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276 F. 2d 892, 896 (2d Cir. 1960), cert. denied, 366 U.S. 962 (1961); Logansport Broadcasting Corp. v. United States, 210 F. 2d 24, 27 (D.C. Cir. 1954); Borden Co. v. Freeman, 256 F. Supp. 592, 598 (D.N.J. 1966), aff'd, 369 F. 2d 404 (3d Cir. 1966), cert. denied, 386 U.S. 992.5

Statutory Provisions Similar to Section 6(g) of the Federal Trade Commission Act Have Been Deemed To Grant Rulemaking Authority to Other Regulatory Agencies

In NLRB v. Wyman-Gordon Co., supra, the issue was whether the Board could in an adjudicated case, establish a requirement on employers, to be enforced in the future, to furnish a list of names and addresses to unions engaged in elections. While the majority of the Court disapproved the Board's practice of promulgating rules through individual case adjudications, the Court was of the unanimous opinion that the Board could have issued such rules under its rulemaking authority.

Mr. Justice Fortas, writing for the plurality of the Court, cited criticism of the Board for never having exercised its rulemaking authority, 394 U.S. at 765, n. 3, as did Mr. Justice Douglas, dissenting, 394 U.S. at 779, n. 2.

This decision has a direct bearing on the question of the Federal Trade Commission's rulemaking authority since the language of Section 6 of the National Labor Relations Act authorizing rulemaking, 29 U.S.C. 156, is substantially the same as Section 6(g) of the Federal Trade Commission Act.

In Chenery, supra, the Supreme Court reviewed an order of the Securities and Exchange Commission under the Public Utility Holding Company Act, holding that stock owned by management could not be converted into stock of a reorganized company. While recognizing that the S.E.C. might have proceeded by rulemaking rather than by adjudication, the Court emphasized that the choice between proceeding by rule and by ad hoc adjudication is one primarily in the discretion of the agency (322 U.S. at 202–203):

"Since the Commission, unlike a court, does have the ability to make new law prospectively through the exercise of its rulemaking powers, it has less reason to rely upon ad hoc adjudication to formulate new standards of conduct within the framework of the Holding Company Act. The function of filling in the interstices of the Act should be performed, as much as possible, through this quasi-legislative promulgation of rules to be applied in the future. principles must await their own development, while others must be adjusted to meet particular, unforeseeable situations. In performing its important functions in these respects, therefore, an administrative agency must be equipped to act either by general rule or by individual order. To insist upon one form of action to the exclusion of the other is to exalt form over necessity.

"*** [T]he choice made between proceeding by general rule or by individual, ad hoc litigation is one that lies primarily in the informed discretion of the administrative agency." [Emphasis added.]

Significantly, the rulemaking authority of the Securities and Exchange Commission under the Public Utility Holding Company Act' considered in Chenery is similar to that of Section 6(g) of the Federal Trade Commission Act.

In Teraco, supra, the Supreme Court sustained the authority of the Federal Power Commission to promulgate rules requiring summary rejection, without an adjudicatory hearing, of contracts containing certain price escalation clauses. Section 16 of the Natural Gas Act, 15 U.S.C. 7170, granted the Federal Power Commission power to prescribe such regulations "as it may find necessary or appropriate to carry out the provisions of this Act." The Court held (377 U.S. at 41,44):

5 Passage of the Administrative Procedure Act, with its provisions for procedural safeguards for rulemaking, has been relied upon in upholding the authority of an agency to engage in substantive rulemaking. Transcontinent Television Corp. v. FCC, 308 F. 2d 339, 343 (D.C. Cir. 1962).

"The Board shall have authority from time to time to make, amend, and rescind, in the manner prescribed by the Administrative Procedure Act, such rules and regulations as may be necessary to carry out the provisions of this Act."

