It is significant that in United States v. Morton Salt Co., 338 U.S. 632, 647–51 (1950), the Court held that, while some of the language of Section 6 of the Federal Trade Commission Act appeared in the prior House bill at a time the Commission was to have been created solely with investigative authority, the section as ultimately enacted should not be afforded such a limited reading since the present Act, including Section 6, must be read as an integrated whole. Plaintiffs' assertion (Complaint, p. 8), that the Commission lacks trade regulation rulemaking authority because of its failure to utilizer or claim such authority prior to 1962, is wholly without merit. See, e.g., NLRB v. Wyman, Gordon Co., 394 U.S. 759 (1969), where the Court was of the opinion that the Board had the power to issue rules, even though such authority had never been exercised. See also, FTC v. Dean Foods, 384 U.S. 597, 609-611 (1966); United States v. Morton Salt Co., 338 U.S. 632, 647 (1950).

B. THE COMMISSION'S Trade REGULATION RULE PRODEEDING DID NOT DENY PLAINTIFFS DUE PROCESS

Plaintiffs are in error when they contend (Complaint, pp 6-8, 10-13, 15, 2122, 24) that the trade regulation rule proceeding has deprived them of due process inasmuch as they were not afforded trial-type rights such as compulsory process, testimony under oath, cross-examination of witnesses, and conduct of hearings by a hearing examiner followed by his initial decision, as in an adjudicative proceeding.

There Is No Constitutional Right to an Adjudicative Hearing in Rulemaking It is well established that there is no constitutional right to adjudicative procedures in rulemaking proceedings.12 In Willapoint Oysters, Inc. v. Ewing, 174 F.2d 676 (9th Cir. 1949), cert. denied, 338 U.S. 860 (1949), rehearing denied, 339 U.S. 945 (1950), the court rejected an argument that the agency must provide a "fair hearing," in rulemaking stating (at p. 694):

"[I]n legislation, or rulemaking, there is no constitutional right to any hearing whatsoever. *** Thus the requirements of any hearing are to be tested solely by the statute so providing, which may or may not import constitutional concepts.

The court found the applicable statute to be the Administrative Procedure Act. Finding no violation of that Act, the court concluded that no constitutional or statutory rights had been violated.

There Is No Statutory Right to an Adjudicative Hearing in Rulemaking

Since there is no constitutional requisite for adjudicative procedures in rulemaking, we turn to the controlling legislation-the Administrative Procedure Act, 5 U.S.C. 533 (c):

"After notice required by this section, the agency shall give interested persons an opportunity to participate in the rulemaking through submission of written data, views, or arguments with or without opportunity for oral presentation. After consideration of the relevant matter presented, the agency shall incorporate in the rules adopted a concise general statement of their basis and purpose. When rules are required by statute to be made on the record after opportunity for an agency hearing, sections 556 and 557 of this title apply instead of this subsection."

13

This statute does not require adjudicative procedures, and plaintiffs' com

12 FPC v. Texaco Inc., 377 U.S. 33, 39 (1964); California Citizens Band Ass'n v. United States, 375 F. 2d 43, 50 (9th Cir. 1967), cert. denied, 389 U.S. 844; Alaska 8.8. Co. v. FMC, 356 F. 2d 59, 61 (9th Cir. 1966); Pan American Pet. Corp. v. FPC, 352 F. 2d 241, 244 (10th Cir. 1965); Superior Oil Co. v. FPC, 322 F. 2d 601, 609 (9th Cir. 1963), cert. denied, 377 U.S. 922; Air Lines Pilots Ass'n Int'l v. Quesada, 276 F. 2d 892, 896 (2d Cir. 1960), cert. denied, 366 U.S. 962 (1961); Forte, Fair Hearing in Administrative Rulemaking: A Recent Experience Under the Federal Food, Drug, and Cosmetic and Fair Packaging and Labeling Acts, 1968 Duke L. J. 1, 3.

13 For cases holding that an agency, in rulemaking, need merely comply with the nonadjudicative procedural requirements of 5 U.S.C. 553, see, e.g., NLRB v. Wyman-Gordon Co., 394 U.S. 759 (1969); FPC v. Texaco Inc., 377 U.S. 33, 39 (1964); California Citizens Band Ass'n v. United States, 375 F. 2d 43, 50 (9th Cir. 1967), cert. denied, 389 U.S. 844; Alaska S.S. Co. v. FMC, 356 F. 2d 59, 61 (9th Cir. 1966); Pacific Coast European Conf. v. United States, 350 F. 2d 197 204-205 (9th Cir. 1965), cert. denied, 382 U.S. 958.

plaint does not allege that the Commission failed to comply with any of the above-stated statutory provisions."

