Coca-Cola Company

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IN THE MATTER OF THE COCA-COLA COMPANY, ET AL.

Docket 8855. Order, Mar. 4, 1!J75 On pre-trial discovery, subpoena duces tecum issued by the administrative law judge was quashed, and the prouction of documentary materials was directed. Appeamnces For the Commission: Rayrrnd L. Hays, William D. Henderson Michael J. Bloom and Duncan J. Farmr. For the respondents: White Case New York City. Gordon B. Spivack, Lord, Day Lord New York City. Miller, Martin, Hitching, Tipton, Lenihan Waterlwuse Chattanooga, Tenn. Richard F. Atwood Atlanta, Ga.

ORDER QUASHING SUBPOENA Duces Tecum AND DIRECTING PRODUCTION OF DOCUMENTARY MATERIALS This matter is before the Commission pursuant to Section 3. of the Rules of Practice and Procedure. Through that provision the Commssion may sua sponte review a decision by an administrative law judge to issue a subpoena requiring the production of Commission records under Section 3.36 of the Rules.

On Oct. 9, 1974, the administrative law judge issued a subpoena duces tecum which required that the Secretary of the Commission make available to the respondents certain internal agency documents. Although the respondents' motion requesting the subpoena was accompanied by a memorandum in support thereof, and complaint counsel submitted a brief in opposition, the administrative law judge did not append to the subpoena any explanation of his decision to grant the requested discovery or any indication of the "terms and conditions for the production of the material as may appear necessary and appropriate for the protection of the puhlie interest." 16 C. R. Section 36(c).

The issuance by an administrative law judge of a subpoena calling for _..

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398 Order internal Commission documents, without any explanation as to whether or not terms and conditions should be attached to their production and disclosure, does not in all cases indicate that the administrative law judge has failed to give appropriate consideration to the requirements of Rule 3.36. But where, as here, a wide arry of documents relating to a number of different suhjects is involved, and where the administrative law judge has neither ordered an in camera inspection of the documents nor required complaint counsel to describe their nature and content, the Commission cannot but conclude that the administrative law judge did not exercise his discretion in the matter and failed to give proper consideration to the question of whether or not terms and necessary andconditions to their production and disclosure ar appropriate in the public interest.

Having concluded that the administrative law judge erred in the matter, the Commission may either determine the matter itself or remand the matter to the administrative law judge with instructions to reconsider the matter and to accompany his resulting decision with an appropriate opinion. In order to avoid furher delay in the completion of pre-trial proceedings before the administrative law judge, and since thc documents descrihed hy the suhpona have ben compiled hy the Secreta and have been inspeted by the Commssion in camBm and the paries have had the opportunity to fully hriefthe issues relating to disclosure and production of the documents, the Commssion has determined to decide the matter itself.

The modern view of pre-trial discovery, as typified hy the Federa Rules of Civil Predure, is that all paries to a proeedng should be permtted access to whatever materials may be available for the uncovering of relevant probative evidence for us at trial. This principle applies to federa agencies as well as to private litigants. To that end, the Commssion s own rules provide for a sweeping arry of discovery tools, including the production of internal agency records when necessary and appropriate.

Whle permitting the issuance of suhpona which call for internal documents, Rule 3.36 is, however, designed to accommodate the necessity of balancing the private litigant's right to prepar a proper defense agnst the government's vita interest in mantaning the integrty and effciency ofthe administrative process. The court have trationaly honored the privilege which prote from indiri-the government's decision- and policymng proesses minate disclosure. Se, , Kailer Aluminum Chemical Cor. United Stairs 157 F. Supp. 939, 946 (Ct.CI, 1958); Carl Zeils S!ifiul/f v. VEB. Carl Zeiss, Jena 40 F.R.D. 318, 32 (V. C. 196), affd 2d 979 (C.C. Cir. 196), cert. den. 38 U.S. 952 (1967); Cf, Order 85 FTC.

