuse of discretion we will not interfere with his decision. In the matter before us, the Commission concludes that unusual circumstances exist by reason of the fact that the hearing examiner s order scheduling hearing dates was entered before respondents were served with a copy of complaint counsel' s motion and that the present hearing schedule would necessitate respondents' counsel's absence from his offce for a period of more than four weeks. Accordingly, It is ordered That the respondents' request for leave to appeal from the examiner s order of August 16, 1967, be, and it hereby is, granted.

It is further O1'dered That the hearing examiner be, and hereby , directed to reschedule the hearings in this matter in a manner that wil permit respondents ' counsel to return to his offce for at least one week during the course of the hearings. Hearing examiner s order of August 10 , 1967, postponing and rescheduling hearings. INTERLOCUTORY ORDERS , ETC. 1003 By the Commission without the concurrence of Commissioner MacIntyre.

SCHOOL SERVICES, INC., ET AL.

Docket 872,9. Order, Sept. , 1.967 Order denying application for permission to file an interlocutory appeal from the hearing examiner s order denying respondents' motion to dismiss and granting respondents' request to elicit testimony from two Commission employees in regard to certain news stories \.which are allegedly prejudicial to a fair trial.

ORDER DEKYING REQUEST FOR PERMISSIOK TO FILE INTERLOCUTORY Appeal AND RULING ON RESPONDENTS' Application FOR THE PRODUCTION OF DOCUMENTS AND THE Appearance OF COMMISSION EMPLOYEES Respondents, at the conclusion of complaint counsel' s case-inchief, moved to dismiss the complaint for the reason that complaint counsel have failed to make out a prima facie case for relief under Section 5 of the Federal Trade Commission Act. The motion was aimed not only at the entire complaint, but at particular portions of the complaint. The hearing examiner, by order of July 18, J 967. denied the motion in its entirety. 1t is from this ruling that respondents wish to appeal. In addition, the examiner has certified, with the recommendation that it be denied, respondents' application for the production of documents and the appearance of Commission witnesses, filed July 25, 1967. In connection with the request for permission to file an interlocutory appeal, respondents contend that the hearing examiner order does not address itself with suffcient clarity and specificity to respondents ' motion to dismiss the complaint. Respondents assert, since complaint counsel have failed to establish a prima facie case, t)mt the hearing examiner should have dismissed the complaint and, failing that, should have a ticulated more specifically the reasons therefor in order to permit respondents to adequately prepare for their defense.

The determination at this stage of the proceeding of whether complaint counsel have established a prima facie case is one within the peculiar grasp of the hearing examiner and, absent unusual circumstances, we will not interfere with his determination.

The Commission has reviewed the hearing of July 14 , 1967, wherein respondents argued their motion to dismiss. It is evident from the motion itself, which to a considerable extent was concerned with argument about the import or significance of the testimony of the various witnesses, that the examiner did not err by failing to find complaint counsel' s case-in-chief clearly insuffcient at this stage of the proceeding. In view of the state of the evidence disclosed by the motion to dismiss, it appears this matter should not be disposed of without findings on the basis of a complete record.

Under S 3.23 of the Commission s Rules of Practice, permission to file an interlocutory appeal wil not be granted "except upon a showing that the ruling complained of involves substantial rights and will materially affect the final decision, and that a determination of its correctness before conclusion of the hearin2" is essential to serve the interests of justice.

The order here chanenged does not affect the substantial rights of respondents. We are unable to onclude from respondents' motion to dismiss or their application to file an interlocutory appeaJ either that they are under any misapprehension as to the charges made against them or that they misunderstand the thrust of complaint counsel's case-in-chief.

Nor does the order materiany affect the outcome of this proceeding. Even if the hearing examiner s ruling were erroneous respondents would not be seriously prej udiced thereby since it is not a final determination. In ruling on the motion to dismiss for failure to make out a prima facie case, the examiner has construed the evidence in the light most favorable to complaint counsel and resolved an conflicts in his favor. When he finds that a prima facie case has been established he denies the motion to dismiss. When the record closes, ho\vever, the standard is different, for a ruling on a motion to dismiss differs from a decision on the merits of the case:

. . . I A denial of a motion to dismissJ is merely a detf'rmination that there is in the record reliahle evidence -which, when considered in connection \.with reasonable inferences which may be drawn therefrom, and if not overcome by the respondent' s evidence, would support an order to cease and desist. The ultimate decision of whether an 01'0(:1' to cease and desist wil be issued, even in the absence of further evidence, is not reached; and it could '\vell be that a hearing officer, upon. full ( consideration of a proceeding submitted for final decision, after making appropriate determinations concerning the credibility of witnesses, the \veight to be given conflicting evidence, and other pertinent questions involved, would dismiss the complaint even though he had theretofore denied a motion to dismiss for failure of the record to establish a prima :facie case.

Ylilconizsd R,tb!,,;r and Pla.,tic.' Co, Docket Ko. G222 , 52 F. C. 533 4 (1(155). INTERLOCUTORY ORDERS, ETC. 1005 Any of the exceptional considerations that might justify us in permitting an interlocutory appeal are therefore absent. As we said in the Vulcanized Rubber case, S1'TJTa n. 1 , 52 F. C. at 535 It is. . . dear that for the Commission to entertain appeals of this nature would be but to encourage the submission of cases for decision piecemeal, with resulting unjustifiable delays. The Commission also has before it respondents' application for production of documents and the appearance of Commission employees, filed July 25, 1967, certified by the examiner. To a considerable extent this request does not differ in substance from the matters dealt with by the Commission s order of June 16, 1967 i71 F. C. 1703J, denying respondents ' request for taking of depositions an,d production of documents. Specifically, respondents request that the Commission produce for their inspection, the minutes of any and all meetings of the Commission held on or before February 13, 1967;, ' during which the Commission determined that it had " reason to believe " that respondents violated the Federal Trade Commission Act and that the issuance of the complaint in this proceeding "would be in the interest of the public. " In. addition, respondents apply for the production of the minutes of any and all meetings from February 13, 1967, 10 dale "reflecting any discussions or decisions of the Commission with respect to this proceeding or any of the Respondents named herein, In support of their application for these documents, respondents cite the denial in their answers that the Commission in fact had reason to believe" that respondents had violated lhe Federal Trade Commission Act, or that a Commission proceeding against them would be in the public interest. In this connection, respondents also cite the defenses averred in their answers-that the Commission lacks jurisdiction since it had no basis to conclude that respondents violated the Act, or that a proceeding against them would be in the public interest; that the Commission is legally incapable of rendering a fair and impartial trial in this case, and that if there is any public interest, it is obviously de minimis. Respondents concede that these reasons given in support of their application have already been dealt with by the Commission order of June 16, 1967.

Since the date of that order, respondents contend, however, that there has been testimony in the proceeding affrming respondents Sellool SCr'' rC$, Inc Docket 1\0. 8729, Onie1' Denying Req\'est Foc' Taking Of De;Jusitiono And Production Of Ducuments (June 16, 1907), pp. 3 , 4 I71 F. C. 1703 , Iio.SJ. 1006 FEDERAL TRADE COMMISSIO:\ DECISIONS contention with respect to the "reason to believe" issue which now makes this defense "more meaningful than ever. " Respondents aJ1ege that two witnesses whose testimony they contend is crucial to certain charges against them were not contacted prior to the issuance of complaint. This circumstance, they argue, supports their contention that the Commission had no information at the time complaint was issued providing "reason to believe" that these aJ1egations of the complaint had any basis. Assuming the two witnesses in question were the ones best qualified to testify on these particular issues, it does not foJ1ow there arises a presumption that the Commission s pre complaint investigation faded to bring to light information suffcient to give the Commission "reason to believe" that these charges were weJ1 founded. In short, respondents have failed to show that there are any unusual circumstances in this case requiring us to deviate from our previous determination that the preservation of the integrity of the administrative process precludes their proposed inquiry. In addition to their application for the Commission minutes relating to this proceeding respondents have also requested that the Comlpission direct the appearance of four of its employees at the hearings, namely, ,Janet Saxon, an attorney in the Bureau of Deceptive Practices; June L. Greene,., an attorney in the Bureau of Field Operations; Charles Sweeny, Director, Bureau of Deceptive Practices; and Sheldon Feldman, described in respondents application as Director, Special Consumer Protection Program. Respondents desire the appearance of Miss Saxon on the ground that she was involved in the negotiation and formulation of the consent decree in Pntricia Stcucns, Inc. Docket ""D. C-840 (1964) f66 F. C. 908J. Respondents state: "According to the theory of the case-in-chief, there is a connection between the advertising in this proceeding and the advertising of Respondent Patricia Stevens, Inc., in Docket ,"0. C-840." They contend that Janet Saxon has "conferred with and passed upon the advertising in Docket o. C-840 and, indeed has expressed opinions concerning it. " In further support of their request for the appearance of Miss Saxon, respondents assert that complaint counsel has suggested that Patricia Stevens, Inc. , was the reason for bringing complaint against School Services, Inc., in this proceeding. They aJ1ege that in order to place into its proper perspective the adver- Ibid. ; The Seeb1tTfI Corj)_ Docket ::D. , On1c1' H,-ling On II'.Bring Examinc!" s C..!'Hir. tion (OctOOP1' 25, 10r,6), p. 11 ;70 F. 1'. C. 1818. 18261. See al "'1oriern Marketing Servic, Iilc.. Dock€t No. 3783, Orde,. Huling- Or. Questions Ce!' tiied (January 7, 196(;) 169 F C. 10771. \ Presumably l' ef'por. dents desire the appearance of Jean F. Greene, an Httorney in the Cummir ion IVashinr;ton area fie!p offce INTERLOCI:TORY ORDERS , ETC. 1007 tising in this case and to meet the theory of complaint counsel with respect to School Services, Inc., it will be necessary to have the testimony of Miss Saxon concerning the advertising involved in Docket No. C-840.

The request for the appearance of :viss Saxon in this proceeding wiJ be denied. Neither the vague allusion to complaint counsel' theory of the case " nor the equally vague contention that the appearance of Miss Saxon would enable respondents to place this advertising "into a proper perspective" gives the Commission suffeient information to make a determination as to the validity of respondents' application on this point. Since respondents have failed to demonstrate the pertinence of Miss Saxon s testimony to their defense, they have not met the relevance requirement of 36 of the Commission s Rules of Practice. With respect to the appearance of 1V1i88 Greene, respondents allege that she is the principal investigator in this proceeding. Respondents further allege that in conversation with one of the respoj1dents "she made various statemeI)ts with respect tpl the advertisements of the respondents. Some of these statementsl have been placed expressly in issue by virtue of the Answers of lthree of thej Respondents... particularly the Seventh Defense." The Seventh Defense of these respondents seems to be essentially that they relied upon the "clearly implied assurances" of Commission representatives that as a result of certain revisions their practices \were in accordance with th( la \v and "could and would never be subject to attack or complaint by the Commission. " In addition, respondents contend that witnesses called during the case-in-chief have made references to the statements of Miss Greene. Respondents allege that it wiJ be impossible to prove their defense without the testimony of this witnesses and that her presence at the hearing is essential to their defense. The request for this witness, too, is couched in general terms making it diffcult for the Commission to evaluate its validity and lending support to the view that the request is merely a dilatory tactic. Since the testimony sought from Miss Greene concerns the substance of conversations which she had with respondents, it is reasonable to assume that they already have in their possession any information that. she might provide. We conclude that respondents have failed t.o show good cause for requiring Miss Greene appearance; the application shall therefore be denied. In the case of Charles Sweeny, respondents desire his testimony with respect to the issues of jurisdiction, prejudice and de minimis public interest. In short. it appears that respondents desire the 1008 FEDERAL TRADE COM!\ISSIOI; DECISIO'-S appearance of Mr. Sweeny to probe again the question of whether the Commission had "reason to believe" that respondents were violating the law and whether the proceeding is in the public interest. The request for :vr. Sweeny s appearance on these grounds wil be denied for the reason set forth in the Commission order of June 16 , 1967 71 F. C. 1703J. Respondents also seek the testimony of :vr. Sweeny and Mr. Feldman with respect to statements attributed to Commission employees in the public press. Respondents, it appears, seek this testimony to document their assertion that these stories demonstrate bias and prejudice and to furnish support for their further contention which charges, in effect, that such stories have created a climate prejudicial to a fair trial. The Commission has determined that respondents should be permitted to elicit the testimony of Messrs. Sweeny and Feldman on their contact with the press allegedly giving rise to the articles of which respondents complain. The appearance of Messrs. Sweeny and Feldman will be 1limited to that purpose.

In view of the foregoing, respondents' application for permission to file an interlocutory appeal wil be denied as wil be respondents application for the production of confidential documents and the application for the appearance of the Commission employees .J anet Saxon and .r can F. Greene. Respondents ' application for the appearance of :\Iessrs. Sweeny and Feldman will be granted within the context indicated above. Accordingly, It is ordered That respondents' application for permission to fie an interlocutory appeal from the hearing examiner s order denying respondents' motion to dismiss be, and it hereby is, denied. It is furth€?' ordered That respondents ' application for the production of Commission documents and the appearance of Commission employees Janet Saxon and Jean F. Greene be, and it hereby is, denied.

It is ' application for the further ",'dered That respondents appearance of the Commission employees Charles A. Sweeny and Sheldon Feldman be, and it hereby is, granted, It is f1n' ther ordered That Messrs, Sweeny and Feldman he and they hereby are, directed that their appearance is limited to the elicitation of testimony relating to their alleged contact with the press resulting in the articles of which respondents complain, INTERLOCCTORY ORDERS , ETC. 1009 INTER-STATE BDLDERS, INC., ET AL.

Docket 8624. Order' u'iul Opinion, Oct. , 1, Order denying petition for reconsideration of two provisions of the final order and toll the time for appeal.

