FTC Federal Register notice, Oct. 16, 1986, 51 FR 36800

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BILLING CODE «910-13-1«

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Federal Register / Vol. 51, No. 200 / Thursday, October 16, 1986 / Rules and Regulations 36801 FEDERAL TRADE COMMISSION 16 CFR Part 4 Exemptions From Restrictions on ex Parte Communications in Adjudicative Proceedings a g e n c y : Federal Trade Commission. a c t io n : Interim rule with request for comments.

s u m m a r y : The Federal Trade Commission is revising Rule 4.7(f) of its Rules of Practice, which governs exemptions to the prohibitions of Rule 4.7(b) against ex parte communications in adjudicative proceedings. The rule is revised (1) by deleting the requirement for disclosure of statements from an exempt communication that relate to facts in issue in a pending adjudicative proceeding, {2) by deleting the requirement for placement on the public record of a description of any trade secrets or other confidential information excised from such statements, (3) by expanding the exemptions of the rule to include communications between the Commission and persons outside the Commission that are occasioned by and concern a nonadjudicative function, and (4) by clarifying two of the rule’s specified exemptions.

d a t e s : The interim rule is effective on October 16,1986. The Commission will, however, accept comments on the revised rule that are received on or before November 17,1986 and may re­ evaluate the rule in light of those comments.

a d d r e s s : Commenta should be submitted to Secretary, Federal Trade Commission, 6th Street & Pennsylvania Avenue NW„ Washington, DC 20580. FOR FURTHER INFORMATION CONTACT: Jerome A. Tintle, Office of General Counsel, Federal Trade Commission, Washington, DC 20580, (202) 523-3521. s u p p l e m e n t a r y in f o r m a t io n : Current Rule 4.7(f) expressly exempts from the prohibitions of Rule 4.7(b) a communication between the Commission and its enforcement staff that is occasioned by and concerns a nonadjudicative matter before the Commission even though the matter may involve parties or issues that are also involved in a pending adjudicative proceeding. Rule 4.7(f) also includes a two sentence proviso, which states that “to the extent such communication relates to a fact in issue in a proceeding in adjudicative status, such portions 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,’’ and that “[a] brief statement describing the general subject matter of an ex parte communication of trade secrets or other commercial or financial information will be placed in the docket binder.*’ This proviso was included not because it was required by law but simply to avoid “any appearance of unfairness.” 42 FR 33042 (June 29,1977). After nearly a decade of experience with the proviso, however, we have concluded that the burdens it creates far outweigh whatever appearances of unfairness it may allay.

In particular, we find that the proviso has imposed unnecessary burdens upon the staff in determining whether any given statement in an exempt communication “relate[sj to a fact in issue” in an adjudicative proceeding within the meaning of that phrase. The requirement has also had a chilling effect upon full and candid consultations between the Commission and its enforcement staff with respect to nonadjudicative matters. Section 554(d) of the Administrative Procedure Act ("APA”) does not restrict such consultations even when they may involve parties or factual issues that are also involved in an ongoing Commission adjudicative proceeding. Maremont Corp. v. FTC, 431 F.2d 124,128 (7th Cir. 1970); Environmental D efense Fund, Inc. v. EPA, 510 F.2d 1292,1304-06 (D.C. Cir. 1975); Environmental D efense Fund, Inc. v. EPA, 548 F.2d 998,1006 n.20 (D.C. Cir. 1976, cert, denied, 431 U.S. 925 (1977); see also, Asimow, When the Curtain Falls: Separation o f Functions in the Federal Administrative Agencies, 81 Col. L. Rev. 759, 768 (1981). Accordingly, we have determined to delete the proviso from the rule.

We have also observed that outside persons involved in a nonadjudicative matter before the Commission seem reluctant to communicate fully and candidly with us about factual issues relevant to the matter when the same or similar issues may also be present in a pending Commission adjudicative proceeding. Their reluctance appears to stem from a concern that section 557(d) of the APA and Rule 4.7 may prohibit their communicating with us about such overlapping issues and may require disclosure or any such prohibited communication, once made.1 If this is 1 Section 557(d) of the APA prohibits ex parte communications between an “interested person” outside an agency and an agency decisionmaker that are “relevant to the merits of [an adjudicative] proceeding.” 5 U.S.C. 557(d)(1)(A) and (B). It further requires the agency decisionmaker to place any prohibited communication “on the public record of the proceeding.” 5 U.S.C. 557(d)(1)(C). Rule 4.7(b) adopts the same prohibition as section 557(d) but extends its coverage to all persons outside the Commission, not just “interested persons”; Rule their concern, we do not believe that it is justified.