Environmental Protedion Agency v. Mink 410 U.S. 73, 87 (1973); United States v. Nixon 418 U.S. 68'3, 41 L.Ed. 2d 1039, 106, n. 17 (I974).

This privilege, as do all evidentiary privileges, effects an adjustment between important but competing interests. There is, on the one hand, the public concern in revelations facilitating the just resolution of leg-.a disputes, and, on the other, occasional but compellng public needs for confidentiality. In striking the balance in favor of nondisclosure of intm-govemmental advisory and deliberative communications, the privilege subserves a prepondcrating policy of fr.mk expression and discussion among those upon whom rests the responsibility for making the determnations that enable government to operd.te Nowhere is the public interest more vitally involved than in the fidelity of the sovereign s decision- and policymaking resources. Cm"/ Zeiss Stiflung v. V.E.B, Carl Zeiss, JeJw, silpra 40 F.R.D. 318, 324. While taking action to establish a policy favoring openness and to support the citizen s right to inquire into the workings of the government, the Congress nonetheless incorprated into the Freedom of Information Act an exception for those intern memoranda which comprise the crucial decisionmking process. 5 U. c. &'Ction 552(h)(5). The Commssion itself has very recently indicated that the highly sensitive nature of such documents should shield them durng the discovery process in the absence of "the most compellng circumstances. Chock Full O'Nuts Car., Inc. Docket No. 88, 82 F. C. 747 (Order Quashing Subpoena Duces Tecum Ma. 2, 1973, p. 2). The documents descrihed hy the suhpona are listed in Appendix A to our Opinion. Certin statistical tahles contained in Douments 10, 15 19 and 23 consist of purely factual materials and ar severable from the context of the documents in which they are contained. Therefore, we are directing the Sereta to produce these tables. Specifcation 2 of the suhpona, broadly interpreted, would appear to speify certain portions of a copy of an electronic data processing magnetic tape, which the Commssion s Bureau of Economics has rented from gconomie Systems, Inc., a private Ill located at 41 W. 38th St. , N.Y. This magnetic tape includes certn purly factua information of a typ generally available from published sources respecting various companies including sever-dol companies engaged in one or another facet of the soft drnk industry. However, in view of the avaiahility of this information from alterntive sources, respondents and intervenors have not shown as required hy Commssion Rule 36b), that this information is not avaiahle from other sources hy volunta methods or pursuant to Commssion Rules 3.33-.34. Respondents and intervenors wi be permtte to seek discovery of this information from the Commission in the event that effort to obtain such materials from alternative sources on a voluntary basis are unsuccessful.

As for the remaining materials describe in the suhpona, the 39R Order Commission has concluded that all of them are of an advisory or deliberative nature and are privileged in that their disclosure "would be injurious to the consultative functions (of the Commission and its staff. which the privilege of nondisclosure protects. Environmental Protection Agency v. Mink 410 U.S. 73, 87 (1973), quoting from Kaiser Aluminum Chemical Corp. v. United ,States, supra 157 F. Supp. at 946.

While these privileged documents are of such a nature that disclosure might he authorized if circumstances of the most compellng nature were presented, respondents and intervenors have not demonstrated that any such circumstances exist in this case, nor are such circumstances apparent on the basis of the record presently before the Commission.