OPINION AND ORDER DE'-YI'iG RESPONDENT S PETITION'i FOR RECO'iSIDERATION On September 18, 1967, respondents petitioned for reconsideration by the Commission of certain sections in the order entered in the instant matter. The decision and orner in this matter were served upon respondents by registered mail. Service was completed on August 21 1967. On September 6, 1967, the Commission granted to respondents an extension of the time until September 18, 1967 for filing a petition for reconsideration. The first issue respondents bring before the Commission for reconsideration involves paragraph 8 (d) of the order which in effect requires respondents to advise customers that they may cancel contracts \within a designated period if in executing them they relied in \whole or in part on any oral representations not contained in the contract Respondents argue that no evidence was presented and no findings were made dealing with or supporting the provision of paragraph 8 (d), that the particular section extends far beyond the violation charged and that it is vague and ambiguous and beyond the authority of the Commission. Respondents ask that the Commission withdraw its order and remand the case to the hearing examiner "to take evidence, hear argument and make appropriate findings and conclusions " upon what respondents call the "new issues" described above. Rule 3.55 of the Commission s Rules of Practice for adjudicative proceedings limits reconsideration to new questions raised by the decision or final order and upon which the petitioner had no opportunity to argue before the Commission. Respondents have raised no new questions nor have they adduced any grounds in the instant petition as to why issues with respect to the illegality of these practices and the scope of the order dealing with them should now be reJitigated. The issues were fully explored at the hearing and on appeal before this Commission. 1 Rcspor.dcn s ar.. orr:U'('r. tu C"lls" and desist from failin!,. R(d) Prior t.(J tbe Olcl(" ptllnCF of ar.O' rOIln,,:t. , t" (ei;\'f'l " t.rw cllt.onwr \vh" ha ('xecuted the contrac'; a copy of the cent" act aYJd a o,epal"a e wl' ten statemen'; rleady and ronspicuol1s:y advj the cust()m"r (1) t.)Ja no ",' al rep, espr.ta:i",- whier. m",y hHv,' u,,,,n mH,k by ar.y sa;es. man 0)' repl' e5entative of J'es)JtJn(!ent., "nd whi, h i" ndt. cont";f)e' in the crmtract is binding upon l"('spono('ni.s; anri ( ) that such customer ma\", within a desir;natecl period -which h;;J1 in nfl e be Jess thar. ter. d"y after receip'; of "'l;ch t":emer_ T, from l' pcm' 'mts . plpcl D cancd this conn-act if in c;.('cu ir. g it he 11"5 " e:iecl il whole OJ' il' part Upo;J a:lY Ol' repl' eoentatitJn not. contained in the cor.tract.

Respondents' deceptive practices in issue in the complaint were embodied in the representations made orally by their salesmen. The written contracts signed by respondents' customers expressly stated that respondents were not responsible for any oral statements not contained in the contract.

The provision of the order now questioned by respondents was directly designed to prevent respondents from continuing their practice of inducing contracts by oral representations and then disclaiming responsibilty for such statements in the text of their contracts.

It is not true as respondents argue that no evidence was presented or findings made dealing with or supporting the provisions of paragraph 8 (d). Findings on these issues are contained in the Hearing Examiner s Initial Decision, findings 6 to 11. The Commission opinion deals with them expressly at pp. 22 to 32 LPP. 397- 404 hereina.

The mere fact that the order entered by the Commission contained provisions which were not found in the order proposed by the examiner does not constitute "new questions raised by the decision or final order " such as to require reconsideration or remand. The scope of the order is always in issue in every proceeding and the mere fact of new provisions in an order entered by the Commission does not warrant remand. See Williams Co. FTC, 381 F. 2d 884, 888 (6th Cir. 1967). Paragraph 8 (d) of the order on which respondents would have a full evidentiary hearing is merely a method of implementation of violationselected by the Commission, to enforce its findings of the act. FTC v. The National Lea.d Company. 352 u.S. 419, 508 (1957). The framing of an order is of necessity a matter of discretion, an area in which the Commission has wide latitude. Jacob Siegel v. FTC, 327 U. S. 608 (1946); FTC v. Rube1'oid Co. 343 U. S. 47 473 (1952).

Respondents also cali for full evidentiary hearings on the excision of the "unless" clause from paragraphs 1 and 2 of the order entered by the hearing examiner. Here again respondents argue that no evidence was presented or findings made supporting the absolute ban imposed by these paragraphs of the order on the enumerated representations which the Commission found to have been deceptive, false and misleading.

There is no basis for respondents' arguments. The order provisions in question were directed to respondents' model homespecial price representations, factual issues which were fully explored in the hearings, Initial Decision of the examiner and Opinion of the Commission. See Hearing Examiner s findings p.

INTERLOCUTORY ORDERS , ETC. 1011 3 to 9. Commission Opinion, pp. 23, 32-35 (pp. 398, 404-407 herein). Hespondents admitted these practices as we pointed out in our opinion:

At the hearing respondent Gottesman conceded on examination by complaint counsel that Inter-State had never used the home of any customer as a model home (Tr. 93). There is no indication in the record that respondents ever intend in the future to use a home as a point of reference for advertising purposes. Since purchasers' premises are not used as models we fail to see how in any case respondents could grant allowances or discounts in return for such use. Moreover, it \vould make little business sense for respondents in the future to use this kind. of advertising and thereby discount their own prices \vhen they can simply use photographs of homes, which they are presently doing, in order to ilustrate what aluminum siding- looks like (Slip Opinion p. 34) (p. 406 hcrcinJ.

Hespondents had full opportunity to argue their position with respect to the ruling which should be entered in connection with these misrepresentations. Again as we pointed out above, the scope of orders is always in issue in Commission proceedings and new issues within the meaning of the applicable rule are not raised by provisions of the order entered by the Commission after argument on appeal. In the instant case, the Commission determined that in order to have an effective remedy to cure respondents' misrepresentations, the "unless" clauses in the prohibitions of paragraphs 1 and 2 of the order must be excised. The Commission noted in its opinion in this matter that its ban was subject to modification. If respondents devise a nondeceptive "ales message embracing some type of testimonial which might violate these t\VO paragraphs in the order, the Commission s procedures afford such respondents ample opportunity to petition the Commission, either for an interpretation of the order as to ,,,whether the !le\.\ sales program \vou1rl or would not violate the order, or for a modification of the order if one i" clearly necessary in order to permit respondents to engage in ,,,hat can be demonstrated to be a nondeceptive sales promotional solicitation (Op. p. 35) (p. 40(-j hereina. A similar action by the Commission in other cases has been sustained by the Courts (Centur)j M etalcmft Co)'p. v. FTC, 112 F. 2d 443, 446 (7th Cir. 1940)).

There is nothing novel about including absolute bans on certain types of representations even though they conceivably in some situations mig-hi be true under certain conditions. The test is always whether under existing facts they are likely to ever be true. Consume)'s Sales Cm' v. FTC 198 F. 2d 404, 408-409 (1952) ; Carolyn R. Macher, et al. v. FTC 126 F. 2d 420 (2nd Cir. 1942) ; Century lVletalcraft COn). v. FTC, 112 F. 2d 443, 446-47 (7th Cir. 1940) ; PTOduct Testing Company Inc. Docket No. 8534, Opinion of the Commission, February 17 , 1964, pp. 4-5 ' 64 F. C. 857 882- 883) ; See P. Lur/llard v. FTC 186 F. 2d 52 , 59 (4th Cir. 1950). Thus respondents can hardly be heard to argue that they did not have an opportunity to argue fully the scope of the ruling before the Commission. Respondents have had full opportunity to litigate these issues. Respondents have pointed to no new questions raised by the decision or final order which they could not have anticipated or on which they did not have full opportunity to offer evidence before the examiner and to argue before the Commission.

Respondents have rcqucsted that the Commission stay the effectiveness of its Final Order and toll the running of the time for appeal. Section 3. 55 of the Commission s Rules of Practice for adjudicative proceedings provides that the filing of a petition for reconsideration shall not operate to toll the running of any statutory time period affecting such decisions or order unless speci!ically so ordered by the Commission. Respondents have offered no cause as to why the time for filing appeal should be tolled and we see none.

For the foregoing reasons, respondents' Petition for Reconsideration and its motion to tali time for appeal should be and they hereby are ordered denied.

Commissioner Elman dissents for the reason that the petition for reconsideration satisfies the requirement of Section 3. 55 of the Commission s Rules of Practice that it "be confmed to new questions raised by the decision or final order and upon which the petitioner had no opportunity to argue before the Commission. 1\ATIONAL BISCUIT COMPANY Docket. 5018. Order, Nov. 1.'(;7 Order denying respondent' s request to suspend conmJiancp proceedings on grounds of appeal to circuit court.

ORDER DENYING RESPONDEXT S REQl:EST TO SUSPEKD COMPLIANCE PROCEEDINGS This matter is before the Commission upon certiflcatJOn by the hearing examiner of respondent's motion, filed October 10, 1967 requesting suspension of the compliance proceeding herein until such time as the court of appeals rules on respondent' s petition to set aside both the modified cease-and-desist order entered on April 26, J 954 i 50 F. C. 932J, and the order issued by the Commission on August 31 1967 (p. 994 herein), denying respondent' motion to reopen the proceeding, Respondent contends that since, on its petition, the record has , INTERLOCUTORY ORDERS, ETC. 1013 now been certified to the court of appeals, the Commission has no authority to exercise jurisdiction. In support of this argument respondent relies in part on the provision in Section 11 of the Clayton Act, prior to its amendment by the Finality Act of 1959 that upon the filing of the record with the court on a petition to review an order:

The jurisdiction of the United States court of appeals to enforce, set aside or modify orders of the Commission or Board shall be exclusive. There can be no doubt that upon respondent' s petition, the court of appeals has exclusive jurisdiction to affrm, modify, or set aside the Commission s order. However, since the petition before the court is that of respondent, there is no issue as to enforcement of the order. In this regard, Section 11 of the Clayton Act, prior to 1959, provided that "If any person fails or neglects to obey such order of the Commission or Board while the same is in effect, the Commission or Board may apply to the United States court of n In construingappeals, '" : '" for the enforcement of its order, '" : this provision, the courts have held that an evidentiary hearing is required on the question of' whether a person has failed or neglected to obey an order of the Commission. The present compliance proceeding in this matter constitutes such a hearing. It is, therefore, a step which must be taken before a determination is made whether or not to petition the court of appeals for enforcement. Since the compliance proceeding does not, of itself, constitute the enforcement, setting aside or modification of an order, it does not come within the purview of that provision in Section 11 which vests exclusive jurisdiction in the court of appeals. Accordingly, respondent' s argument that the Commission does not have authority to proceed is rej ected.

In further support of its contention that the Commission must suspend the compliance hearings, respondent relies on a parent- 1 that:

thetical comment by the court in Stondonl Rmnds If, in future cases, a respondent, believing the Commission s order invalid "'lishes to avoid what it may consider the needless expense of such a lcom plianceJ hearing' if the order is invalid, such a respondent ean promptly test the order s validity by a petition to review the order. The modified order to cease and desist, which the respondent contends is invalid, was issued in 1951. At that time, respondent contested the validity of the modification before the Commission and no v states that the original order \vas modified over its stron obj sections. However, thirteen years elapsed from the issuance of the modified order until respondent decided to test its validity. p"deral Trade Com.",ission v. Standard BraJuIs. JUl'. 189 F ,i SHi (2d Ci, 1%1) Certainly, this does not constitute a prompt testing of the order validity, as specified by the court. In any event, we do not believe the court's comment can be construed to condone an attempt to avoid the expense of a compliance hearing by a decision to test the validity of an order after such hearing has been instituted. Respondent further contends that, as a matter of comity to the court of appeals and of fair play to it, the Commission should suspend the compliance hearings while the validity of the modified order is "1Lb j1Ldice. Respondent alleges that, with full knowledge of its pricing structure, the Commission delayed for thirteen years in invoking the modified order, and rejected its attempt to achieve immediate voluntary compliance. These are the same arguments advanced by respondent in its motion of :vay 12, 1967, requesting that the order directing compliance hearings be rescinded. We have ruled on these contentions in our order issued .June 26, 1967, denying the request for the reason, among others, that respondent has been aware since at least 1964 that its reported compliance was not satisfactory and that, in its administrative discretion, the Commission had determined that an investigational hearing is necessary to develop suffcient facts to ascertain compliance with the order.

There are additional factors which must be considered in weighing a decision as to whether the public interest requires a continuation of the compliapce hearing. The Commission has issued orders against several of respondent' s major competitors, which orders, as is respondent' s, arc directed at prohibiting discriminatory pricing practices in the sale of biscuits and crackers. The pricing programs developed and engaged in by these competitors are allegedly patterned after those engaged in by respondent. Accordingly, the evidence developed in this proceeding wil directly affect the Commission s decision in other matters involving members of this industry.

Respondent' s argument of alleged unfairness loses sight of one other factor. Basically, it is respondent's position that the end result of the compliance hearing would be "utterly futile " if the court of appeals determines to enter its order modifying the Commission s modified order issued in 1954. We do not agree with this contention. Respondent has raised no issue as to the validity of the original order issued in 1944. Thus, the information developed in the compliance hearing may be used to determine whether respondent' s pricing practices comply with the 1944 order or such information may serve as a basis for a determination as to whether a new proceeding is 'warranted.

Finally, respondent' , argument that a continuation of the eom- IKTERLOCUTORY ORDERS , ETC. 1015 pliance proceeding would be an affront to the court must be rejected. As Commission counsel point out, by suspending the compliance proceeding at this time, the court may be burdened with twice considering what is essentially but two phases of the same case. The court may prefer a final disposition of the complianc€ proceeding before ruling on respondent's petHion in order that the matter of enforcement, if deemed warranted by the Commission, may be determined at the same time. For the foregoing reasons, it is the Commission s position that a continuation of the compliance proceeding is necessary and proper. Accordingly, It is order-cd That respondent's motion, filed October 10, 1967 , and it hereby is, denied.