In holding that the agency need only comply with the nonadjudicative requirements of 5 U.S.C. 553, the court in American Airlines, Inc. v. CAB, 359 F.2d 624, 629-30 (D.C. Cir. 1966), cert. denied, 385 U.S. 843 stated: * such

***** [R]ule making is a vital part of the administrative process, rule making is not to be shackled, in the absence of clear and specific Congressional requirement, by importation of formalities developed for the adjudicatory process and basically unsuited for policy rule making.

"*** The need for and importance of policy rule making made on the basis of a procedure appropriate thereto is clearly identified in the Administrative Procedure Act ***. In general, the APA establishes a dichotomy between rule making and adjudication. For adjudication a formal system is provided.

"Rule making, however, is governed by § 4 [5 U.S.C. 553], which essentially requires only publication of notice of the subject or issues involved, an opportunity for interested persons to participate through submission of written data, and the right of petition in respect of rules. These more limited requirements are geared to the purpose of the rule making proceeding, which is typically concerned with broad policy considerations rather than review of individual conduct. ***" [Emphasis added.]

The Fact That the Commission Could Have Instituted Adversary Adjudicative Proceedings Under Section 5(b) of the Federal Trade Commission Act Does Not Require Thut it Afford Adjudicator Rights in Rulemaking Proceedings As demonstrated, supra, pp. 10-27, the Commission may proceed initially under its general rulemaking authority rather than resorting in the first instance to an adversary proceeding as provided by Section 5(b) of the Federal Trade Commission Act. In FPC v. Teraco Inc., 377 U.S. 33, 44 (1964), it was held that adjudicative procedures need not be followed in rulemaking merely because the agency could have instituted an adjudicative proceeding against a party under a different section of the statute." And see, NLRB v. WymanGordon Co., 394 U.S. 759, 764 (1969), where the nonadjudicative rulemaking procedures of the Administrative Procedure Act, 5 U.S.C. 553, were deemed appropriate when rulemaking was utilized rather than adjudication.10

Plaintiffs, therefore, were not entitled to trial-type rights in the rulemaking proceeding merely because the Commission could have issued a complaint under Section 5(b).

In the instant case, the essential procedural requirements for rulemaking are being fully satisfied, indeed exceeded. Plaintiffs have been afforded complete opportunity to make known in the administrative proceeding all their views, data, documents and arguments and to rebut all contrary positions. The Commission has established a public record containing over 1600 pages of relevant material. The Commission "[o]n the basis of the Record *** concluded that the issuance of a Trade Regulation Rule requiring the posting of minimum research octane ratings on gasoline dispensing pumps is required by that record and is in the public interest" (Defendants' Exhibit B, p. 39).

After all interested parties were given the opportunity to file written data, views and arguments and to orally present data, views and arguments concerning the proposed rule (and all such data, views and arguments were made available for examination) (Exhibit C attached to complaint), the record was kept open for 30 days for the receipt of any additional statements or rebuttal material which might be submitted (Defendants' Exhibit A-1, p. 421). And,

14As Section 6 (g) of the Federal Trade Commission Act does not require that Commission rules be made on the record after opportunity for agency hearing, the requirement for Section 556 and 557 adjudicative proceedings set forth in the last sentence of Section 553 (c) is inapplicable here. See, Siegel v. AEC, 400 F.2d 778, 787 (D.C. Cir. 1968).

15 It is well established that general rulemaking may be effectuated without adjudicative procedures even though the agency could have proceeded initially against individual respondents pursuant to adjudicative proceedings provided for by the controlling statute. See, United States v. Storer Broadcasting Co., 351 U.S. 192, 202-03 (1956); Total telecable Inc. v. FCC, 411 F. 2d 639, 641 (9th Cir. 1969); Pacific Coast European Conf. v. United States, 350 F. 2d 197, 204-05 (9th Cir. 1965), cert. denied, 382 U.S. 958. 16 Mr. Justice Black, concurring, joined by Justices Brennan and Marshall, also recognized that the Labor Board need not follow adjudicative procedures if it chose to proceed by rulemaking, 394 U.S. at 771-2. And Justices Douglas and Harlan dissenting, 394 U.S. at 775 and 780, respectively, both were of the opinion that the agency had to follow the procedures specified by the Administrative Procedure Act when making rules, 5 U.S.C. 553, a procedure which does not afford adjudicative rights.

after promulgation of the Rule, when Texaco Inc., requested that the record be reopened so that further information might be submitted concerning the propriety of using research octane number as the basis for posting, the Commission did, on April 13, 1971, postpone the effective date of the Rule from June 28, 1971, to September 1, 1971, and did reopen the record, inviting all interested persons to submit written data, views and comments regarding the appropriateness of reliance upon the research octane method including suggestions of alternate methods (Pres Release, April 13, 1971, Defendants' Exhibit C; 36 Fed. Reg. 7309, April 17, 1971).