The order we enter today wil not preclude respondents and intervenors from again applying for discovery of these documents and attempting to demonstrate before the administrative law judge that notwithstanding the privileged nature of the documents, circumstances of the most compelling nature exist to warrant their production. If respondents and intervenors do so, the administrative law judge should make appropriate findings on this point in disposing of the application for discovery. To the extent that any such application is granted, the Administrative Law Judge should explain what, if any, terms and conditions for the production of the material are necessary and appropriate for the protection of the puhlic interest. Accordingly, It is ordered That the subpoena duces tecum, and it hereby is quashed without prejudice. However, the Secretary of the Commission is directed to produce and disclose to respondents and intervenors copies of the statistical tables appearing at the particular pages indicated in the following described documents: (1) pages 2-6 of a memorandum from Edward Manfield to Michael Glassman, Chief Division of Economic Evidence, dated Nov. 30, 1972, entitled "Soft Drink Industry" (identified in Appendix A hereto as Document No. 10); (2) pages 3- , 7, 13 and 15 of an undated attachment entitled "Proposal for the Study of the Soft Drink Industry" to a memorandum from H. Michael Mann, Director, Bureau of Economics, to the Commission dated Feh. 4, 1972, entitled "Study of Soft Drink Industry" (Document No. 15); (3) pages 3- , 7- , and 12 of a memorandum from the Bureau of Economics to the Commission, dated Oct. 18, 1973, entitled Recommendation: That an Investigation he Initiated in the Soft Drink Industry" (Document No. 19); and p. 6 of a 6-page attachment entitled Proposal for a Study of the Soft Drink Industry" to a memorandum from Robert Lamer, Chief, Division of Industry Analysis, and James Dalton, to H. Michael Mann, Director, Bureau of Economics, dated Oct. Order 85 F'.

, 1971, entitled "Priority Rating of Soft Drink Study" (Document No. 23). The Secretary is further directed to excise all textual materials which appear on the aforementioned pages before producing them to respondents and intervenors.

APPENDIX A Documents Described in Specificatiuns of Subpoena Duces Tecum 1. A memorandum to the Commission from Division of General Trade Restraints dated June 18, 1969, entitled "Budget Plan and Program for Fiscal 197I-Response to Commissioner Jones' memorandum of May 27, 1969. 2, Two tables from a compilation of tables entitled "OPPE Antitrust Benchmark Data System for Key Competitive Characteristics: Volume 1. Agriculture, Construction Mining and Manufacturing," as follows: (a) "Profile of Competitive Characteristics, SIC 2087, Flavoring Extracts and Sirups NEC" and "Profie of Competitive Characteristics SIC 2086, Bottled and Soft Drinks.

3, A memorandum to the Commission from Bureau of Economics dated Jan. 25, 1972 entitled "Allocation of Commission Antitrust Resources- in Response to Commission Minute of September 15, 1971, Regarding Policy Planni'.g Program " consisting of 3 pages.

4. A memorandum from Wiliam F. Long, staff economist, Bureau of Economics dated Jan, 25, 1972, entitled "Allocation of Commission Antitrust Resources " a 42-page document.

5. A memorandum to the Commission from H. Michael Mann, Director, Bureau of Economics, dated Apr. 4, 1972, entitled "Allocation of Commission Antitrust Resources Regarding Policy Planning Program-Response to Commission Minute of Sept. 15, 1971 a one-page document attaching "Appendix A" to the Bureau of Economics' memorandum of Jan. 25, 1972. "Appendix A" is a 15-page econometric model consisting of a series of algebraic formulations, purporting to be a highly technical demonstration of the proofs necessary to sustain many of the documents contained in that memorandum. 6. A memorandum from Wiliam F. Long, Bureau of Economics, and Edward J. Heiden, Office of Policy Planning and Evaluation, dated Mar. 30, 1972, entitled "Pilot Project to Ilustrate a Policy Planning Model for the Bureau of Competition-in Response to the Minute of Feb. 8, 1972." This is a 34-pagedocument which presents a "provisional" model of a decisionmaking framework for the allocation of the Commission s antitrust resources and incorporating the "monopoly loss calculations" developed in the Bureau of Economics' memorandum of Jan. 25 , 1972 (Item 4 above), information on competitive characteristics from the OPPE benchmark data system, and estimates of the probabilty of enforcement success from the Bureau of Competition. 7. Tables for Long/Heiden memorandum of Mar. 31 , 1972, consisting of 13 tables amounting to a total of 30 pages, summarizing, industry by industry, the quantitative data developed in the referenced memorandum (Item 6 above). 8. A memorandum to the Commission from the Bureau of Economics and Offce of Policy Planning and Evaluation dated Mar. 30, 1972, entitled " Prototype Resource Allocation Model for two Antitrust Activities: Shared Monopoly and Horizontal Mergers " a 6-page response to a Commission Minute of Feb. 8 1972. 9. A one-page memorandum to the Commission from Wiliam F. Long, Bureau of Economics, dated May 10, 1972, entitled "Errata for BE/OPPE memorandum of Mar. 30 1972 " and attached revised Table 13.