It i8 fur-the,' ordered That this matter be, and it hereby is returned to the hearing examiner for further compliance hearings as directed by Commission order issued April 14 , 1967 171 F. 1674) .

Commissioners EJman and MacIntyre not participating. ASSOCIATED MERCHANDISIXG CORPORATION ET AL. Docket 8651. OrdeTand OpiTcion, Nov. , 196'7 Order denying respondents' appeal from hearing examiner s denial of application for depositions and subpoenas duces tecum of 173 \vitnesses. Interprets Sees. 3.33 and 3. 35(b) of the rules of practice OPINION OF THE COMMISSIOI' This matter is before the Commission upon respondents' appeal from the hearing examiner s order filed October 5, 1967, denying their application for depositions of, and the issuance of subpoenas duces tecum to, certain companies and persons listed in the application. Respondents have appealed pursuant to S 3. 17 (f) of the Commission s Rules of Practice effective August 1 , 1963, which they deemed applicable, and they have also appealed, in the alternative, under S 3. 35 (b) of the Commission s current rules effective July 1, 1967. We believe it is clear, since respondents motion and the ruling complained of occurred subsequent to the effective date of the Commission s present rules (i. July 1, 1967), that such current rules are applicable to the subject matter concerning which appeal is sought. In any event, there has been no claim made nor is there any indication that the application of the Commission s present Hules of Practice to this issue would be in any way prejudicial to respondents.

Respondents' application for depositions and the issuance of subpoenas duces tecum to "nonresource" companies and persons was filed September 22, 1967, with the hearing examiner. The request covered 173 persons, assertedly designated by complaint counsel as witnesses against respondents, as well as 50 persons not designated as witnesses by complaint counsel. The latter include 47 organizations described by respondents as "buying offces and 3 large retail chains, namely, Sears-Roebuck, Montgomery Ward, and J. C. Penney. These are all individually listed in Exhibits A through D attached to the application. Respondents assert that of the 173 designated as witnesses 153 were described by complaint counsel as "unfavored customers " of the vendors who allegedly discriminated in respondents' favor, 15 described as "wholesalers" and 5 as "competitors.

Respondents included in their application for depositions a statement as to justification on each grouping of persons named. Referring to the un favored customers " respondents contended that an important purpose of examining them would be to test the validity, accuracy and relevance of complaint counsel's tabulations of alleged discriminatory transactions. They also stated that they would question the alleged unfavored customers as to any affliations with buying offces, cooperatives and similar organizations, the opportunities of these customers to affliate with such organizations and the reasons that they may not have chosen to do so. On the "wholesalers" and the "competitors " respondents stated that they as yet had no indication of the specific legal or factual matters which wi1 be involved in these depositions, claiming that complaint counsel had failed to provide any information concerning the anticipated testimony of such witnesses. With reference to so-called "buying offces " and retail chains which include such organizations as R. H. Macy & Co., New York New York, Gimbel Brothers, Inc. , :\ow York, New York, and others, respondents state they seek to discover broad categories of information, including the accuracy and validity of complaint counsel' s figures, the extent to which buying offces received rebates on purchases made by their affliated retailers, and other data, On the chain stores in particular, they claim the depositions are essential because these retailers are major competitors of the store respondents and that through them respondents would seek to establish that any competitive injury suffered by alleged unfavored customers was due to price benefits accorded the chain stores.

Respondents, in justification for subpoenas duces tecum, in conjunction with their request for depositions, claim that they have INTERLOCUTORY ORDERS , ETC. 1017 encountered diffculties concerning the retaining of records in the prior discovery of resources (suppliers). The assertion is that in numerous instances relevant documents had already been destroyed or lost. Respondents also state that compulsory process is necessary because all witnesses to which the discovery pertains are hostile by definition and none of them can be expected to cooperate voluntarily in satisfying respondents' discovery requirements. Complaint counsel, on October 4, 1967, filed a document which included an answer in opposition to respondents' application for depositions and subpoenas. Therein counsel state that respondents application, if granted, would involve the holding of approximately 206 different pretrial discovery depositions in 12 different cities and the issuance of about 250 different subpoenas duces tecum. They assert that the delay involved in such discovery would be intolerable. Complaint counsel, in general, argue against the application on the ground that under 9 3.33 (a) of the Commission rules depositions are not to be ordered when it appears that such would result in undue delay of the proceeding. The hearing examiner, by order of October 5 , 1967, denied respondents' application. He stated that in the main he subscribed to complaint counsel's statement and that to depose 173 personsmost, if not all, of whom he asserted would be called as witnesses in this proceeding-would unduly delay commencement of formal proceedings. The examiner s position was that the overriding criteria for the taking of depositions is the question of undue delay, and he concluded that, particularly in light of respondents previous actions, the depositions requested would result in interminable delay.

Respondents, as stated, have appealed from the examiner s order of October 5, 1967, denying their request. In their brief on appeal they dwell mainly on the merits of their request for the depositions. Additionally, they seem to be charging the Commission with unfairness in the application of its discovery rules by assertedly applying one standard for its rules to complaint counsel and another to the respondents. Finally, they aver that the Commission ought to abide by the Hickman v. Taylor" precept, which they claim is that the deposition-discovery rules are to be accorded a broad and liberal treatment. Complaint counsel, in ans\ver to respondents' appeal, argue or seem to argue that in a big case 1 The examiner, possibly ir,advertently, referred specifically in his order only () the 17:, persons to be call.',) as witnesses. ""' e be:ieve i clear from h; dings ition of the mCitter that he was Hlso n;li!1g CIS to the ,'iO !,onwinlP,s orgClnizClt;ons on which responden':s seek depositions; how!'vp)' if tben, i, any doubt on this, Hspondenb are not prej\ diced h()m req Jestinf; the examiner to reconsidel' that part Df thpir aplJiiration S29 U. S. 49,' (1947).

discovery should be narrowly limited; that the Commission s rules specifica1Jy provide for not ordering depositions where undue delay wi1 result; and, finally, they charge respondents with delay in making the application for depositions. Under 9 3.35 (b) of the Commission s Rules of Practice, an appeal wi1 be entertained only upon a showing that the ruling complained of involves substantial rights or wi1 materia1Jy affect the final decision and that a determination of its correctness before conclusion of the hearing is essential to serve the interests of justice. Respondents, relying as they do on broad principles of claimed rights to discovery and the asserted unequal application of the Commission s discovery rules, have completely neglected to justify their appeal under the rule. Perhaps they intended to do so in connection with their claims of justification for the requested depositions and subpoenas. However, they have failed to spe1J out in what respects the rejection of their request brings them within the express terms of the Commission s rule. Furthermore, the examiner, as we have frequently observed, is vested with a broad discretion in matters of discovery, , Topps Chewing Gum, Inc. Docket No. 8463 (order issued July 2, 1963) 3 F. C. 2196J; Arnen:can Brake Shoe Company, Docket No. 8622 (order issued September 1, 1965) 168 F. C. 1169J. The rule on the taking of depositions (9 3.33) explicitly grants the hearing examiner discretion in such matters. It states in part: . At any time during the course of a proceeding, \vhether or not issue has been joined, the hearing examiner in his d lscretion may order the taking of a deposition and the production of documents by the deponent. (Emphasis supplied.

Unless it can be clearly demonstrated that the hearing examiner has abused his discretion, his rulings in such a matter must stand. There has been no such showing here. As we have indicated above respondents' contentions center mainly on the claim of broad discovery as a fundamental right. They fail to demonstrate that they could not adequately defend themselves without the depositions requested. They do not show, nor make any attempt to show, that there are no alternatives to the sweeping discovery demands made. The second sentence of 9 3.33 on depositions reads as follows: Such order may be entered upon a sho\ving that the deposition is necessary for JJUrposes of discovery, and that such discovery could not be accomplished by voluntary methods.

Respondents have failed to make a satisfactory showing that the discovery here requested could not be made by voluntary methods. Their only apparent attempt in this direction is the statement in INTERLOCUTORY ORDERS, ETC. 1019 their application to the examiner in which they aver, in a general way, that the witnesses are by definition hostile and that they cannot be expected to cooperate voluntarily. They do not suggest that voluntary methods were attempted and that such proved to be unsuccessful. This, we believe, is a wholly inadequate showing under the rule.

Section 3.33 of the Commission s rules also provides that a deposition should not be ordered to obtain evidence from a person relating to matters with regard to which he is expected to testify at the hearing or to obtain evidence which there is reason to believe can be presented at a hearing without the need for deposition or to circumvent the orderly presentation of the evidence at the hearing. Respondents' request for depositions relates mostly to persons who wil be called as witnesses. They have made no showing that their application-at least so far as witnesses are concerned-should not be governed by the aforementioned provision in the Commission s rule. Finally, 9 3.33 also provides that, insofar as consistent with considerations of fairness and requirements of due process and the rules in such part, a deposition should not be ordered when it appears that it wil result in undue burden to any party or in undue delay of the proceeding. The examiner clearly indicated his belief that the request was of such a broad and comprehensive nature that to grant it would unduly delay the commencement of formal hearings. To some extent he was influenced by the length of time respondents have already taken in connection with a previous request for discovery. We believe it is also clear that the examiner, in making his ruling, considered the questions of fairness to respondents and due process and found that respondents would not be prejudiced by his denial of their request. He has indicated his sensitivity to such considerations throughout this proceeding.

Full and adequate discovery is provided for under the Commission s rules, including the taking of justified depositions. The rules, however, carefully delineate the scope of discovery permitted by deposition and the circumstances under which such wil be granted. Discovery provided under the rules does not require the examiner to grant every request or any particular request for a deposition-he has discretion in the matter. Moreover, there is nothing in the Commission s rules which would necessarily, or even ordinarily, require the examiner to grant the discovery of the vast scope here sought. In instances of broad requests for discovery (such as here), which, in essence, parallel the contemplated trial, a consideration-in addition to those of fairness and justice-is whether or not the benefits, if any, could possibly justify the repetitive calling of witnesses, the extra burdens, and the delay, and in this case we do not believe they would. We do not hold that respondents are foreclosed from all discovery by deposition; our determination here is only that the broad request made has not been adequately justified. In the circumstances, we cannot say-nor has it been shown-that the examiner erred in denying respondents' application for depositions and subpoenas duces tecum.

We hold that respondents have not justified their appeal under the requirements of 35 (b) of the Commission s Rules of Practice, and, accordingly, it is directed that such appeal be denied. An appropriate order will be entered.

Commissioner Elman did not participate.

ORDER DENYING Appeal FROM EXAMINER S DENIAL OF Application FOR DEPOSITIONS AND SUBPOENAS Respondents having filed an appeal from the hearing examiner order filed October 5, 1967, which order denies respondents' application for depositions and supporting subpoenas duces tecum; and The Commission having considered such appeal, the answer filed thereto by complaint counsel on October 23, 1967, and the reply of the respondents filed October 27, 1967, and having determined, in accordance with the views expressed in the accompanying opinion, that respondents' appeal should be denied: It is ordered That respondents' appeal from the hearing examiner s order filed October 5 , 1967, denying their application for depositions and subpoenas duces tecum, be, and it hereby is, denied. Commissioner Elman not participating.

ALL-STATE INDUSTRIES OF NORTH CAROLINA, IC\C., ET AL.

Docket 8738. Order and 01Jinion 1''./0'1. 18 . 1.967 Order granting respondent's motion to quash hearing examiner s order per- , 3. mitting inspection and copying of documents. Interprets Sees. 3. and 3. 34 of the rules of practice.

OPINIOK OF THE COMMISSIOK On June 19, 1967, the Commission issued its complaint, stating it had reason to believe that respondents violated Section 5 of the Federal Trade Commission Act in the advertising, sale and installation of various home improvement products, including aluminum siding and storm windows. This matter is before the Commission upon respondents' interlocutory appeal, filed pursuant to 35 of the Commission s rules of practice, from the hearing INTERLOCGTORY ORDERS, ETC. 1021 examiner s order of August 30, 1967, denying respondents' motion to quash the hearing examiner s order to permit the inspection and copying of documents.

The motion filed by complaint counsel and granted by the examiner would require respondents to permit the inspection and copying of various documents described in seventeen specifications. Respondents argue that the examiner s order, ostensibly issued under 32 of the new rules of practice (effective July 1 , 1967), is inappropriate since the former rules of practice (effective August 1, 1963) apply to these proceedings. Respondents assert that complaint counsel have requested the production of documents and that only 11 of the former rules of practice authorizes motions for production. Alternatively, respondents assert that if the July 1, 1967, rules do apply, there is no longer any authority for the motion granted by the examiner inasmuch as orders requiring the production of documents are no longer provided for. Irrespective of which rules apply, respondents also argue that the order must be quashed because it is overly broad, basically investigative in nature, and outside the scope of the Commission s intended discovery processes. The Commission agrees with respondents' last contention.

The complaint in this proceeding was served upon respondents on June 22, 1967. The Commission s rules of practice which went into effect on July 1 , 1967, were first published in the Federal Register on June 13, 1967. The motion which gave risc to this appeal was filed on July 24, 1967. The examiner held that the July 1 , 1967 , rules were applicable throughout the trial of this proceeding. Respondents have not called our attention to any instance or manner in which they will be prejudiced by the application of the new rules. In the absence of a showing of prejudice, the examiner s ruling was correct.

Since the July 1 1967, rules apply, it is obvious that if complaint counsel's motion and the examiner s order call for the production of documents, as such, the order must be quashed. The new rules authorize the hearing examiner to issue orders directing access to files ( 32), the taking of depositions ( 33), or the issuance of subpoenas ( 34), but not the production of documents, except as such may be incidentally involved in granting access to files or as may be required in responding to an order for the taking of a deposition or to a subpoena.