Section 557(d) of the APA by its terms applies only to adjudications and other formal proceedings required by statute to be determined on the record after opportunity for an agency hearing, and not to nonadjudicative matters. In particular, section 557(d) does not prohibit “any communication with an agency decisionmaking official if not involving a formal adjudicatory proceeding,” H.R. Rep. No. 1441, 94th Cong., 2d Sess. 29 (1976), S. Rep. No. 1178, 94th Cong., 2d Sess. 29 (1976), or any communication that “does not directly discuss the merits of a pending adjudication.” S. Rep. No. 354, 94th Cong., 1st Sess. 37 (1975); see also H.R. Rep. No. 880, Part I, 94th Cong., 2d Sess. 20 (1976); H.R. Rep. No. 880, Part II, 94th Cong., 2d Sess. 20 (1976). Hence, we do not believe that section 557(d) should be construed to prohibit private communications about a nonadjudicative matter between the Commission and persons outside the Commission who are involved in the matter even when such communications address factual or legal issues that may also be present in a pending Commission adjudicative proceeding. Nor do we believe that Rule 4.7(b) should be interpreted to impose any greater restrictions than are imposed by section 557(d).

Accordingly, we have revised Rule 4.7(f) to make clear that the rule’s exemptions apply not only to communications between the Commission and its enforcement staff but also to those between the Commission and persons outside the Commission who are involved in a nonadjudicative matter.2 With these revisions, the enforcement staff and outside persons should feel free to communicate fully and candidly with the Commission about any nonadjudicative matter in which they are involved.

It is conceivable, however, that a nonadjudicative matter could be so directly related to a pending adjudicative proceeding because of a mutuality of parties and facts that the Commission could conclude that the interests of justice would better be served by disclosure of a communication on the nonadjudicative 4.7(c) implements section 557(d) by requiring public record disclosure of any ex parte communication prohibited by Rule 4.7(b). 2 Ex parte communications between the Commission and its enforcement staff or persons outside the Commission that directly discuss the merits of a pending adjudicative proceeding will, of course, continue to be prohibited by Rule 4.7(b).

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36802 Federal Register / Vol. 51, No. 200 / Thursday, October 16, 1986 / Rules and Regulations matter. A provision has. therefore been added to Rule 4.7(f) which provides for disclosure of such a communication at the Commission’s discretion and under such restrictions as it may deem appropriate. Any disclosures will, of course, be subject to statutory or other legal restrictions governing confidential commercial or other information. In addition, the exemption of current Rule 4.7(f)(1) can be read to exclude from the prohibitions of Rule 4.7(b) a communication occasioned by and concerning the. “conduct or disposition”' of an “adjudicative proceeding.” This reading of the exemption conflicts with sections 554(d) and 557(d) of the APA. Accordingly, the exemption has been reworded so as to make clear that it applies only to communications involving a nonadjudicative matter, such as the initiation, conduct, or disposition of an investigation, the issuance of a complaint, or the initiation of a rulemaking or other proceeding. Finally, the exemption of current Rule 4.7(f)(4) can be read to apply to the disposition of a consent settlement under Rule 3.25 only when the settlement is “executed by some but not all respondents.” The exemption is, in fact, meant to cover any Rule 3.25 consent settlement, whether it involves some or all of the respondents or some or all of the charges set forth in a complaint. The rule is revised to reflect that intention.

List of Subjects in 16 CFR Part 4 Administrative practice and procedure.

PART 4—[AMENDED] In consideration of the foregoing, 16 CFR Part 4 is amended as follows: 1. The authority for Part 4 continues to read as follows:

Authority: Sec. 6(g), 38 Stat. 721 (15 U.S.C. 46); 80 Stat. 383, as amended (5 U.S.C. 552). 2. Section 4.7(f) is revised to read as follows:

§ 4.7 Ex parte communications. * *- * * * (f) The prohibitions of paragraph (b) of this section do not apply to a communication occasioned by and concerning a nonadjudicative function of the Commission, including such functions as the initiation, conduct, or disposition of a separate investigation, the issuance of a complaint, or the initiation of a rulemaking or other proceeding, whether or not it involves a party already in an adjudicative proceeding; a proceeding outside the scope of § 3,2, including a matter in state or federal court or before another governmental agency; a nonadjudicative function of the Commission, including but not limited to an obligation under § 4.11 or a communication with Congress; or the disposition of a consent settlement under § 3.25 concerning some or all of the charges involved in a complaint and executed by some or all respondents. The Commission, at its discretion and under such restrictions as it may deem appropriate, may disclose to the public or to respondent(s) in a pending adjudicative proceeding a communication made exempt by this paragraph from the prohibitions of paragraph (b) of this section, however, when, the Commission determines that the interests of justice would be served by the disclosure. 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 individual Commissioner or Administrative Law Judge to assist in the decision of the adjudicative proceeding. Such employee shall not, however, have performed an investigative or prosecuting function in that or a factually related proceeding. By direction of the Commission, dated October 7,1986.

Emily H. Rock, Secretary.

[FR Doc. 86-23332 Filed 10-15-86; 8:45 am]