Compliance Proceedings; Petitions To Reopen and Modify Final Orders; and Ex Parte Communications in Adjudicative Proceedings

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BILLING CODE 4910-13-M FEDERAL TRADE COMMISSION 16 CFR Parts 1,2,3 and 4 Compliance Proceedings; Petitions To Reopen and Modify Final Orders; and Ex Parte Communications in Adjudicative Proceedings AGENCY: Federal Trade Commission. a c t io n : Final rules. SUMMARY: This concerns amendments to a variety of FTC procedural rules as follows: (1) rules governing compliance proceedings; (2) rules governing petitions to reopen and modify final orders; and (3) § 4.7 concerning ex parte communications in adjudicative proceedings. The amended compliance

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40636 Federal Register / Vol. 44, No. 135 / Thursday, July 12, 1979 / Rules and Regulations rules are intended to make clearer than the previous rules that compliance proceedings are nonadjudicative. The amended rules governing petitions to reopen have the same purpose. Section 4.7 is amended to specify all categories of adjudicative proceedings to which the rule applies and the time at which the rule begins and ceases to apply to a particular proceeding and to clarify the rule in other minor respects. EFFECTIVE DATE: July 12,1979. FOR FURTHER INFORMATION CONTACT: Jerome A. Tintle, Office of General Counsel, Federal Trade Commission, Washington, D C. 20580, (202-523-3487). SUPPLEMENTARY INFORMATION: Rules Governing Compliance Proceedings Under the present structure of the Commission’s Rules of Practice these rules have been located until now in Part 3 and have been designated as § 3.61, Subpart G. Their placement with the rules relating to adjudicative proceedings, has caused needless confusion, however. For example, parties involved in compliance proceedings at times have claimed that the inclusion of the compliance rules among the adjudicative rules supports their contention that they are entitled to adjudicative rights at the compliance stage and that the Commission and its staff may not engage in ex parte discussions about matters in compliance. The adjudicatory provisions of the Administrative Procedure Act, however, are applicable only to agency proceedings “required by statute to be determined on the record after opportunity for an agency hearing.” 5 U.S.C. 554(a). Sisselman v. Smith, 432 F.2d 750 (3rd Cir. 1970); United States v. Walker, 409 F.2d 477 (9th Cir. 1969); Jorski Mill & Elevator Co. v. Farmers Elevator Mutual Insurance Co., 404 F.2d 143 (10th Cir. 1968); W ebster Groves Trust Co. v. Saxon, 370 F.2d 381 (8th Cir. 1966); La Rue v. Udall, 324 F.2d 428 (D.C. Cir. 1963). No provision of the Federal Trade Commission Act, 15 U.S.C. 41 et seq., requires formal hearings at the compliance stage. The Commission’s rules, moreover, expressly provide that compliance proceedings are not adjudicative. 16 CFR 3.2. And the courts have upheld the Commission’s position. Robertson v. FTC, 415 F.2d 49 (4th Cir. 1969); see also Floersheim v. Engman, 494 F.2d 949 (D.C. Cir. 1973); Rettinger v. FTC, 392 F.2d 454 (2d Cir. 1968); Martin Marietta Corp. v. FTC, 376 F.2d 430 (7th Cir. 1967) cert, denied, 389 U.S. 923 (1967); United States v. Papercraft Corporation, 393 F. Supp. 408 (W.D. Pa. 1975), rev’d on other grounds, 540 F.2d 131 (3rd Cir. 1976).