The Commission, on occasion, has excused a respondent' s technical noncompliance with the rules where thc failure was insubstantial and inadvertent or where respondent's counsel was not 1022 FEDERAL TRADE COMMISSIO'- DECISIONS suffciently familiar with Commission procedure.' Where justice would be served, we may extend similar limited exemptions to counsel supporting the complaint. However, as a general proposition, it is not unreasonable to insist that the Commission s own staff scrupulously adhere to the letter and the spirit of the rules of practice.

Complaint counsel appears to have fused the provisions of former 11 (production of documents) with the present (orders requiring access). Both the caption and the request by complaint counsel are for a motion to produce documents, books and papers. The hearing examiner in his order of August 8, 1967 appears to have adhered more closely to the letter of 32. The examiner, however, did order respondents to "produce" documents for inspection and copying.

Although we admit to considerable perplexity as to whether the order in question is more like an order calling for production or an order calling for access, we rule that, under the circumstances of this case, respondents wil not be prejudiced by treating the examiner s order as one calling for access. Inasmuch as this appeal indicates some confusion concerning particular provisions of the present rules of practice, a few general comments concerning the underlying reasons for some of the provisions of the rules are appropriate. Sections 2.7 (subpoenas in investigations), 2. 10 (depositions), 11 (orders requiring access), and 2. 12 (reports) authorize Com- I mission counsel's broad and extensive use of these procedures in pre complaint investigation.

The Supreme Court has distinguished between the Commission power to get information from those who best can give it" and the judicial power to summon evidence in the course of litigation, saying that the Commission- '" '" has a power of inquisition if one chooses to call it that, which is not derived from the judicial function. It is mote analogous to the Grand Jury, which does not depend on a case or controversy for power to get evidence but can investigate merely on suspicion that the law is being violated, or even because it wants assurance that it is not. Holding that the order of the Commission requiring the filing of a special report did not transgress the Fourth and Fifth Amendments, the Court stated:

Even if one ,"'ere to regard the request for information in this case as caused by nothing more than offcial curiosity, nevertheless law-enforcing agencie . The Carl Mfg. Cu. Docket Ko. R6H9 , order issut'd December 23 1966 170 F. C. 1846J United State v. Mortem Salt Co. , 338 U. S. 632, (j36 (1950) , , INTERLOCUTORY ORDERS , ETC. 1023 have a le!!itim tp rip" to sHtisf t?ernselves that COT rate b ehavior is consistent with the I course, a governmental investigation into corporate matters may be of such a sweeping nature and so unrelated to the matter under inquiry to exceed the investigatory power. . . . But it is suffcient if the inquiry is within the authority of the agency, the demand is not too indefinite and the information sought is reasonably relevant.

Therefore, it should be manifest that the Commission s rules of practice 2rp. intended to and do provide for comurehensive 1Jrecomplaint investigation.

The rules for adjudicatory proceedings are intended to embody the Commission s conviction that, to the fullest extent practicable the strategy of surprise and the art of concealment wil have no place in a Commission proceeding. Hence, we have also provided for thorough post complaint discovery procedures. It should be obvious that discovery is a two-way street and that it is the hearing examiner s responsibility to insist that both complaint counsel and respondent's counsel be provided with suffcient data to insure an expeditious and completely fair hearing. To attain this end, the rules provide several different discovery techniques. Wherever possible, opposing counsel are encouraged and authorized to make extensive use of admissions as to facts and documents (9 3.31). Opposing counsel are also authorized to use depositions (93.33)5 and subpoenas (93.34). Orders for the production of documents, as such, are no longer authorized because proper use of 9 3.33 and/or 9 3.34 makes the use of such orders superfluous.

Complaint counsel may also make application for an order requiring a respondent corporation to grant access to files for the purpose of examination and the right to copy documentary evidence (9 3.32). Such application must meet the same requirements as an application for subpoena (9 3.34). A subpoena, deposition, or order requiring access aimed at obtaining information not ordinarily obtainable before issuance 3Id. at 641.

4 The examiner is responsible for the conduct of adjudicative proceedings, and bis rulings on procedural matters in the absence of unusual circumstanee will not be reviewed or disturbed by the Commission (Topps Chewing Gum, Ing. Docket No. 8463, order issued July 2 , 1963) r63 F. C. 219(;1.

"Section 3. 33 states, in pertinent part (Tlhe hearing examiner, in his discretion, may order the taking- of a deposition and the pl"odl.ction of documents. . . upon a showing that the deposition is necessary for lJurposes of discovery, and that such discovery could not be accomplished by volunt!iJ'Y methods.

r, Section 3.34 states, in pertinent part Application for issuance of a subpoena. . . haJl be made in writing to the hearing examiner, and halJ specify as exactly as possible the documents to be produced, showing the general relevancy of the documents and the reasonableness of the scope of the subpoena.

. . . Subpoena duces tee.um may bc used by any party for purjJoses of discovery or for obtaining documents for use in evidence, or for both purposes : ;

''A0h 't H-LI (J. 1024 +-DE fjlit of the complaint, additional details, or an extension of information as to disclosed transactions or events for which evidence is to be adduced in support of the complaint is manifestly within the bounds of proper pretrial discovery. Section 3.1 which provides for the expedition of adjudicative proceedings in no way prevents and is in no way inconsistent with a complaint counsel's request for access to a respondent's records or for a deposition or for a subpoena duces tecum for records in the possession of a respondent. There is no l' ission s rules, nor is there any precedent whi' ld in effect re Ulre com am co e to ave evidence that he wil need rior to the issuance of the complain The general rule stil remains that an onerous burden would be placed not only on the investigator but upon the party or parties investigated if the preliminary investigation must encompass the gathering of all of the details for each and every transaction which may eventually become an evidentiary item in a subsequent complaint. Many Federal Trade Commission proceedings present factual and conceptual complexities. In such cases, complaint counsel may properly find, particularly after the issues are refined in a prehearing conference. that some additional docuati()n m;:v tlP rp(mil"P N +A '1m/11r1 nut. extend. or Buvnl'll further details for the D:'rti(,111:1r transac be pursued. s. the les re not ntended to nrovwp. for comn,\p.hensive ostco ' i ation, but only postcomplaint discover The Commission recognizes a, In e a s rac, t e meaning of discovery" is necessarily vague. We are also aware that terms such as "round out extend " or "supply further details" are incapable of concise definition and wil depend on the particular facts and circumstances in every instance. Whatever the conceptual diffculties, it is clear that the particular order which is the subject of this appeal goes far beyond the f :' ""O fn ho nrp in e nature of an investigational sub For example, we are unaware a any reason w y, at this stage of the proceeding, complaint counsel requested and the examiner ordered the inspection and copying of broad classes of documents such as "Records or files containing all correspondence relating to purchases, sales and 7 That is not to say that H ;1. , 3.33 and ;'.34 e or broad investi ati poses eve tb' e Commission has t ., r t to investibeate after comp amt issues. Federal. Trade Commi.s, ion v. M"'Iz;es 242 F. 2d 81 (4th Cir. 1957), e era Ta e ommls. ion Waltham Watch Co. 1G9 F. Supp. r,14 (S. Y. 1959). See also Ku:;'ser Industries Corporation , Docket No. , 1962 8 , ol" jer issued March 2 ion held .that ,"'he1' e the it .has the aut.hority to issue sdJPoenas m the course of an IIwestlgatlOn t.oComn:issobtam mformatlOn which relates to the , subject matter of an adjudicative p"oceeding'. .

\. Ww HMI( i4.w /! 1a -"S INTERLOCUTORY ORDERS, ETC. 1025 advertising for the period January 1, 1965 to date. " While there may be innumerable instances where such broad specifications may be generally relevant, reasonable in scope, and within the bounds of proper discovery, it is incumbent upon the moving party, in explaining the reasonableness of scope, to offer some explanation for the failure to specify the needed documents more exactly and for the failure to obtain the requested information by other less burdensome means-for example, a request for admissions under 31 of the rules.

In short, we have been presented with a legal chimera. It has the head of an order for the production of documents, the body of a broad investigational subpoena, and the tail of an order requiring access. While we cannot condone the existence of such a creature, upon proper application by complaint counsel the examiner is fully empowered to issue a more limited and unified order which measures up to the Jetter and spirit of the current rules of practice. Accordingly, respondents' appeal is granted and an appropriate order will be entered.

ORDER GRANTING INTERLOCUTORY Appeal This matter is before the Commission upon respondents' interlocutory appeal, filed pursuant to 35 of the Commission s rules of practice, from the hearing examiner s order of August 30, 1967, denying respondents ' motion to quash the hearing examiner order to permit the inspection and copying of documents, and upon briefs and argument in support thereof and in opposition thereto. The Commission has determined that the appeal should be granted. Accordingly, It is ordencl That the respondents' motion to quash the hearing examiner s August 8 , 1967, order to permit the inspection and copying of documents, be, and it hereby is, granted. It is fwDwr or.dend That this matter be, and it hereby is, remanded to the hearing examiner for further proceedings in accm' dance with the views expressed in the accompanying opinion. A & R AGENCY, INC., ET AL.

Docket. 8716'. Ot"der Va?), :l8, ).16'7 Order denying effective date of initial decision until further order of the Commission. See 73 F, C. 5, for fmal order. ORDER STAYI:-G EFFECTIVE DATE OF INITIAL IJECISION The initial decision in this case having been mailed on October , 1967; and service thereof having been made as to some of the respondents but not as to all of the respondents: It is ordered That the effective date of the initial decision of the hearing examiner filed October 25, 1967 r73 F. C. 5J, be, and it hereby is, stayed unti further order of the Commission. It is further ordered That this order is not to be construed as extending the time provided under Section 3. 52 of the Commission s Rules of Practice for filing notice of intention to appeal from the initial decision by any party to this proceeding. BROWN & WILLIAMSON TOBACCO CORPORATION ET AL. Docket 7688. Order, Dec. 1967 Order reopening proceeding and proposing modification of paragraph 3 of the cease and desist order. See 73 F. C. 439 for modified order. ORDER REOPENING PROCEEDING AND PROPOSING MODIFICATION OF ORDER TO CEASE AND DESIST On September 28, 1967, respondents, Brown & Wiliamson Tobacco Corporation and Ted Bates & Company, Inc., filed a petition to reopen the proceeding for the purpose of modifying the order entered by the Commission on February 24, 1960 (56 F. C. 956J. of the orderIn substance, respondents request that Paragraph 3 be modified so as to permit representations of government findings concerning the tar and nicotine content of Brown & Wiliamson filter cigarettes as compared with the smoke of other filter cigarettes. Complaint counsel has filed an answer not opposing the petition.

Upon consideration, the Commission has concluded that good cause has been shown for modifying the order, but not in the precise language proposed by respondents. Accordingly, It is ordered, That this proceeding be reopened and that, within thirty (30) days after service of this order, respondents Brown & Wiliamson Tobacco Corporation and Ted Bates & Company, Inc., shall show cause why Paragraph 3 of the order to cease and desist heretofore entered in this proceeding should not be modified to read as follows:

3. Representing, directly or by implication, that the United States Government, or any agency thereof, has found that the smoke of Life cigarettes, or any other filter cigarette, is lower in tar or nicotine content when compared with the smoke of other filter cigarettes, unless such Government or agency thereof in fact has so found, and such findings are presented in a manner that is fair and not misleading and the basis for comparison is fully and fairly stated. INTERLOCUTORY ORDERS, ETC. 1027 CUR TISS- WRIGHT CORPORATION Docket 8703. Order and Opinion, Dec. 1, 1967 Order denying respondent' s and Martin A. Sherry s appeals from hearing examiner s denial of their motions to quash subpoenas duces tecum and remanding case to hearing examiner for further proceedings. OPINION OF THE COMMISSION This matter is before the Commission upon the hearing examiner s certification, filed November 3, 1967, of Martin A. Sherry and respondent' s motion to quash subpoena duces tecum, fied October 26, 1967, which he denied in part, and respondent's additional motion to quash the same subpoena duces tecum; and upon respondent' s and Martin A. Sherry s interlocutory appeal, filed November 15, 1967, from the hearing examiner s order denying motion to quash subpoena duces tecum. Complaint counsel, on November 21 , 1967, filed an answer in opposition to respondent' and Martin A. Sherry s appeal, and respondent, on November 28, 1967, filed a reply to such answer.

In this matter, the hearing examiner, on June 12, 1967, issued an order against respondent to produce documents covering certain of respondent's cost and profit data on aircraft engine parts for the years 1960 through 1963. Upon respondent's refusal to comply therewith the matter was certified to the Commission on September 25, 1967. The Commission, on October 2, 1967, issued an order directing the hearing examiner to withdraw the order to produce documents and to consider, upon application and in lieu of the order to produce, the issuance of a subpoena duces tecum pursuant to 34 of the Commission s Rules of Practice "to the extent that the production may be justified under such rule." Thereafter, upon application by complaint counsel, a subpoena duces tecum was issued, directed to Martin A. Sherry, Curtiss-Wright Corporation One Passaic Street, Wood-Ridge, New Jersey 07075. This subpoena required the appearance of Martin A Sherry and the production of documents pursuant to specifications which are, except as to certain modifications in form, the same as the specifications in the earlier order to produce. It is in connection with such subpoena duces tecum that respondent (and in the one case, Martin A. Sherry) has made its motions to quash and to certify to the Commission. It is also from such subpoena that respondent and Martin A. Sherry have filed interlocutory appeal' The contentions of respondent and Martin A. Sherry in the 1 Complaint counsel, on November 2, f,)ed Bnswer in opposition to the motions to Quash. Respondent, on November 7 , 1967, filed Ii reply to the anRwcr in opposition to respondent' s motion to quash and requf'st to certify.

