Associated Merchandising Corporation

Text (OCR of the scan; may contain errors)

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 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 sufficient information to insure that the review be an intelligent 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 difficulty, 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 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 was 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 difficult 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 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.