Accordingly, to eliminate misconceptions caused by the physical incorporation of compliance procedures in Part 3 of the Commission’s Rules of Practice, the procedures are transferred to Part 2 (Nonadjudicative Procedures) and redesignated as § 2.41, Subpart D. In addition, § 3.2 is amended to make explicit that compliance procedures generally, including requests for extensions of time to comply with final orders, are excepted from Part 3 procedures and not just “hearings” as previous § 3.2 specified. Rules Governing Petitions To Reopen and Modify Final Orders These rules, like the compliance rules, have been located until now in Part 3 of the Commission’s Rules of Practice. Specifically, they have been included among the provisions of § 3.72 governing formal reopening of proceedings. The latter proceedings are, of course, subject to the adjudicatory provisions of the APA since section 5(b) of the FTC Act, 15 U.S.C. § 45(b), provides that a final order issued under section 5 may be altered, modified, or set aside only “after notice and opportunity for hearing * * No provision of the FTC Act, however, requires notice and opportunity for hearing with respect to the Commission’s predecisional deliberations on petitions to reopen; hence, the APA adjudicatory provisions are inapplicable to these deliberations. The mere filing of a petition to reopen, in other words, does not under the FTC Act automatically trigger the adjudicative process. That process begins only if the Commission after reviewing the petition issues an order pursuant to section 5(b) reopening the proceeding when in its opinion changed conditions of fact or law or the public interest require such reopening. If the Commission denies the petition, however, no adjudicative reopening occurs. See Rettinger v. FTC, supra; Martin Marietta Corp. v. FTC, supra. The rules governing petitions to reopen are amended, therefore, to make clearer than the previous rules that the administrative deliberations involved in disposing of such petitions are nonadjudicative. The provisions previously designated as § 3.72(b)(2) are transferred from Part 3 of the Commission’s Rules of Practice to Part 2, redesignated as § 2.51, Subpart E, and further amended. Additional amendments include substitution of the terms “request”, "information” and “ruling” for the terms “petition”, “evidence and argument”, and “decision” respectively. They also include the deletion of the provision requiring that “(wjithin thirty (30) days after service of such a petition, the Director of the appropriate bureau of the Commission shall file an answer.” In making the last mentioned procedural change, the Commission has determined as a matter of policy that during predecisional deliberations on requests to reopen proceedings the public interest will best be served by the full and frank exchange of views between the Commission and its staff such as now takes place when the Commission is considering whether or not it should on its own initiative reopen proceedings pursuant to § 3.72(b)(1). The rules governing formal reopening are, of course, retained in Part 3 and amended solely to reflect the transfer of rules governing requests to reopen. Section 4.7 Section 4.7(a) is amended by changing the phrase "ex parte communications” to read “ex parte communication.” Section 4.7(b)(2) is amended to include among the categories of persons subject to the rule “any employee who is * * * involved in the decisional process,” a category inadvertently omitted from the previous rtile. Section 4.7(e) is amended to specify all categories of adjudicative proceedings to which the prohibitions of § 4.7(b) apply and the time at which such prohibitions begin and cease to apply to a particular proceeding. Preyious § 4.7(e) specifically referred only to adjudicative proceedings commenced by issuance of complaint and adjudicative hearings on issues arising in rulemaking proceedings under the Fair Packaging and Labeling Act; and it specified when the prohibitions of the rule would begin to apply to such proceedings, but not when they would cease to apply. Amended § 4.7(e) corrects these deficiencies so that the provision reflects both the kinds of proceedings to which, and the time periods in such proceedings during which, the provisions of § 4.7(b) are in practice applied.

Several amendments of § 4.7(f) are made so as to conform the provision with other provisions of the rule. Thus, the exemptions listed in the first sentence of § 4.7(f) apply to communications involving the same persons as are specified in § 4.7(b) except the Administrative Law Judge and anyone assisting him on the case. The first sentence of § 4.7(f) is amended accordingly. The phrase “pending adjudicative proceeding” of the second sentence of § 4.7(f) is amended to read

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Federal Register / Vol. 44, No. 135 / Thursday, July 12, 1979 / Rules and Regulations 40637 “proceeding in adjudicative status” as appears in § 4.7(b). The third sentence of § 4.7(f) is amended by substituting the words “any member of the Commission, the Administrative Law Judge, or any other employee who is or who reasonably may be expected to be involved in the decisional process” for the words “Commissioners, the Administrative Law Judge, or any other employee who is involved in the decisional process.” so as to conform that sentence to the language of § 4.7(b). Finally, words such as “communications,” “employees,” and “agents of the Commission” are amended to read in the singular form as they appear in other provisions of the rule.

The second sentence of § 4.7(f) is also amended to make clear that the requirement for placing material in the docket binder of a proceeding in adjudicative status does not apply to trade secrets or other confidential commercial or financial information. Miscellaneous Conforming Amendments References to § 3.61 appearing in §§ 1.2 and 4.9(b) (11) and (13) are amended to read “§ 2.41.” As rules of agency organization, practice and procedure, these amendments are not subject to the requirements of 5 U.S.C. 553 for notice of proposed rulemaking and opportunity for public comment and no such notice and opportunity for comment was given. Accordingly, 16 CFR Chapter 1, Subchapter A, is amended as set forth below.