The Act, 15 U.S.C. 79t, provides :

"(a) The Commission shall have authority from time to time to make, issue, amend and rescind such rules and regulations and such orders as it may deem necessary or appropriate to carry out the provisions of this Chapter

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"The rulemaking authority here, as in Storer, is ample to provide the conditions for applications under § 4 or § 7. Section 16 of the Natural Gas Act gives the Commission power to prescribe such regulations “as it may find necessary or appropriate to carry out the provisions of this Act." *

"To require the Commission to proceed only on a case by case basis would require it, so long as its policy outlawed indefinite price changing provisions, to repeat in hearing after hearing its conclusions that condemn all of them. *** We see no reason why under this statutory scheme the processes of regulation need be so prolonged and so crippled." [Emphasis added.]

In Storer, supra, the Supreme Court upheld the power of the Federal Communications Commission to promulgate a rule limiting the number of radio stations that could be held under common ownership. The Commission had applied the rule in rejecting an application for a radio station license because the applicant already owned the maximum number of stations permitted by the rule (351 U.S. at 202–03):

"We do not read the hearing requirement, however, as withdrawing from the power of the Commission the rulemaking authority necessary for the orderly conduct of its business. *** The challenged Rules contain limitations against licensing not specifically authorized by statute. But that is not the limit of the Commission's rulemaking authority. 47 U.S.C. § 154 (i) and § 303 (r) grant general rulemaking power not inconsistent with the Act or law." [Emphasis added.]

In American Trucking Ass'ns, supra, the Supreme Court found that the Interstate Commerce Commission was authorized to issue regulations applicable to certain leasing agreements. The Court held that the authority was necessary to carry out the agency's statutory duties, and that the rulemaking authority of the Interstate Commerce Commission (which is similar to that conferred by Section 6(g) of the Federal Trade Commission Act) is not limited to agency procedures and administration, 344 U.S. at 311.

Strikingly parallel to the language employed in Section 6(g) of the Federal Trade Commission Act is that of Section 43 of the Shipping Act of 1916, which provides that "[t]he [Federal Maritime] Commission shall make such rules and regulations as may be necessary to carry out the provisions of this chapter," 46 U.S.C. 841a. This language was recently construed as conferring "broad rulemaking power" upon the Maritime Commission. Pacific Coast European Conf. v. FMC, 376 F. 2d 785, 789 (D.C. Cir. 1967).

The Maritime Commission had promulgated a regulation which articulated specific requirements under Section 15 of the Shipping Act, 46 U.S.C. 814, which generally requires shipping conference agreements to provide "reasonable and equal terms and conditions" respecting membership. Plaintiff failed to comply with the regulation, and the Commission withdrew its approval of the agreement. The Conference argued that the Commission could not appraise the agreement in light of the requirements formulated by the regulation. The Court flatly rejected this argument" *** as wholly out of keeping with the Congressional purpose underlying the grant of [rulemaking] authority

Still another statutory grant of rulemaking authority in language similar to that of Section 6(g) of the Federal Trade Commission Act was construed in Borden Co. v. Freeman, 256 F. Supp. 592 (D.N.J. 1966), aff'd, 369 F. 2d 404 (3d Cir. 1966), cert. denied, 386 U.S. 992. There, the court (256 F. Supp. at 598) held that the authority to adjudicate on a case-by-case basis, when dealing with potentially false or misleading labels, in violation of the Poultry Products Inspection Act, did not limit the rulemaking power of the Secretary of Agriculture since the statute:

"*** grants to the Secretary the power to "promulgate such rules and regulations as are necessary to carry out the provisions of this chapter"; [accordingly] the Secretary has a general legislative power concerning matters covered by the Poultry Act in addition to whatever adjudicative power is conferred by particular provisions thereof." [Emphasis by the Court.]

It is also significant that the statutory authority of the Commissioner of Foods and Drugs to issue the regulations that were involved in both Toilet

"To administer, execute, and enforce all provisions of this chapter, to make all necessary orders in connection therewith, and to prescribe rules, regulations, and procedure for such administration ***. 49 U.S.C. § 304 (a) (6).