:! first motion to quash and in the appeal from the hearing examiner s order denying motion to quash are principally as follows: (1) that under the Commission s Rules of Practice dated July 1 1967, the Commission cannot continue an investigation after an adjudicative proceeding has commenced, and (2) that the subpoena duc.es tecum is oppressive, burdensome and unreasonable and violates respondent' s rights under the due process clause of the Constitution, The additional assertion is made that the subpoena was improperly addressed to :vartin A. Sherry-who, it is asserted, is not a party to this proceeding-and therefore that no proper call has yet been made upon respondent' s documents. In respondent's second motion to quash subpoena duces tecum and requesting the certification of such motion to the Commission, respondent argues mainly that the Commission is bound by stare decisis and that it cannot retroactively apply the 1967 Rules of Practice to a question previously decided under the 1963 rules, Respondent contends that this action is beyond the Commission authority and a violation of respondent' s rights. Apparently there has been some misunderstanding over the Commission s ordering herein of the substitution of a subpoena duces tecum, if applied for, in lieu of the previously issued order to produce. Our purpose and intent was that a request for a subpoena, if made, was to be evaluated in terms of the requirements of the new rules to insure that such request concerned discovery and did not constitute a postcompJaint investigation. We are not clear that the examiner has considered the issue before him on the subpoena duces tecum in exactly these terms. For one thing, he did not have the benefit of the Commission s recent opinion coveris, All-State Indus-ing the scope of its new discovery rules-that tries of North Ca1'olina, Inc. , et al. (order granting interlocutory appeal issued November 13 , 1967 (p. 1020 hereina. Therein the Commission held in effect that while complaint counsel is not required to have all evidence that he will need prior to the issuance of the complaint-that is, he may properly seek additional documentation which may be required to round out, extend or sUl'pl1J further details for the particular transactions to be pursuedmay not, under the new rules, engage in " comprehensive postcomplaint investigation.

2 In All-State Industrics of North Carolina, inc. , et 01. , the Commission held that cumplaint counsel wol1jd be entitled to gathe!' " additional documentation. . . to round out. extend OT supply hlTther detail. for the particular transactions to he pur,ued. " (Emphasis in original) The Commission fm ther elaboratc,J on the question of discovery as foilDws: 'rhus, th" rules a1'(' not intended to provide for comp,.,hensive p(J twmplaint investigation but only postcomp)aint di r.()very. The Commi ion rec.gniz that, in the ab!otrac.t, the meaning of 'discovery' is necessarily vag,"e. y.' e are a; () aware that terms such a rOlmd out extend ' or supply further details ' 1i1"t' incapable of concise def. nition and wil deper,d on the particular facts and cil"cumstance in every instance.

INTERLOCUTORY ORDERS, ETC. 1029 In connection with the subpoena in issue, it is apparent that the request is, in relatively broad terms, seeking the production of a whole category of documents. We believe that the examiner should have evaluated this request in terms of whether or not it was justified and appropriate postcomplaint discovery. We wil remand this matter to the examiner for such an evaluation and for a determination consistent therewith. That is, if he finds the subpoena duces tecum to contravene the Commission s policy against conducting a comprehensive postcomplaint investigation, he should quash, or, if possible and appropriate, limit the subpoena to proper bounds. If he finds otherwise he should order compliance. So far as this matter concerns the argument that the Commission has improperly proceeded in directing the withdrawal of the order to produce and to consider, upon application, the issuance of a subpoena duces tecum in substitution therefor, we hold against the respondent. After it is made clear that the examiner has evaluated the request and proceeded in terms of the limits of a subpoena duces tecum under the Commission s adjudicative rules it will be manifest that the Commission s action will not be to the 1 So far as the other issues raised areprejudice of respondent. concerned, by both respondent and the individual referred to in the subpoena, we believe that such are matters, in the present posture of the case, to be left to the discretion of the hearing examiner. Accordingly, the motions to quash subpoena duces tecum to the extent certified, will be denied, and the interlocutory appeal from the hearing examiner s denial of the motion to quash wil be denied. An appropriate order will be entered. Commissioner Elman did not participate.

ORDER DENYING CERTIFIED MOTIONS TO QUASH AXD INTERLOCUTORY Appeal AND REMANDING WITH INSTRUCTIONS This matter having come on to be heard upon the hearing examiner s certification, fied November 3, 1967, of Martin A. Sherry and respondent' s motion to quash subpoena duces tecum, filed October 26, 1967, which he denied in part, and respondent' s additional motion to quash the same subpoena duces tecum; and upon , filedrespondent' s and Martin A. Sherry s interlocutory appeal 3 Respondent does not challenge " the CornmiSS;OT) S rir"ht to lipply new J"ules of pmdicf' retroactively in a pending- T'roccedin jn the absence of Ii showing of prejudice to a respondent." (Request to certify, p. 11. ) MorcDver. r€6pondent does not contest comIJlaint counsel's right of discovery. It states.

. . . (of course, "e pondent bas neVPl" contended that the Commission was barred from discovery after the i uance of a comp aint- nol" that Section 3. 11 forbids discovery. JL arg\Jment ha always been that the Commission is barred from continulnR a p1' complaint investigation after the institution of aT: adj\ldicativp proceeding. )" (Request to certify, p. 9. November 15, 1967, from the hearing examiner s order denying motion to quash subpoena duces tecum; and The Commission, for reasons appearing in the accompanying opinion, having determined that respondent's and Martin A. Sherry s motion and respondent's separate motion to quash subpoena duces tecum and their appeal from the examiner s denial of their motions to quash subpoena duces tecum should be denied and that the matter should be remanded for further proceedings in accordance with the Commission s views expressed in the accompanying opinion:

It is ordered That respondent's and :vartin A. Sherry s motion and the separate motion of respondent filed October 26, 1967, to quash subpoena duces tecum, to the extent that they have not been denied by the hearing examiner, be, and they hereby are, denied. It is furthe1' ordered That respondent's and Martin A. Sherry appeal from the examiner s denial, on November 3, 1967, of their motions to quash subpoena duces tecum, be, and it hereby is, denied. It is further ordered That the matter be, and it hereby is, remanded to the hearing examiner for further proceedings in accordance with the views expressed by the Commission in the accompanying opinion.

Commissioner Elman not participating.

ASSOCIATED MERCHANDISING CORPORATION ET AL. Docket 8651. Order, Dec. 1.96'7 Order denying respondents ' request for the production of certain documents. ORDER RULING ON HEARING EXAMINER S CERTIFICATION OF RESPONDENTS ' :vOTIOK FOR PRODUCTION OF DOCUMENTS This matter is before the Commission on the hearing examiner certification of respondents' motion for production of documents filed September 22, 1967. The request is made pursuant to Amended Prehearing Order No. , and to 11 of the Commission s rules of practice, effective August 1 , 1963. Respondents move that complaint counsel be required to produce or permit them to inspect and copy certain books and papers which they contend are nonprivileged, constitute evidence relevant to the subject matter of this proceeding, and are in the possession, custody or control of complaint counsel.

Specifically, the motion encompasses "all books, records and other documents " obtained by complaint counsel, or any employee or agent of the Federal Trade Commission in conj function with INTERLOCUTORY ORDERS, ETC. 1031 this proceeding or the investigation preceding complaint from the following companies:

American Artists Group, Inc.

Detecto Scales, Inc.

Fleck Bros. ;

Fralick Specialties;

Gibson Greeting Cards, Inc.

Johnson & Johnson;

Protex Products Company;

The Richelieu Corp. ;

Royal Typewriter Company, Inc.

SCM Corporation.

Excluded from the request are those records obtained from the respondents or which have been previously offered for inspection to the respondents.

Respondents contend their request meets the good cause standard under 11 of the rules in effect prior to July 1 , 1967. They assert, in this connection, that they had been informed during pretrial discovery that complaint counsel had secured a number of documents from the files of these companies prior to issuance of complaint and that many of the documents previously examined by complaint counsel had been destroyed in the ordinary course of business. Many of these documents, according to the motion, relate to specific transactions described in complaint counsel' tabulations and have a bearing upon the question of whether the tabulations reflect the actual net prices at which the merchandise was sold. In addition, respondents assert that they have reason to believe that complaint counsel has omitted from his exhibit list documents which would aid in the preparation of respondents defense. The motion concludes that since all the data involved in this request came from the suppliers "whose dealings with respondents comprise the entire case against respondents" they are necessarily relevant.

Complaint counsel by answer filed October 4, 1967, opposes the motion for production on the ground that the documents involved are confidential and that respondents have failed to establish the relevancy of their request.

The hearing examiner recommends that in the absence of a more clear and definite showing on the part of complaint counsel of the sensitive nature of the data requested, that they should be released for the inspection of respondents. This recommendation is made on the assumption that the requested materials merely relate to day-to-day sales transactions and routine correspondence. 36 of the Commission s rules now in effect governs the release of confidential records from the Commission s files. Any request for such data must meet the standards set forth in that rule. In this connection, the rule states that motions made pursuant to this provision shall specify as exactly as possible, the material to be produced and the nature of the information to be disclosed. The rule also requires that the motion shaJ1 contain a statement showing the general relevancy of the material or information involved and the reasonableness of the scope of the application together with a showing that such material or information is not available from other sources by voluntary methods or through other provisions under Part 3 of the rules. Respondents' request was not made pursuant to 36 and their motion does not meet the standards set forth therein. The rule requires that the material to be produced or the information which is to be disclosed shall be identified as exactly as possible to permit a determination of whether the request meets the prerequisites to disclos\lre specified by the r\lle. In short, the rule contemplates review by the Commission of the applications made there\lnder and that they contain suffcient information to insure that the review be an inteJ1igent one. Respondents' request broadly defining the material they desire as al1 books, records and documents obtained from the suppliers listed in their motion can only be evaluated with diffculty, if at al1, against the standards of the rule. Another relevant consideration is the fact that the Commission s files contain all manner of documents and information, some of which would have no relevance to the issues involved in Jitigation. The necessity for adhering to the procedures set forth in 9 3.36 is accordingly clear.

Further, some of the information secured in the course of a Commission investigation is necessarily more sensitive than other data obtained through the Commission s investigative processes. At this juncture, on the basis of respondents' motion of September 22, 1967, the Commission is not in a position to determine whether al1 books, records and other documents obtained from the ten companies are in fact non-privileged as respondents assert. Finally, it seems evident on the basis of the assertions in respondents' motion alone, that they could specify far more explicitly the materials they desire than the description in their application of September 22, 1967. In this connection, respondents have had, as they assert, pretrial discovery of the ten suppliers involved in this case and were in fact informed by these companies that a number of documents from these suppliers were turned over to the Commission and that certain material had been destroyed by the suppliers. On the basis of these contentions, it is reasonable to assume that respondents should be able to specify with greater INTERLOCUTORY ORDERS , ETC. 1033 exactitude the identity of or at least the categories of documents which they desire. In this connection, respondents should also set forth with more precision than in their motion the issues with respect to which the material they desire is relevant. Accordingly, the motion for production will be denied without prejudice. Respondents may renew the motion pursuant to S 3. 36 of the Commission s rules in conformity with the views expressed above. Accordingly, It is ordered That respondents' motion for production of documents filed September 22, 1967, and certified by the examiner on October 5, be, and it hereby is, denied without prejudice. Commissioner Elman dissenting.

STATESMAN LIFE INSURANCE COMPANY Docket 86'86'. Onler and Opinion, Dec. , 1.97 Order denying motion to defer issuance of press release on initial decision. Interprets Freedom of Information Act, Sec. 3. ORDER AND OPINION DENYING MOTION TO DEFER ISSUANCE OF PRESS RELEASE Respondent, Statesman Life Insurance Company, has filed a motion with the Hearing Examiner requesting the Commission to defer issuance of all further press releases in this matter pending final hearing and adjudication by the Commission or unti final action favorable to the Commission by the United States Court of Appeals for the District of Columbia Circuit in Pederal Trade Commission v. Cinderella Coree?' and Pinishing School, Inc. No. 118, 1967 Trade Cases ' j72 072 18 S.&D. 470, 660J. The Hearing Examiner has now filed his initial decision in this matter in which respondent was charged with engaging in false and deceptive advertising of life insurance policies in violation of Section 5 of the Federal Trade Commission Act. The initial decision has been served on respondent. Respondent argues that if such decision is adverse to it, issuance of a press release announcing the facts of this decision might cause policy holders in respondent to cancel their policies and thus prejudice and cause injury to respondent. Respondent asserts in its brief without any supporting documentation that the issuance by the Commission of a press release concerning the Commission s filing of the complaint in this matter caused many of respondent' s policy holders to cancel their policies to the injury of respondent and perhaps also of the policy holders in question. However, no objection \vas ever made by respondent to the issuance by the Commission of this press release nor of that issued by the Commission making public respondent' s answer to the complaint.

Complaint counsel opposes the instant motion of respondent on the ground that the initial decision of the Hearing Examiner is a public document and that the granting of the motion would therefore be contrary to the public interest. The Hearing Examiner has certified the motion to the Commission without recommendation.