PART 2— NONADJUDICATIVE PROCEDURES Subpart D [Redesignated from Part 3, Subpart G] (a) Subpart G of Part 3 is transferred to Part 2 and redesignated as Subpart D. § 3.61 Redesignated as § 2.41. (b) Section 3.61 is transferred to Part 2 and redesignated as § 2.41 of newly designated Subpart D.

(c) A new Subpart is added to Part 2 and designated Subpart E—Requests to Reopen.

(d) Section 3.72(b)(2) is transferred to Part 2, redesignated § 2.51 of newly designated Subpart E, and is amended to read as follows:

Subpart E— Requests To Reopen § 2.51 Requests to reopen.

Whenever any person subject to a Commission decision containing a rule or order which has become effective, or an order to cease and desist which has become final, is of the opinion that changed conditions of fact or law require that said rule or order be altered, modified, or set aside, or that the public interest so requires, such person may file with the Secretary a request to reopen the proceeding for that purpose. The request shall state the changes desired, the grounds therefor, and shall include, when available, such supporting information as will assist the Commission in ruling upon the request. Part 3— Rules of Practice for Adjudicative Proceedings (a) The beginning of the third sentence of § 3.2 is amended to read as follows: § 3.2 Nature of Adjudicative proceedings. * * * It does not include other proceedings such as negotiations for the entry of consent orders; investigational hearings as distinguished from proceedings after the issuance of a complaint; requests for extensions of time to comply with final orders or other proceedings involving compliance with final orders; proceedings for the promulgation of industry guides or trade regulation rules; proceedings for * * *, Subpart G [Reserved] (b) Subpart G is reserved. (c) Section 3.71 is revised to read as follows:

§ 3.71 Authority.

Except while pending in a U.S. court of appeals on a petition for review (after the transcript of the record has been filed) or in the U.S. Supreme Court, a proceeding may be reopened by the Commission at any time in accordance with § 3.72. Any person subject to a Commission decision containing a rule or order which has become effective, or an order to cease and desist which has become final may file a request to reopen the proceeding in accordance with § 2.51.

§ 3.72 [Amended] (d) Section 3.72 is amended as follows:

(i) Section 3.72(a) is unchanged. (ii) Section 3.72(b)(1) is unchanged. (iii) Section 3.72(b)(2) is transferred to Part 2, redesignated as § 2.51, and amended as previously noted. (iv) Section 3.72(b)(3) is renumbered as § 3.72(b)(2) and amended to read as follows:

§ 3.72 Reopening.

* * * * * (b) After decision has become final. k * ★ * (2) Whenever an order to show cause is not opposed, or if opposed but the pleadings do not raise issues of fact to be resolved, the Commission, in its descretion, may decide the matter on the order to show cause and answer thereto, if any, or it may serve upon the parties (in the case of proceedings instituted under § 3.13, such service may be by publication in Federal Register) a notice of hearing, setting forth the date when the cause will be heard. In such a case, the hearing will be limited to the filing of briefs and may include oral argument when deemed necessary by the Commission. When the pleadings raise substantial factual issues, the Commission will direct such hearings as it deems appropriate, including hearings for the receipt of evidence by it or by an Administrative Law Judge. Unless otherwise ordered and insofar as practicable, hearings before an Administrative Law Judge to receive evidence shall be conducted in accordance with Subparts B,C, D, and E of Part 3 of this Chapter. Upon conclusion of hearings before an Administrative Law Judge, the record and the Administrative Law Judge’s recommendations shall be certified to the Commission for final disposition of the matter.

(v) The designation “§ 3.72(b)(3)” is not reserved.

PART 4—MISCELLANEOUS RULES Section 4.7 is amended by revising paragraphs (a), (b)(2), (e) and (f) to read as follows:

§ 4.7 Ex parte communications. (a) Definitions. For purposes of this section, “ex parte communication” means an oral or written communication not on the public record with respect to which reasonable prior notice to all parties is not given, but it shall not include requests for status reports on any matter or proceeding. (b) Prohibited ex parte communication. * * * and (2) no member of the Commission, the Administrative Law Judge, or any other employee who is or who reasonably may be expected to be involved in the decisional process in the proceeding, shall make or knowingly cause to be made to any person not employed by the Commission, or to any employee or agent of the Commission who performs investigative or prosecuting functions in adjudicative proceedings, an ex parte