APPENDIX

LEGISLATIVE HISTORY OF FEDERAL TRADE COMMISSION ACT WITH EMPHASIS ON SECTION (6g)

I. INTRODUCTION

In making this review, a basic distinction should be noted which will render inapposite for analysis here the congressional debates which preceded the consideration by the Congress of the Conference Report. The House debates which occurred pursuant to the original House bill were directed in entirety to the creation of an "Interstate Trade Commission," the function of which was strictly investigative in nature. The new commission was to act as a primary source of information which would supply to the Congress and the President that material required for the purpose of new legislation. The commission was to have no quasi-judicial authority through which it could act affirmatively. Such an investigational organization was obviously not a body which required, or indeed should have had, "substantive" rulemaking authority. Rather, at this juncture as an investigator for the executive and legislature, the commission would have been authorized by the House bill to promulgate mere "housekeeping" rules and regulations.

When the House bill was passed and forwarded to the Senate for consideration, it was referred to the Senate Committee on Interstate Commerce. That committee completely revised the form and tenor of the bill by recommending the passage of a substitute bill, the thrust of which was the creation of a "Federal Trade Commission" with quasi-judicial function. The Senate version contained no provision granting rulemaking authority to the commission. Thus, it is obvious that the Senate debates on this bill also have no application to the Section 6(g) rulemaking authority as it was ultimately enacted.

Subsequent to the Senate's passage of its own version of the bill, both houses of Congress agreed to a conference on the two bills to resolve the acute differences inherent in them. The conferees agreed upon an entirely new bill which, upon referral to the House and Senate, was passed and ultimately approved by the President. Since it was only at this time that the Federal Trade Commission of today was finally envisioned in its entirety, the congressional debates which followed the report of the conferees alone have any relevancy to the intent of Congress in creating the Commission.

II. BACKGROUND

The amended bill which was ultimately to be enacted to create the Federal Trade Commission was not the first bill proposed in either the House or the Senate in this connection. Several unsuccessful attempts were made prior to 1914 to create a similar commission. On July 5, 1911, Senator Newlands of Nevada introduced a bill to create an interstate trade commission which would have been granted broad regulation-making authority:

"That the said commission shall have power to make any and all regulations necessary and proper to carry out the purposes of this act, and at any time to alter, amend, or repeal the same or any part thereof." [S.2941, 62d Cong., 1st Sess. § 17 (1911) (emphasis added).]

This bill, however, was never reported out of the Senate Committee on Interstate Commerce.

Another bill proposing to grant a similar rulemaking authority to a trade commission was introduced in the House on January 25, 1912, by Representative Morgan of Oklahoma. This bill contained a detailed rulemaking provision:

"The commission is hereby authorized and empowered to make and establish rules and regulations, not in conflict with the Constitution and laws of the

Following these early legislative bills, President Wilson, on January 20, 1914, addressed the Congress and requested that it establish a commission to serve as an investigative body of business, to promote competition between and discourage monopoly by businesses, and to assist business in better understanding the law.

Puruant to this request, Representative Covington of Maryland introduced H.R. 15613 (hereinafter referred to as the Covington Bill) on April 13, 1914. The bill provided for an "Interstate Trade Commission" which would assume all powers, authority, and duties of the old Bureau of Corporations, an investigative body, which had been established by Congress in 1903. Additionally, the bill made annually statistical reporting to the proposed commission mandatory for all corporations having capital exceeding $5 million, and further provided: "That the commission may from time to time make rules and regulations and classifications of corporations for the purpose of carrying out the provisions of this Act: [H.R. 15613, 63d Cong., 2d Sess. § 8 (1914) (emphasis added).] Mr. Covington expressed his interpretation of the rulemaking authority to be conferred upon the commission by his bill when he referred to a case which the Supreme Court had decided in January 1914:

"In United States v. Antikamnia Chemical Company (231 U.S., 654) it was held that section 3 of the pure food and drugs act (34 Stat., 768), giving the Secretaries of the Treasury, of Agriculture, and of Commerce, and Labor the power "to make uniform rules and regulations for carrying out the provisions of the act," authorized them to make a regulation requiring the labels on packages of drugs containing any derivative of the substances named in section 8 of the act to state the name of the parent substance as well as the derivative. It was held that while the power given to the secretaries was "undoubtedly one of regulation-an administrative power only-not a power to alter or add to the act," the regulation in question was "administrative of the law" and not "additive to it." If it fulfills the purpose of the law it cannot be said to be an addition to the law. . . . (pp. 666-667)." [51 CONG. REC. 8844 (1914).]'