Under Section 3 of the Administrative Procedure Act as amended by the recent Freedom of Information Act, administrative agencies are required to make available for public inspection and copying, in accordance with the published rule "an final opinions (including concurring and dissenting opinions) and all orders made in the adjudication of cases. " Section 8 (b) of that Act requires that a11 decisions (including initial, recommended or tentative decisions) shall become part of the record. The Commission s Procedures and Rules of Practice provide expressly that the adjudicative proceedings of the Commission are public unless otherwise ordered by the Commission and that the initial decisions of the Hearing Examiners are part of the public record and are available to the public without charge. (Sec. 3.41 and 4.9 (a), (d), and (e) (4). ) It should be noted that all Commission news releases respecting publication of initial decisions of its hearing examiners contain the following express explanation of the status of these decisions: This is not a final decision of the Commission and may be appealed, stayed or docketed jor review. (Emphasis in original.) It is diffcult to understand that respondent or its policy holders could be prejudiced by the publication of the initial decision in this case which publication wi1 simply record the findings and conclusions of the examiner an of which are matters of public record. This is particularly true in this case where the facts of the complaint and respondent's answers have already been made public. We cannot understand how publication of the initial decision of the hearing examiner can constitute prejudgment of these issues by the Commission. The granting of the instant motion, in our judgment, would contravene both the Freedom of Information Act and the Commission s own rules. Initial decisions by hearing examiners in publicly conducted adjudicative proceedings are matters of public interest of which the public has a right to be informed. The Commission s news releases containing such information are designed to be entirely factual and objective. It is an unwarranted libel on the Commission to suggest that it is thereby INTERLOCUTORY ORDERS, ETC. 1035 attempting to "smear" respondents or to try its cases in the newspapers. No special or unusual circumstances having been shown by respondent in support of its motion, we are constrained to deny the motion and are issuing our order to this effect. ADVISORY OPINION DIGESTS* No. 133. Agreement among members of trade association to comply with government ruling A trade association requested an advisory opinion as to its proposal to hold joint discussions among its members as to the proper description of the industry s product looking toward a possible agreement among all concerned to comply with ruling of a government agency as to how the product should be labeled. The Association assured the Commission that the discussion v.wuId be for this limited purpose only and that there would be no price fixing, monopoly or other antitrust question involved. The Commission advised that there could be no objection to discussion among the members looking ioward a limited agreement to comply with this ruling on a voluntary basis. The members were further advised, however, that nothing in this opinion was to be construed as approval of any steps which might be taken by the members, acting in their private capacity, to enforce this ruling themselves as to any members who might not be inclined to agree. Such approval as was given was limited to the simple agreement in principle to comply with the ruling, with enforcement being left to the properly constituted government authorities. (File No. 673 7104 , released July 13, 1967.

No. 134. Proposed lease of patented industrial machine A manufacturer of a patented industrial machine designed to produce a nonpatented end product has requested an advisory opinion as to the legality of its proposed form of lease. The manufacturer posed two specific questions pertaining to the lease and requested an opinion as to any other phase which the Commission might feel should be covered. The first question related to the lease term and royalty provisions, which provide that the lease shall continue in effect for three years with the lessee having the right to terminate upon 90 days notice during the second and third years and that the rental shall be 2.2 percent of the gross sales of products produced on the machine by the lessee. * In conformity with policy of the Commission, advisory opinions arc confidential and are not availabl," to tbe p-.biic, oniy digests of advise)"y opinions arc public record. Digesb of advisory opinions are c.t.nentiy pub:ishcrl in the Federal Rcgistel The Commission stated that it viewed the patent grant as conveying to the patentee the right to charge whatever royalty was satisfactory to the parties, measured by whatever patented or unpatented royalty base he desired for as long a period of time as he elects, so long as there is no attempt thereby to extend the patent monopoly beyond its intended scope. Therefore, it could see no objection to three provisions as written. The second question related to the paragraph providing that the lessor wil not make any sales of the equipment and wil not enter into a lease agreement for such equipment with anyone else whose place of business is located within the lessee s trading area as defined in the lease. The Commission noted that this provision did not grant the licensee an exclusive territory, although it had been advised that the nature of the end product would make it diffcult for anyone else to compete within that area because of the freight factor. Be that as it may, the Commission was of the opinion that the owner or holder of exclusive patent rights to make, use and sell may carve out of his grant a limited monopoly for a licensee and, therefore, it could see no objection to this provision.

The Commission further noted that following discussions with the staff the manufacturer authorized deletion of one sentence in the lease for editorial purposes and that in the paragraph dealing with alterations, the manufacturer requested deletion of the sentence requiring that any alterations, improvements, or changes, which are or may be patentable, shall, upon request, be assigned to the lessor. Thus the manufacturer did not request an opinion as to the required grant-back of improved patents incorporated in the original submittal.

While the Commission did not purport to pass upon the purely contractual aspects of the lease, it did state that it had reviewed the other provisions of the lease and expressed no objections thereto from the standpoint of the laws it administers, particularly in view of the fact that it had been advised that there were other competitive machines which the lessees are free to rent or purchase and in view of the fact that there were no tie-ins requiring the purchase of auxiliary or other equipment or supplies from the lessor. (File No. 673 7108, released July 13, 1967. No. 135. Tripartite promotional assistance plan featuring rewards to customers.

The Commission was requested to render an advisory opinion concerning the legality of a tripartite promotional program featuring the sale by a promoter to grocery retailers of books in ADVISORY OPINION DIGESTS 1039 which customers can paste labels from suppliers' products and receive a cash reward depending upon the number of labels collected.

Under the plan, manufacturers wil be solicited for permission to show reproductions of their labels, box tops, etc., within the pages of the books at no charge. The promoter wil then offer the books for sale to all retailers within the boundaries of the initial test area. The retailers can then distribute the books in any manner they choose, either by mail, house-to-house, or at their stores. They may offer them as a bonus for a certain purchase or for purchases of a specified amount.

Consumers wil be invited to buy and try the products shown and to paste or otherwise fasten the actual label or other product identification over the designated space in the book. The books are redeemable for cash at the issuing retailer s store and the value depends upon either the total number of product identifications returned in one type of book or whether all product identifications are returned in the other type of book. The retailer advances the cash reward to consumers redeeming books issued by him. The promoter will then reimburse the retailer the fuil amount advanced and in addition pay him a checking and handling fee, which wiil vary depending upon whether it is a completely filled or partially filled book. The promoter wiil then invoice suppliers based on the number of product identifications returned. This invoice wil include an amount suffcient to cover the cash reward to the consumer, and fee to be paid the retailer and a payment to the promoter for his costs plus his profit.

Retailers stocking all the items shown on the inside pages, or wiling to do so, wil be offered a choice of the two types of books. First, a book offering a cash reward based on the number of product identifications returned. The consumer can fasten one or more of the product identifications in the book and return it to the retailer for a cash reward. Second, a book offering a flat cash reward for completely filling the book with all identifications shown. Retailers stocking one or more of the items shown, but not all of them, wil be offered the book where redemption value is based on the number of identifications returned. The consumer can make purchases anywhere and fill as many spaces as desired regardless of limit to items stocked by the issuing retailer. Retailers using either type of book can choose from individualized covers or preprinted stock covers and wil have a choice of using a- name coined by the promoter or a name of their own choosing. The cost to the retailer wiil vary according to the type and quantity of books purchased. The promoter has advised that 1040 FEDERAL TRADE COMMISSIOK DECISIONS the differences in costs of both the standard and individualized covers is solely attributable to differences in the cost of printing and distributing different quantities and that the books are to be sold to retailers at cost.

The promoter wi1 mail an " Offer to Retailers" to all grocery stores, supermarkets, headquarters of each local, regional and national chain, wholesalers and the area headquarters or warehouses of each cooperative or association within the geographic area, as their names can be found in trade and telephone directories, route lists, etc. Realizing that some stores might be missing from these lists and also that other types of retailers might be offering at least some of the products shown, the promoter wi1 run an advertisement in every daily newspaper within the area outlining the features of the books and offering to furnish a copy of the notice to any interested retailer. In any county where there is no daily newspaper, the notice of advertisement will be run in a weekly newspaper of general circulation. The Commission advised that while it believed the promoter had done a commendable job of devising a plan which contained alternatives which should prove to be usable in one form or another by every customer of the participating suppliers, there was still lacking the element of proportionally equal treatment of those customers as required by Sections 2 (d) and (e) of the Clayton Act, as amended. In brief, these sections require that whenever a seller makes payments and furnishes services for the benefit of one customer, he must make those payments or services available on proportionally equal terms to all competing customers. If a situation such as this, where a number of suppliers wil be making payments to the promoter which will inure to the benefit of their customers, the responsibility rests on the promoter and the suppliers to see that the promotional assistance thereby rendered is made available on proportionally equal terms to each competing customer of each participating supplier. The Commission s concern with this proposal stemmed first from the fact that the retailers wil be charged different prices for these books depending upon the quantities ordered. In one sense, this could be viewed simply as a sale from the promoter to the retailers and thus subject to the cost justification defense which the statute makes available to one charged with a discrimination in price. Rovlever, the Commission found it conceptually impossible to lift this transaction out of the whole and view it as a separate price discrimination problem. The proposal involves one essentially promotional program in which the parts cannot be separated from the whole. While it is true that the promoter wi1 sell the books to ADVISORY OPINION DIGESTS 1041 the retailers, he wil do so at cost and this would not be possible were it not for the fact that he wil derive his profi from payments made by the suppliers. Thus the Commission ruled that the entire plan was keyed to payments which emanate from the suppliers and this being all parts must be judged according to the standards set forth in Sections 2 (d) and (e) of the Act. This brought the Commission into confrontation with the fact that the defense of cost justification is not available to one charged with a violation of these Sections. It followed, in the Commission view, that there was no way to escape the conclusion that the smaller dealers were not being afforded proportionally equal treatment when they had to pay more for the books than did their larger competitors. The opinion acknowledged it to be true that these prices are equally available to all in that all wil be charged the same price for the same quantities. But is is equally true that all will not be able to buy in the same quantities. Since the retailers profits from this plan will equal the amount by which their payments for redeeming books exceed their cost of purchasing such books, the Commission could not view the plan as being available on proportionally equal terms so long as there is a disparity in the prices they must pay in order to participate. In this connection, the Commission made it clear that it was only concerned with the prices charged for the books with standard covers since those were the real base of the plan. The purchase of books with individualized covers appeared to be purely optional with the retailer if he cared to spend more in order to more closely identify the plan with his own store.

A second respect in which this proposal was held to be deficient under the law stemmed from the fact that the large retailers were apparently to be offered both the fully completed and the partially completed book plans, while the smaller retailers were to be offered only the latter. In the Commission s view, both plans must be affrmatively offered to and made available to all retailers before the overall plan could be said to be available to all competing customers on proportionally equal terms. The opinion singled out two additional factors of the proposal which should be borne in mind if it is to be conducted within the law. The first concerned the fact that grocery retailers wil be notified by mail and all other customers of the participating suppliers wil be notified by advertisement. While the statute prescribes no particular method by which the availability of allowances or services is to be communicated to a seller s customers, it is clear that the duty rests upon such seller to see that all competing customers are informed. A plan can only be said to be available to a customer if he knows about its existence. If the method of notification chosen actually reaches all competing customers, there could be no objection to the plan on that score. However, the promoter was cautioned to keep in mind that the suppliers could incur liability if it subsequently developed that some did not as a matter of fact receive notice because of the method chosen. The second factor stemmed from the fact that was proposed initially to test the program in nine contiguous counties. Even though this is a test area the promoter was advised to be careful here not to discriminate against customers located on the fringes but outside the area selected since they may be actually competing with those who are participating. In such situation, the existence of competition prevails, not geographic or political subdivisions, and the fringe area customers, if any there be, who in fact compete must be afforded an equal opportunity to participate. (File No. 673 7096, released July 19, 1967.

Modified July 11 , 1968, 69 F. C. 1211. No. 136. Selective leasing of shopping center space The Federal Trade Commission was asked its views as to the legality of the following proposed course of conduct: A real estate developer plans to develop a new city composed of some 5 000 families. In connection therewith space is to be made available for business and service facilities. Prospective lessees of this space wil be accepted, or rejected, in light of a statistical study purport.ing to show an optimum occupancy mix. The Commission advised the requesting party that, in the absence of any purpose or intent to create a monopoly, prospective lessees could be accepted or rejected at wil provided the action taken was taken independently and as the result of the lessor s individual judgment.

The Commission noted, however, that it expressed no views as to the propriety, under the trade regulation laws, of any agreement between lessor and Jessee as to others to whom space might be leased. (File No. 673 7105 , released July 19, 1967. No. 137. Proposed trade associat.ion discussion seeking firm price guarantees from suppliers The Commission was requested to render an advisory opinion with respect t.o the legality of a user s trade association discussing and seeking a "guarantee that a quoted price wil remain firm for a definite number of days" from individual suppliers or from their national association.

It was represented t.hat the product constitutes about 30 percent ADVISORY OPINION DIGESTS 1043 of the cost of doing business and that while some users buy direct others purchase from intermediate suppliers. Regardless of the supply source, product suppliers change prices without notice and wil not guarantee firm prices unless the purchase contract calls for a large quantity of the product. As users' customers demand firm price quotations on their needs and because of the normal time lapse between a quotation and actual product purchase, an interim price increase by producers results in a lessening of the users' profit. The Association added that there is no agreement not to do business with those producers who decline to guarantee firm prices, but that individual users wil continue to bargain for concessions as they do at present.

The Commission advised that it could neither approve nor sanction the proposed industry discussions. Though such discussion might be motivated by a purpose to remove evils affecting the industry, it appears to go further than is reasonably necessary to accomplish the desired result. Even if the discussions were accompanied by disclaimers, there is implicit therein too grave a danger that it would serve as advice whereby the concerted power of members of the local association, and even of the national association, might be brought to bear to coerce the producers, or their association, to conform pricing policies to the standard desired or at the very least as an invitation to enter into agreements among themselves to do so. (File o. 683 7022, released Aug. 24 1967.

No. 138. Use of symbols and names having fur-bearing animal connotations in labeling textie fiber products The Commission was requested to render an opinion with respect to the labeling of textie fiber products manufactured so as to simulate a fur or fur product.

The requesting party proposed using a label which would bear the depiction of a fur-bearing animal commercially used in fur products, a trade name and trademark having a fur-bearing animal connotation, and the required fiber content disclosures. The Commission pointed out that the Rules and Regulations promulgated under authority of the Textile Fiber Products Identification Act provide, in Rule 9, that the label of a textie fiber product shall not contain a name, word, depiction, descriptive matter, or other symbol which connotes or signifies a fur-bearing animal, unless such product is a fur product within the meaning of the Fur Products Labeling Act. Subject to this proviso, a textile fiber product may not be described on the label with the name or part of a name of a fur-bearing animal, whether as a single or , combination word similar to a fur-bearing animal name, for example Broadtail."