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40638 Federal Register / Vol. 44, No. 135 / Thursday, July 12, 1979 / Rules and Regulations communication relevant to the merits of that or a factually related proceeding. * * * * * (e) The prohibitions of this section shall apply in an adjudicative proceeding from the time the Commission votes to issued a complaint pursuant to § 3.11, to conduct adjudicative hearings pursuant to § 3.13, or to issue an order to show cause pursuant to § 3.72(b), or from the time an order by a U.S. court of appeals remanding a Commission decision and order for further proceedings becomes effective, until the time the Commission votes to enter its decision in the proceeding. If a petition for reconsideration of a Commission decision is filed pursuant to § 3.55, the provisions of this section shall apply from the time the petition is filed until the time the Commission votes to enter an order disposing of the petition. (f) The prohibitions of paragraph (b) of this section do not apply to a communication between a member of the Commission or an employee who is or who reasonable may be expected to be involved in the decisional process in the proceeding (other than the Administrative Law Judge and any employee assisting the Administrative Law Judge in the decisional process in the proceeding) and an employee or agent of the Commission who performs investigative or prosecuting functions in adjudicative proceedings, when such communication is occasioned by and concerns: (1) the initiation, conduct, or disposition of ^separate investigation or adjudicative proceeding, whether or not it involves a party already in an adjudicative proceeding; (2) a proceeding outside the scope of § 3.2, including a matter in state or federal court or before another governmental agency; (3) a nonadjudicative function of the Commission, including but not limited to an obligation under § 4.11 or a communication with Congress; or (4) the disposition of a consent settlement under § 3.25 executed by some but not all respondents. Provided, however, that to the extent such communication relates to a fact in issue in a proceeding in adjudicative status, such portion will be placed in the docket binder of the proceeding to which it pertains except for trade secrets or other confidential commercial or financial information. A brief statement describing the general subject matter of an ex parte communication of trade secrets or other commerical or financial information will be placed in the docket binder. The prohibitions of paragraph (b) of this section also do not apply to a communication between any member of the Commission, the Administrative Law Judge, or any other employee who is or who reasonably may be expected to be involved in the decisional process, and any employee who has been directed by the Commission or requested by an indivudual Commissioner or Administrative Law Judge, to assist in the decision of an adjudicative proceeding. Such employee shall not, however, have performed an investigative or prosecuting function in that or a factually related proceeding. Miscellaneous conformning amendments PART 1 [AMENDED] (a) The final sentence of § 1.2 is amended to read as follows: § 1.2 Procedure.

* * * If the request is for advice as to whether the proposed course of action may violate an outstanding order to cease and desist issued by the Commission, such request will be considered as provided for in § 2.41 of this chapter.

PART 4 [AMENDED] (b) Sections 4.9(b) (11) and (13) are amended to read as follows: § 4.9 Public records.

* * * * * (b) The public records of the Commission which are routinely available for inspection and coping include:

★ ★ * * * (11) Requests for advice concerning proposed mergers and applications for approval of proposed divestitures, acquisitions, or similar transactions subject to Commission review under outstanding orders, together with supporting materials and communications with respect to such proposed transactions received by any member of the Commission and any employee involved in the decisional process, to the extent that such requests, applications, and materials are made public under §§ 1.4 (a) and (b) and 2.41 (d) and (f) of this chapter; objections or comments with respect thereto which are filed for the public record; and any advice or response given and made public under § § 1.4 (a) or (b) and 2.41 (d) or (f) of this chapter, together with a statement of supporting reasons; * * * * * (13) Reports of compliance and supplemental materials filed in connection with Commission orders requiring divestitures or establishment of business enterprises or facilities, save those otherwise specifically dealt with in §§ 2.41(f) and 4.9(b)(ll), are confidential until the last divestiture or establishment of a business enterprise or facility, as required by a particular order, has been finally approved by the Commission. At the time each such report is submitted the filing party may request continuing confidentiality in whole or in part and submit satisfactory reasons therfor, and the Commission with due regard for its statutory restrictions, its rules, and the public interest will pass upon such request; ★ * * * * (Sec. 6(g), 38 Stat. 721 (15 U.S.C. Sec. 46(g)) By direction of the Commission, dated June 21,1979.

Carol M. Thomas, Secretary.

[FR Doc. 79-21579 Filed 7-11-79; 8:45 am]