Goods Ass'n v. Gardner, 387 U.S. 158 (1967), and Gardner v. Toilet Goods Ass'n, 387 U.S. 167 (1967), provided simply that the Commissioner may "promulgate regulations for the efficient enforcement" of the Act (Color Additive Amendments of 1960, 21 U.S.C. 371(a))—an authority comparable to that contained in Section 6(g) of the Federal Trade Commission Act. The opinions in both casese were based upon the assumption that the Commissioner had thus been afforded rulemaking authority.

The Courts Have Recognized That the Federal Trade Commission Has Rulemaking Authority

While dissenting in Abbott Laboratories v. Gardner, 387 U.S. 136 (1967, on other grounds, Mr. Justice Fortas, joined by Chief Justice Warren and Mr. Justice Clark, recognized the rulemaking authority of the Federal Trade Commission (387 U.S. at: 198);

* But the fact of the matter is that the dilemma is no more than citizens face in connection with countless statutes and with the rules of the SEC, FTC, FCC, ICC, and other regulatory agencies."

In Atlantic Ref. Co. v. FTC, 381 U.S. 357 (1965), the Court upheld a Commission order prohibiting use of certain sales-commission agreements. Mr. Justice Goldberg dissented on the ground that the Commission's findings did not support so broad an order, but emphasized the rulemaking authority of the Federal Trade Commission (at pp. 390–91):

"The Commission has the general power to choose to proceed in this field, as in others, through either rulemaking or the process of case-by-case adjudication."

Since institution of the Trade Regulation Rule procedure in 1962, the Commission has promulgated 16 Trade Regulation Rules, not including the one here challenged (16 C.F.R. 400 et seq.). These rules deal with such subjects as misbranding of leather content of belts, labeling of dry cell batteries, advertising of lubricating oils, advertising the size of television set pictures and use of games of chance in the food retailing and gasoline industries. It is significant that none of the Commission's currently effective Trade Regulation Rules has been judicially challenged.

Since at least 1920, the Commission has interpreted the Act to authorize it to conduct rulemaking proceedings designed to prevent unlawful practices on an industry-wide basis. See, 29 Fed. Reg. 8370. The Commission's Rules have long provided for "Trade Practice Rules" which are "designed to foster and promote the maintenance of fair competitive conditions in the interest of protecting industry, trade, and the public." 16 C.F.R. 17.1(b). The Commission has issued approximately 160 Trade Practice Rules. See 16 C.F.R. Subchapter B. Such rules have ben relied upon by the Commission in adjudicative proceedings to support findings of unlawfulness, and the courts have upheld the Commission in so relying."

The Rule Does Not Constitute an Unlawful Exercise of Legislative Authority Plaintiffs (Complaint, pp. 6, 21, 23-24) assert that the Commission's Rule constitutes an unlawful exercise of legislative authority. But it is obvious that the Rule is not legislative in the sense of adding new substantive rights or obligations. The Rule merely defines the application of Section 5 of the Federal Trade Commission Act to specific practices in the oil industry within the jurisdiction of the Commission.

The process of adjudicating cases under Section 5(b) of the Act also involves a form of legislative interpretation, concededly valid. See, FTC v. Colgate-Palmolive Co., 380 U.S. 374 (1965), where the Court said (at pp. 384-85): "Congress amended the Act in 1938 to extend the Commission's jurisdiction to include 'unfair or deceptive acts or practices in commerce-a significant amendment showing Congress' concern for consumers as well as for competi. tors. It is important to note the generality of these standards of illegality

• See, e.g., Prima Prods, Inc. v. FTC, 209 F.2d 405, 408 (2d Cir. 1954): "That it is within the competence of the Federal Trade Commission to promulgate these [Trade Practice] Rules in the public interest is not challenged. * * * As these Rules are applicable alike to all members of the industry, petitioner must comply with them." And see, Burton-Dixie Corp. v. FTC, 240 F. 2d 166 (7th Cir. 1957); Lazar v. FTC, 240 F. 2d 176 (7th Cir. 1957); Northern Feather Works v. FTC, 234, F. 2d 335, 338 (3d Cir. 1956); Buchwalter v. FTC, 235 F. 2d 344 (2d Cir. 1956).