The Rules permit the non deceptive use on textile fiber products of fur-bearing animal names but only where the animal fur is not commonly or commercially used in fur products, as for example Bear. " Further, the Rules do not prevent nor prohibit the nondeceptive use of a trademark or trade name containing the name symbol, or depiction of a fur-bearing animal unless "the textile fiber product in connection with which such trademark or trade name is used simulates a fur or fur product. The Commission advised that it would not be proper, in the labeling of textile fiber products, to use a label bearing the depiction of a fur-bearing animal nor a trademark and trade name having fur-bearing animal connotations. Such labeling, with or without the required fiber content disclosures, of a textile fiber product manufactured so as to simulate the fur of an animal commonly or commercially used in fur products would have the tendency and capacity of inducing prospective customers into the mistaken belief that the textile fiber product to which such label is affxed contains the fur of the animal depicted of fur fibers from such animal. (File No. 683 7007, released Aug. 24, 1967. 1\0. 139. Advertising claims for spray deodorant The Commission rendered an advisory opinion in regard some proposed advertising claims for a personal deodorant spray. Specifically, the Commission considered the propriety of the following two claims: (1) that the product meets the l;.S. Government requirements for safety and effectiveness and (2) that no other medicated personal deodorant spray equals its safety and effectiveness.

In regard to the first claim, the Commission said there were no specific standards or requirements offcially recognized by the U. Government relating to the safety and effectiveness of personal deodorant sprays. Lnder these circumstances, therefore, the Commission said it would be improper to claim that such requirements exist and that the product meets those requirements. With respect to the second claim, the Commission said that opinion evidence indicated there are other medicated deodorant sprays on the market which are equally as safe and effective as the product in question. In view of this opinion evidence, and in the absence of reports of properly controlled studies establishing the validity of the claim, the Commission said that it could not ADVISORY OPINION DIGESTS 1045 give its approval to the second claim. (File No. 683 7004, released Aug. 30 , 1967.

No. 140. Advertising allowances by book publisher The Commission rendered an advisory opinion in regard to the legality of a book publisher s promotional plan calling for the payment of advertising allowances. Specifically, the Commission ruled that the proposed plan would be in compliance with Sec. 2(d) of the Clayton Act, as amended.

Under the terms of the proposed plan, the book publisher proposes to offer to retailers, wholesalers and retailers who purchase through wholesalers advertising allowances equal to 75 percent of the actual cost for newspaper and magazine advertisements at local rates, but not to exceed 10 percent of the net value of confirmed orders for the advertised titles. Additionally, allowances wil be paid for the use of stuflers, circulars and catalogs, but not to exceed 10 percent of the dealers' net purchases. Regardless of which method of advertising is used, promotional payments wil not exceed 10 percent of the buyers' total net purchases. (File No. 673 7107, released Aug. 30, 1967.

No. 141. Proposed advertising for mink oil skin lotion The Commission was requested to render an advisory opinion with respect to proposed advertising for a skin lotion containing mink oil, which would represent that the product will relieve the scaling, itching and redness of psoriasis and eczema. The opinion advised the advertiser that while the Commission has no objection to representations that the product will afford temporary relief of itching and scales of psoriasis, any mention of eczema or representations in advertising that the product will relieve redness would appear to have the capacity and tendency to deceive. (File No. 683 7014, released Sept. 6, 1967. Ko. 142. Information required on label affxed to textie fiber products The Commission was requested to render an opinion with respect to the labeling of textile fiber products manufactured so as to stimulate a fur or fur product.

The requesting party proposed using two labels on his products. The first would bear his trademark and trade name and would be affxed inside the neck of the garment in the conventional manner. The second, bearing the required fiber content disclosures, would he a separate tag hung elsewhere on the garment. The Commission pointed out that the Rules and Regulations promulgated under authority of the Textile Fiber Products Identification Act define "required information" as that which must appear on labels, and "label" as the means of identification required to be affxed on textile fiber products and on which the "required information" is to appear (Rule 1, paragraphs (e) and (f)). The required information " includes "the generic names and percentages by weight of the constituent fibers present" which shall be conspicuously and separately set out on the same side of the label in a manner as to be clearly legible and readily accessible to such a prospective purchaser (Rule 16). The name to be used on such labels "shall be the name under which the person is doing business" or his word trademark if registered (Rule 19). The opinion pointed out that Rule 16 (b) provides that the required name or registered identification number may be conspicuously set out on a separate label which is prominently displayed in close proximity to the label containing the other required information. However, in this instance, the Commission believed that it would not be proper, in the labeling of a textile product to identify the product with one label bearing a trademark and trade name including fur terminology and to make the fiber content disclosure on another label or tag hung elsewhere on the product. It was the Commission s opinion that the proposed labeling of a textile fiber product manufactured so as to simulate the fur of an animal commonly or commercially used in fur products would have the tendency and capacity of inducing prospective purchasers into the mistaken belief that such product was a fur or fur product. (File No. 683 7008, released Sept. 6, 1967. No. 143. Promotional allowances by fabric supplier In an advisory opinion the Commission ruled that a fabric supplier who makes advertising allowances available to one or more resellers of a finished product, irrespective of the fact that intermediary performs work on the raw material which transforms it into the finished product, thereby adopts those resellers of the finished product as his customers and must comply with Sec. 2 (d) of the Robinson-Patman Act.

Commenting further upon the customer relationship, the Commission said:

We think Congress clearly intended to ban discriminations in the form of advertj,:ing allo\vances, regardless of the fact that intermediaries might be interposed, \vhere the grantor deliberately contacts hundreds of retailers directly with the purpos( of expending thousands of dollars for advertising purposes. Thus where a supp1icr initiates such a promotional program with retailers and has primary, if not the sole, responsibility over the control and administration of the plan, we think the customer relationship has been ADVISORY OPINION DIGESTS 1047 established and the plan must be tested in the light of the requirements of Sec. 2 (d) of the Act.

Under the terms of the proposed plan, the fabric supplier would pay 50 percent of retailers' advertising costs if the retailer sells and advertises wearing apparel manufactured from a certain line of fabric, up to a total cost of 1 200 lines published in Advertising Checking Bureau (ACB) newspapers. Retailers who use non-ACB rated newspapers, radio, television, handbils or mail stuffers wil be paid an equivalent measurable cost. The plan wil be made available to all retailers located in selected trading areas of all wearing apparel manufacturers who purchase and produce the finished product from the fabric in question. Only dealers who purchase apparel at regular wholesale prices wil be eligible to participate.

In its opinion, the Commission concluded that the plan complies with Sec. 2 (d) of the Robinson-Patman Act with two reservations. In commenting upon the first reservation, the Commission said: The statute requires onc who gives advertising allowances to make those payments available to al1 competing customers. Availability means that the grantor of the allowance must notify all competing customers of their right to participate in the plan. Thus the provision of the plan which requires a retailer located just outside one of the selected areas to show that he competes with onc or more of the favored retailers in order to have the offer made available to him ,vould appear to shift the responsibility of notification required under the statute. For this reason, the Commission cannot approve this particular provision of the plan should it result in discrimination against retailers located on the periphery of the selected trading areas. With respect to its second reservation, the Commission said that its opinion should not be construed as implying approval of the phrase "at regular wholesale prices" if the practical effect of that language is to procure resale price maintenance. (File No. 673 7103 , released Sept. 12, 1967.

No. 144. Proposed license agreement for process patent The Commission rendered an advisory opinion in which it informed the owner of patented process for preparing food that it could see no objection to the form of a proposed licensing agreement with the food processing industry.

The proposed agreement, which was the only form of agreement to be used, was described as nonexclusive in nature and provided for the licensees to use the process and machinery at one uniform rental rate regardless of the physical location of the licensee. Although the process patent contemplates the use of the machinery and the agreement contemplates use by the licensees of that ma- , 1048 FEDERAL TRADE COMMISSIO:- DECISIONS chinery, there is no absolute requirement that the licensees use any particular machinery in connection with the process. The hourly rental to be charged all licensees was to be measured by a meter attached to the machine and the licensor reserved the right to cancel the license if the annual rental due from operation of the machinery feil below a stated minimum amount, unless the licensee paid the difference between the actual rental due and the required minimum. The duration of the agreement was to be for a period of five years.

The Commission advised that while it did not purport to pass upon the purely contractual aspects of the agreement, it could see no objection to the form of the agreement from the standpoint of the laws it administered, as distinguished from matters pertaining to the implementation thereof. (File No. 683 7016, released Sept. 1967.

No. 145. Aggregating purchases of multi-unit organizations The Commission rendered an advisory opinion in which it concluded that it would not be permissible under Sec. 2 (a) of the amended Clayton Act to aggregate the purchases of three centrally owned retail grocery stores for the purpose of cost justifying a lower price to those stores.

The reason for this " the Commission said is that discounts to multi-unit purchasers must be cost justified on a store-to-store basis where, as here, each store orders separately, receives separate delivery and is invoiced separately.

Concluding its opinion, the Commission said: Since independent and singly owned retail stores are served in identically the same manner, it '\vould confer an advantage on the multi- unit store, not by virtue of any savings in cost to the store but solely by reason of its membership in the centrally owned organization. Combining or aggregating purchases therefore, for the purpose of determining costs of a multi- unit organization is not related to the realities of the market since the independent or singly owned store competes \"ith the individual stores of the chain organization.

The particular facts in the advisory opinion involved three centra1Jy o'W'Ted retail grocery stores. Each store placed separate orders with the wholesaler, had its goods delivered separately and was invoiced separately. In addition, some single owned stores bought in larger volume than the sma1Jest store which belonged to the centra1Jy owned organization. (File No. 683 7023, released Oct. 17, 1967.

ADVISORY OPIKION DIGESTS 1049 No. 146. Request for revision of advisory opinion pertaining to use of the word "new The Commission was requested to reconsider and revise its advisory opinion as to the permissible period of time during which an advertiser may continue to describe a new product as being "new." The opinion in question was announced in Advisory Opinion Digest No. 120 '71 F. C. 1729J and took the position that unti such time as later developments may show the need for a different rule, the Commission would be inclined to question use of any claim that a product was new for a longer period of time than six months.

The request was that the Commission revise this opinion to omit specifying any time limit or, in the alternative, to specify a period of at least one year, with the same proviso as was written into the present opinion that exceptional circumstances may warrant a longer or shorter period. In response to this request, the Commission stated its basic conclusion that the general rule announced in the opinion, which was announced as the rule which would be fo1Jowed until later developments might show the need for a different rule, has not been in existence long enough for the accumulation of any additional experience which would indicate the need for a change at this time.

However, the Commission did take note of the argument that six months is not adequate time for test marketing new products, which are usual1Jy tested in areas representing between 1 and 15 percent of the population and run for an average of six months to two years. In this regard, the Commission advised that the six months rule announced in its previous opinion does not apply to the bona fide test marketing of a new product. So long as the test marketing program does not cover more than 15 percent of the population, so long as the test period does not exceed six months in duration and so long as it is being conducted in good faith for test purposes only, the Commission stated that it did not intend to apply the six months rule until the test period had ended and the product had been introduced to the general market. The requesting party had further contended that the time selected was not long enough to cover the average life of packaging: materials and advertising literature and thus would necessitate scrapping such materials after the time had expired. With respect to this point, the Commission stated that while it was always anxious to minimize such losses to advertisers whenever it could do so consistently with its duty to protect the public from deception. it would seem that here the advertiser is peculiarly in control of the situation and able to protect himself against being caught with a large inventory of such materials on hand. When an advertiser introduces a new product to the market he is at that time on notice that the claim "new" can remain valid for only a temporary period of time and he is at that time charged with the responsibility of preparing only so much material containing the word as can be used within the period of time. during which the product can accurately be described as new. Even granting that one cannot predict with mathematical accuracy how fast the inventory wil be consumed, stil one experienced in such matters should be able to predict with reasonable accuracy how much wil be needed for six months use and be prepared to discontinue use of such material at the end of that time without the loss of significant amounts.

Finally, the Commission stated that it had announced in its first advisory opinion on this subject (Advisory Opinion No. 120) that shorter or longer periods of time would be considered for particular products upon a showing that such different period was more appropriate for the product in question. No such showing had been made on this application warranting the Commission to make any change in its announced time period. (File No. 683 7017 released Oct. 24, 1967.

No. 147. Granting of "back- haul" allowances to customers picking up their own orders The Commission rendered an advisory opinion advising a manufacturer of food products that it would probably be illegal to grant so-called "back-haul" allowances to customers who pick up their own purchases at the manufacturer s warehouses. The manufacturer in question presently sells its products on a delivered price basis with bracket pricing and does not permit customers to pick up products at warehouses or plants. Customers with trucks returning empty to their warehouses along routes near the manufacturer s warehouses and plants are now demanding the opportunity to pick up products and to earn an allowance by so doing. Consequently, the manufacturer proposed to institute a program whereunder customers would be permitted to pick up products and be paid an allowance equal to the amount the manufacturer would otherwise have to pay a common carrier to deliver to the customer.

The Commission advised that the proposal was governed by the provisions of Section 2 (a) of the Clayton Act, as amended by the Robinson-Patman Act, which, in brief, provides that it shall be unlawful for a seller to discriminate in price between different ADVISORY OPINION DIGESTS 1051 purchasers of goods of like grade and quality where the effect may be substantially to lessen competition or to create a monopoly and where none of the defenses afforded by the Act are present. Considered in the light of this statute, the Commission concluded that, assuming the presence of al1 the other elements necessary to a determination of a violation of the statute, the implementation of this proposal would probably result in a violation of the law. This result seemed to the Commission necessarily to flow from the use of a delivered pricing system, for in such a case the freight factor included within the price is not the actual freight to any given point, but an average of the freight costs for all customers within the zone wherein the delivered price is quoted, or, at least a figure determined by some formula apart from actual costs. If one customer is then given a "back-haul" allowance for the actual freight saved, the opinion advised serious possibilty of discrimination would exist in any delivered pricing system and it is highly doubtful that the defense of cost justification, at least, would be available.