10. A memorandum from Edward Manfield to Michael Glassman, Chief, Division of 39R Order Economic Evidence, dated Nov. 30 1972, entitled "Soft Drink Industry, summarizing the author s views concerning market structural trends in the industry. 11. A memorandum from Edward Manfield to Staff, dated July 12, 1973, entitled " Theory of Shared Monopoly," consisting of 5 pages, 12. A memorandum from Mr. Manfield to Mr. Glassman, dated Oct, 26, 1972, entitled Preliminary Thoughts on Franchising" (12 pages). 13. A memorandum from Mr. Manfield to Mr. Glassman, dated Mar. 2, 1973, entitled Barriers to Entry," consisting of20 pages.

14. A memorandum from James Dalton and Robert Larner to H. Michael Mann Director, Bureau of Economics, dated Oct. 7, 1971, entitled " Data Requirements and A vailability for the Proposed Soft Drink Study," consisting of 2 pages. 15. A memorandum from H. Michael Mann, Director, Bureau of Economics, to the Commission, dated Feb. 4 , 1972, entitled "Study of Soft Drink Industry- Response to Commission Minute of Sept. 17, 1971," consisting of 20 pages. 16. A one-page memorandum marked "CONFIDENTIAL " from Robert Larner Chief, Division of Industry Analysis, Brueau of Economics, to John Ferguson, Assistant General Counsel, dated Sept. 23, 1971 , attaching a first draft study of the: soft drink industry.

17, A memorandum from Messrs. Dalton and Larner of the Bureau of Economics, to Messrs. Bob Lee and Dave Wilson, attorneys, dated Dec. 8, 1971, entitled "Justification for Request From Soft Drink Companies " consisting of 3 pages. 18. A memorandum from Robert Larner, Chief, Division of Industry Analysis, and Mr. Dalton to H. Michael Mann, Director, Bureau of Economics, dated Oct. 18, 1971 entitled "Priority Rating of Soft Drink Study," consisting of 2 pages. 19. A memorandum from the Bureau of Economics to the Commission, dated Oct. 18 1973, entitled "Recommendation: that an investigation be initiated in the soft drink industry," consisting of 17 pages.

20. A memorandum from the Bureau of Economics to the Commission dated Mar, 1 1972, entitled "Study of Soft Drink Industry-Response to Commission Minute of Feb. 22 1972 " consisting of 5 pages, 21. A memorandum from James W. Meehan, Jr., Assistant to the Director of ttJe Bureau of Economics, to Commissioner Mary Gardiner Jones, dated May 25, 1972 entitled "Study of the Soft Drink Industry," consisting of 7 pages. 22. A memorandum from James Dalton to H- Michael Mann et at. dated Feb. 16 1972, entitled " Commissioner Jones' Memorandum of Feb. 15 , 1972 " consisting of 2 pages. 23. A memorandum from Robert Lamer, Chief, Division of Industry Analysis, to H. Michael Mann, Director, Bureau of Economics, dated Oct. 18, 1971, entitled "Priority Rating of Soft Drink Study" (same as #18 above), with appended materials as follows: pages 2 through 22 of Item #18 above; an undated 6-page document entitled "yroposal for Study of the Soft Drink Industry; four numbered undated pages beginning "What the Study Wil Do; and another copy of the Larner and Dalton memorandum included as an attachment to Item #15 above.

404 Vi'DERAL TRADE COMMISSION DECISIONS Order 85 F.