"This statutory scheme necessarily gives the Commission an influential role in interpreting § 5 and in applying it to the facts of particular cases arising out of unprecedented situations. Moreover, as an administrative agency which deals continually with cases in the area, the Commission is often in a better position than are courts to determine when a practice is "deceptive" within the meaning of the Act. This Court has frequently stated that the Commission's judgment is to be given great weight by reviewing courts."

"10

Trade Regulation Rules are simply another form of legislative interpretation, which the Commission deems vital in fulfilling its statutory responsibilities. And as the Supreme Court stated in SEC v. Chenery, 332 U.S. 194, 202 (1946), "The function of filling in the interstices of the Act should be performed, as much as possible, through this quasi-legislative promulgation of rules to be applied in the future."

Resort to Legislative History Is Not Necessary or Proper; In Any Event, the Legislative History Supports the Commission's Position

Petitioners erroneously assert (Complaint, pp. 8-9, 21) that the legislative history shows that the Commission lacks authority to issue substantive rules. In view of the clear, unambiguous rulemaking authority contained in Section 6(g) of the Federal Trade Commission Act-language similar to that which has consistently been held by the courts to authorize agencies to engage in substantive rulemaking (see, supra, pp. 10, 13-20)—there is no need to resort to legislative history."

If the Court, however, deems it appropriate to consider the legislative history, attached for the Court's information is an Appendix which sets forth the legislative history of the Commission's rulemaking authority in pertinent detail. As this Appendix reveals, there is little in the legislative history of the Federal Trade Commission Act that is relevant to the rulemaking authority bestowed by Section 6(g). This is so because the original House bill and the bill as initially passed by the House would have created a commission with functions strictly investigative in nature. While that bill contained a rulemaking provision, it is obvious that this provision could only pertain to "housekeeping" or procedural matters, since the Commission would have had no authority to prevent unfair methods, acts and practices. Debate concerning the rulemaking authority of such a commission, therefore, has no pertinence to the rulemaking authority of the Commission as ultimately established.

When the House enactment was forwarded to the Senate, it was referred to the Senate Committee on Interstate Commerce. That Committee reported a substitute bill which, unlike the House bill, would have created a "Federal Trade Commission" with a quasi-judicial function. The Senate committee bill contained no rulemaking provisions. Consequently, the Senate debates on this bill also have no application to the Section 6(g) rulemaking authority as ultimately enacted.

Significantly, following passage of the Senate bill, the differing Senate and House versions were referred to a Conference Committee. That Committee reported out a compromise bill which was subsequently enacted into law. The "rules and regulations" provision of the Conference bill was a modification of that contained in the House enactment. Thus, it was not until the Conference Report was considered by the House and Senate that the Commission's present rulemaking authority was before the entire Congress.

The Senate passed the Conference bill on September 8, 1914, after very little discussion on the bill as a whole and none on the "rules and regulations" provision of Section 6(g). The House received the Conference bill on September 10, 1914, and passed it on the very same day. House debate on the rulemaking provision of Section 6(g) was limited. Considered overall, however, the conclusion is inescapable that Section 6(g) was intended by Congress to provide substantive rulemaking authority.

10 And see, Borden Co. v. Freeman, 256 F. Supp. 592, 598 (D. NJ. 1966), aff'd, 369 F. 2d 404 (3d Cir. 1966), cert. denied, 386 U.S. 922; FTC v. Motion Picture Advertising Serv. Co., 344 U.S. 392, 394 (1953); FTC v. R. F. Keppel & Bro., Inc., 291 U.S. 304 (1934).

11 When a statute is clear, the courts refrain from resorting to legislative history. United States v. Oregon, 366 U.S. 643, 648 (1961). Concurring opinions of Mr. Justice Jackson in Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 395-96 (1951), and United States v. Public Utils. Comm'n of Calif., 345 U.S. 295, 319 (1953); 2 Sutherland, Statutes and Statutory Construction (3d ed., Horack, 1943), § 4502.

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