While this conclusion may seem unreasonable from one point of view, since the allowance would be for no more than the actual freight saved, it seemed to the Commission to be a necessary result of using a delivered pricing system. Whenever such a seller departs from his delivered prices for the benefit of one customer, he leaves himself open to a charge of discriminating against his other competing customers who order in the same quantities and hence fall within the same pricing bracket because he failed to make allowances for the individual cost factors present in their situations. The law does not require that a seller pass on his cost savings to his customers, the Commission stated, but where he elects to do so in one instance it does require that he not discriminate between his purchasers where such discrimination has the proscribed adverse effect on competition.

Commissioner Elman did not concur. (File No. 683 7026, released Oct. 24, 1967.

No. 148. Corsage wearing apparel under Flammahle Fabrics Act The Commission was requested to render an advisory opinion as to whether a corsage made a wood fiber chips is considered to be wearing apparel under the Flammable Fabrics Act. The Commission has advised the requesting party that in its opinion a corsage made of wood fiber chips is an article of wearing apparel as the term "article of wearing apparel" is defined in the Flammable Fabrics Act, and is subject to the Act. (File No. 8217, released Nov. 7, 1967. ) (Issued under authority of Section 61 (c) of the Commission s Rules of Practice (1967). No. 149. Payment for recruiting new students The Commission advised a school that it might properly offer and pay a stated sum of money to present students under the following circumstances:

, or near, the conclusion of a course of instruction students would be supplied with cards recommending the school for distribution to their friends. When and if a recipient of one of the distributed cards contracted for, and paid the fee for, a course of study offered by the school, the student who had distributed that card would be, at his option, paid a stated sum or would have an equal sum credited against the cost of his further studies. DISSENTING OPINION BY JONES Commissioner:

In her view this particular type of paid testimonial (where students are to receive $10 credit on tuition for every new enrollee recruited by them) without disclosing the fact of such payment is inherently deceptive. (File No. 683 7036, released Nov. 21, 1967. No. 150. Trade association publication of advertisements for use by members featuring range of prices to be charged consumers The Commission advised a trade association in the home improvement field that it would probably not be illegal for the association to furnish its members ,with advertising featuring a range of prices to be charged consumers. The advertisements in question were to be included in a booklet to be sent to ajj members and would be suitable for mailing to the members' customers. The advertisements would depict typical home improvement projects, list the specifications for the project and state a range of prices in terms of dollar amounts per month for qualified bya specified number of years. The prices would be stating that they will vary according to labor and material costs in various areas. One page of the booklet would include a schedule of financing charges for one. two, three years, etc. The advertisements would be marked "Proof" and members purchasing the booklets to send to their customers would have the option of changing any of the suggested proj ect prices if they desire. The opinion stated that, in general, there could he no objection to the proposal if implemented exactly as outlined above. In this connection, however, the Commission added that all involved should be aware of the dangers of suppressing or eliminating or ADVISORY OPINION DIGESTS 1053 restraining price competition among individual builders or contractors because of the fact that prices are to be included in the advertisements. Thus, this plan would be rendered unlawful if in practice the suggested prices were used as a subterfuge or pretext for horizontal price agreements, or otherwise restraining competition, between contractors or builders in particular market areas. Special care must therefore be taken to insure that the legality of the plan is not impaired by the manner in which it is implemented. This advisory opinion is expressly predicated on the assumption that the proposal wil be implemented in strict conformity with the representations made to the Commission. (File No. 683 7028, released Nov. 21 , 1967.

No. 151. Commission cannot approve substantial additional annual volume discount pricing program The Commission advised a manufacturer it cannot approve pricing proposal to provide customers an additional 10 percent discount on all purchases above $15,000 in volume within the calendar year. The additional discount would be granted as soon as the $15 000 volume is reached in the year. The proposal was scheduled to go into operation in 1968. The same rules would apply for each succeeding calendar year. Also, the program would provide a further discount on purchases above S25, 000 in annual volume. The present pricing program is not under examination. The manufacturer sells his products solely to nonexclusive distributors who resell them, and similar commodities produced by other suppliers, to end-users.

The Commission told the manufacturer it cannot approve the proposal because there is a strong likelihood that price discriminations in violation of Section 2 (a) of the Clayton Act may result if the proposal is put into operation. The Commission pointed out that price discriminations to customers who in fact compete with each other in resale of commodities of like grade and quality would violate Section 2 (a) of the Clayton Act unless cost justified or unless the lower price is a good faith meeting of a competitor equally low price. (File No. 683 7054 , released Dec. 8, 1967. No. 152. Product certification prog-ram The Commission rendered and advisory opinion involving a trade association s proposed use of a certification mark which is designed to upgrade the safety and quality of a particular product. Specifically, the Commission was requested to rule upon the following two questions:

1. Can the association require non-members to join the association as a condition precedent to using the association s patented certification mark? 2. If not, can the association charge non-members a higher fee than members for use of the mark? In response to the first question, the Commission said that it should not grant approval to a program where the "trade association requires non-members to join the association as a condition to using the association s patented certification mark because there is at this time insuffcient information to evaluate the impact on competition of such a restriction." Commenting further on the first question, the Commission sent the requesting party a copy of Advisory Opinion Digest No. 96 l70 F. C. 18781. dealing with a closely related situation where the Commission did give its apaproval to a similar program on condition that a11 competitors be given unrestricted and nondiscriminatory access to its certification program whether they were members of the association or not. In response to the second question, the Commission reached the following conclusion:

. . . non-members of the association may be charged a higher fee than mem. bers provided it represents no more than a reasonable differential to insure that members and non-members of the association alike pay an equal share of the costs necessary to support the program. In short, if members of the association by payment of dues or other assessments have borne some of the cost of the program not reflected in the certification fees charged them then the payment of that portion of the costs may be reflected in the fees charged to non-members. This advisory opinion of course can not give you more than general guidance on this matter and the question of what is a reasonable djfferential \vould have to be decided on the facts of each case. DISSENTING OPINION By JONES CMJ1,1nissioner:

I have no quarrel with the substance of the Commission s response to the applicant Association s request for an advisory opinion on two questions relating to the availability to nonmembers of the Association of the certification mark to be adopted by the Association relative to a particular type of safety device and to the right of the mark by non-members. However, I am dissenting from this opinion because in my view the Commission should not have responded to what are obviously peripheral aspects of the Association s certification program without full knowledge of the substantive features of the program. The members of the applicant trade association manufacture the safety device involved. They describe their products as "high performance" ones which are used in particular fields. The certifi- ADVISORY OPINION DIGESTS 1055 cation program which gave rise to the advisory opinion request is said to have been adopted in order to upgrade the quality of the safety device involved and to insure that no one requiring such a product places too great a reliance on an inadequate product. We do not know whether the certification mark represents minimum or maximum safety standards, nor do we know whether the product test standards being used were designed for the particular uses for which this product might be purchased. It is highly possible that a product failing to qualify under the mark may be entirely adequate for some uses though not for others. It is equally possible that a product meeting the standards might be quite inadequate for other purposes. Thus, some manufacturers who make adequate products for certain purposes might nevertheless be excluded from obtaining the mark. We also have no information on the procedures used in formulating the standards on which the mark wil be based. Finally, we are not informed as to how the mark might be advertised and what the impact of the name of the standards institute which formulated the standard might have on the public s attitude towards the Association s mark. In short, we are asked to give an opinion on a peripheral aspect of this program when the program itself, either in its conception or in its administration, might be in violation of the laws administered by this Commission. I do not believe that we should give advisory opinions under such circumstances. Commissioner REILLY concurs with the dissenting statement. (File No. 683 7042, released Dec. 13, 1967. No. 153. Proposal to grant discounts for increased annual purchases The Commission rendered an advisory opinion in \which an applicant \Ws informed a proposal to grant discounts to a certain class of customers .i jobbers who bought his products for resale-to be given at the end of a sales year based on increased amounts of purchases over purchases in the preceding sales year cannot be approved because it appears on its face the proposal would violate Section 2 (a) of the Clayton Act if it were put into operation. The proposal was based on the following scale: (a) 2%, discount on a 20;; to 29S; ' inclusive increase; (b) 37; discount on a 30% to 39% inclusive increase; (c) 4%, discount on a 40% to 49% inclusive increase; and (d) 5 fi. discount on a 50 % or more increase. The Commission further pointed out that price discriminations to customers who in fact compete with each other in resale of commodities of like grade and quality would violate Section 2 (a) of the Clayton Act unless cost justified or unless the lower price is a good faith meeting of a competitor s equally low price. (File No. 683 7037, released Dec. 19, 1967.

No. 154. I egality under antitrust laws of complying with State milk marketing orders The Commission rendered an advisory opinion that a distributor who complied with a state s milk marketing order fixing the minimum resale prices of dairy products would not be subject to a charge of violating the antitrust laws. The distributor in question did not have a warehouse in the state in question, but shipped dairy products into the state from its warehouses located in neighboring states. In most cases, the price increases required by the order issued pursuant to the state dairy products marketing act would be significant and the distributor sells the same products at substantially lower prices to stores located in the neighboring states because competitive pressures dictate lower prices except where the higher prices are required by Jaw.

The distributor expressed concern that by agreeing to comply with the orders of the state, it would subject itself to possible action under the Sherman Act, the Federal Trade Commission Act, or possibly even the Clayton Act, as amended by the Robinson- Patman Act, since sales will be made at different prices to purchasers in different states of commodities of like grade and qualiy. Hence an opinion was requested as to whether the distributor wiJ be in violation of any of the laws administered by the Commission if it complies with the state laws fixing the minimum resale prices of dairy products.

The Commission advised that it was of the opinion that the distributor would not be subject to a charge of violating any of the laws it administers because of its compliance with the lawful orders of the state as to the minimum resale prices of dairy products. In the Commission s view, it is well settled that the antitrust laws have application to the actions of individuals, partnerships and corporations and not to the activities of a state. While a state may not authorize individuals to perform acts which violate the antitrust laws nor declare that such action is lawful, it may, in the exercise of its sovereign power, itself conduct such regulation of business activities within its borders as its own legislature snaJl properly deem necessary in the public interest. So long as the resulting regulation is a state as opposed to individual activity, those subject to the regulation would not be subject to a charge of ADVISORY OPINION DIGESTS 1057 violating the antitrust laws by reason of their compliance with the state s orders. (File No. 683 7044, released Dec. 22, 1967. No. 155. Varying discount price schedule-distributor recruitment through grant of override The Federal Trade Commission advised a manufacturer of household products that his proposed varying discount price schedule and his proposed granting of bonus payments to recruiting distributors on the business of distributors whom they recruit would, under the facts presented, in all probability result in violation of both Section 2 (a) of the amended Clayton Act and Section 5 of the Federal Trade Commission Act.

The manufacturer proposed to appoint as independent distributors such persons as would buy the requisite amount of inventory. Initial sales to such distributors would be at 33% percent of the manufacturer s suggested prices for his products. Incentive bonuses, computed at from 5 percent to 60 percent of the value their purchases, increasing as the value of purchases increased would be paid from time to time to the distributors. Distributors would be encouraged to recruit additional distributors who would also make a capital investment in inventory. A recruiting distributor would be given at 10 percent to 12 percent override on the dollar volume of purchases of any distributor whom he had recruHed.

The Commission noted that because of the nature of the plan it was almost inevitable that very \vide differences in prices \vould be charged customers, some of whom would, by reasonable assumption, be competitive with others. These differences would be so great that the anti-competitive effects made unlawful by the amended Clayton Act would almost certainly follow. In addition, it is clear from the facts presented that the requesting party contemplates that the so-called independent distributors would be for the most part selling at retail. The marketing plan is not primarily designed as an offer to knowledgeable businessmen, competent to weight and evaluate commercial risks. It is designed, rather, to appeal to uninformed members of the general public, unaware of and unadvised of, the true nature of the risks run-persons with limited capital who are led to part with that capital by promise and hopes which are seldom, if ever, fulfilleo. A particular vice of the plan is that part which provides override bonuses for recruited distributors. Implicit in such an arrangement is the promise, rarely if ever kept, that the recruiting distributor can, without himself working, profit greatly from the work of others. (File No. 683 7043, released Dec. 29 , 1967. , No. 156. Origin of toilet preparations The Commission rendered an advisory opinion in regard to the legality of using foreign words indicating French origin in the brand name of a toilet preparation, where the product is blended in the United States with domestic alcohol and French oils. Specifically involved in the opinion was the propriety of using foreign words in the brand name of the product immediately followed by the following qualification- BLENDED WITH FRENCH OILS IN USA.

In its opinion, the Commission said that the question posed is governed by Rule 3 (b) of trade practice rules for the Cosmetic and Toilet Preparations Industry. "This rule " the Commission said specifically forbids the use of any foreign word or depiction in the brand name of a toilet preparation which may tend to convey the erroneous impression that the product is made wholly in a foreign country, unless a conspicuous disclosure is made close conjunction therewith of the fact that such product was blended in the United States.

Concluding its opinion, the Commission said: . . , the proposed disclosure, "BLEXDED WITH FRENCH OILS IN USA " would meet the requirements of Rule 3(b) as an adequate qualification of a French brand name to describe a product blended in the United States with domestic alcohol and French oils. It is not necessary to disclose the presence of French oils, but this diclosure is permissible so long as the statement is factually true.

(File No. 683 7061 , released Dec. 29, 1967.