1 In Antikamnia Chemical Co., the Supreme Court made even more explicit the rulemaking authority conferred by the provision "to make uniform rules and regulations for carrying out the provisions of the act." It stated (231 U.S. at 666):

"The extent of the power however, must be determined by the purpose of the act and the difficulties its execution might encounter. The fact that [the secretaries were] given the power to make rules and regulations for the execution of the law shows how complex the matters dealt with were considered to be, and the care that was necessary to be taken to guard against their defeat or perversion." (Emphasis added.)

Thus did Mr. Covington interpret the rulemaking authority of the proposed commission, notwithstanding the fact that he proposed only an investigative agency.

On April 14, 1914, the House Committee on Interstate and Foreign Commerce favorably reported out the Covington Bill, stating that the proposed trade commission should investigate the business community and report to Congress so that necessary legislation would be prompted and enacted:

"It is largely the experience of the independent commission itself that will afford Congress the accurate information necessary to give to the country from time to time the additional legislation which may be needed." [S. Rep. No. 533, 63d Cong., 2d Sess. 8 (1914) (emphasis added).]

The primary thrust of the bill was the creation of an agency possessing strictly investigatory and information-gathering powers. To this end, Section 3 of the Covington Bill would have transferred to the proposed commission the "powers, authority, and duties of the Bureau of Corporations and of the Commissioner of Corporations." Id. at 5. What led to the proposal was the belief that these powers should be exercised by an independent commission, and that "the investigations conducted and the information acquired by the commission under the authority heretofore exercised by the Bureau of Corporations or the Commissioner of Corporations" should be "remove[d] entirely from the control of the President and the Secretary of Commerce. . . ." H.R. Rep. No. 533, 63d Cong., 2d Sess. 3 (1914).

Since the type of commission proposed by the Covington Bill was to be merely a fact-finding agency with no quasijudicial functions, logic dictated that such an agency would have required no authority to promulgate rules for the purpose of declaring specific acts or practices to be unlawful methods of competition. In fact, the Covington Bill did not even declare “unfair methods of competition" to be unlawful, as does Section 5 of the present Federal Trade Commission Act, 15 U.S.C. § 45.

While a number of amendments were offered in the House which, if adopted, would have had the effect of creating a commission with powers closely aligned to those authorized in the FTC Act as ultimately enacted, the House at that time had no inclination to establish a commission with a quasi-judicial function. An amendment which would have created such a commission was proposed by Representative Lafferty, who was a member of the House Interstate and Foreign Commerce Committee which reported out the Covington Bill. Lafferty filed a minority report in which he proposed to establish a commission with enforcement as well as investigative powers. This commission would have had authority to make regulations defining unfair trade practices. The primary provisions in the Lafferty proposal included:

"SEC. 19. That unfair or oppressive competition and unfair trade practices in commerce among the several states and with foreign nations as hereinafter defined are hereby declared unlawful.

"SEC. 20. That the Commission is hereby empowered and directed to prevent all corporations or associations subject to the jurisdiction of said Commission from engaging in such unfair or oppressive competition or unfair trade practices.

*

SEC. 22. That the Commission is empowered to make, alter, or repeal regula. tions further defining more particularly unfair trade practices or unfair or oppressive competition made unlawful by this or any other Act." [H.R. Rep. No. 533, Part 3, 63d Cong., 2d Sess. 19-22 (1914) (emphasis added).]

The Lafferty amendment also proposed that the commission be empowered to issue an order restraining a corporation which it found to be violating the Section 19 proscriptions. This order was to be enforceable in the Federal district courts. Id. §§ 23, 24.

It is interesting to note that Section 20 of the Lafferty proposal was substantially the same as Section 5(a) (6) of the FTC Act, and that Sections 23 and 24 were the equivalent of the present Section 5(b), 15 U.S.C. § 45. Thus, it appears that Mr. Lafferty, based upon his concept of the type of commission necessary to remedy the evils at which the legislation was aimed, had the foresight to anticipate the substance of the bill which was to be finally enacted. The House Commerce Committee was not disposed to adopt the Lafferty proposals, and reiterated its intent to create a commission having only investigatory powers by rejecting the Lafferty amendment.

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