# Amicus Curiae Brief — National Petroleum Refiners Ass'n v. Federal Trade Commission

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1974
- **Citation:** 415 U.S. 951

## Text

ES REIS REIS YEN TUR EEN ONE Ee BE eee

NOV ao 1973

No. 73-806

Prerenel RICAN, 27. OLE

—-
———

IN THE

Supreme Couwt of the United States
OcToBER TERM, 1973

NATIONAL PETROLEUM REFINERS ASSOCIATION, ET AL.,
Petitioners,
Vv.

FEDERAL TRADE COMMISSION, ET AL., Respondents

BRIEF ON BEHALF OF
THE AMERICAN BANKERS ASSOCIATION
AS AMICUS CURIAE IN SUPPORT OF
PETITION FOR WRIT OF CERTIORARI

MATTHEW HALE
General Counsel
The American Bankers
Association
1120 Connecticut Avenue,
N.W.
Washington, D.C. 20036

Attorney for Amicus Curiae
November 30, 1973

Press or Byron S. ADAMS PRINTING, Inc., WASHINGTON, D. C.

DAE PLR PE NIE en eee
.

Page
eT ie vac ceuecuncewewhonne 1
Interest of Amicus Curiae ...............cc cee eceee 2

The Significance of the Decision of the Court of
Appeals that the FTC has Authority to Issue

SN I Sins cence sean adewdecusnaee 6
The Congress Needs a Definitive Ruling Now ........ 13
SE i. ve ode xkd c55sns cokes kindack¥eseescdtecs 15

LIST OF CITATIONS
CASES:

Bristol-Myers Co. v. FTC, 284 F.Supp. 745 (D.D.C.
1968), aff’d in pertinent part, 424 F.2d 935 (D.C.
Cir. 1970), cert. denied, 400 U.S. 824 (1970) .... 7

Lever Bros. v. FTC, 325 F.Supp. 371 (D. Me.
BS Tide ME CENERS CWEREGEY a eA OEE Rees eae

Mourning v. Family Publications Services, Inc., 411

SE SUS x + chr Ov dedeadecenicesexieeuens 11
StaTuTES—F EDERAL:
Cigarette Labeling and Advertising Act, 15 U.S.C.
See, Oe es Ue CNTs 6 esc ccscsecevasesess 8

Fair Packaging and Labeling Act, 15 U.S.C. §§ 1451
i ee es SO NOES 6.55.00 00 cds cds ivescenss

Federal Trade Commission Act, 15 U.S.C. §§ 41 ff,

38 Stat. 717 (1914), 52 Stat. 111 (1938). ...... 1, 3, 6-7

12, 14
Oe ee as 1, 3, 6,7
NE SO ee Se eee 12

Flammable Fabrics Act, 15 U.S.C. §§ 1191 ff., 67 Stat.
| errr rrr rrr rr rer rey yee 6, 11

Index Continued

Page
Fur Products Labeling Act, 15 U.S.C. § 69, 65 Stat.
ME EE nto hah uC eeaucs ben kwtk oauee cee ceed 6, 11
Interstate Commerce Act, 49 U.S.C. §§ 1 ff., 24 Stat.
DORN cc coon erated eeeceuneeoenecesesece se 7
National Bank Act, 12 U.S.C. §§ 21 ff., 13 Stat. 99
GRR eat ges ho Pong mtn oe 9 aa a Apa ee RAN 2
Securities Act of 1933, 15 U.S.C. §§ 77a ff., 26 Stat.
ae as ca cacao Pa eNG base eae Kae 9
Sherman Anti-Trust Act, 15 U.S.C. §§ 1 ff., 26 Stat.
ee oC ee ee sate he hteke 8
Truth in Lending Act, 15 U.S.C. §§ 1601 ff., 82 Stat.
ET ae ie c knee ccd anne ea Nas 9, 11-12, 14
EE errr ere err err e 11
i Pe oa sauna eka ae ae OCR EN eee eaN 12
oe og sans Geka seh aeaeeeaeans 12
Se EE. -Ccida chad bec nunaes beecueesese 8

StaTuTES—StTaTE:
Calif. Civil Code:
Retail Installment Sales Act, §§ 1804.1, 1804.2,

McC oe Olea eeeicleleuyeauerenecs tse es 5
Automobile Sales Finance Act, §§ 2983.5,

DE ore tells veer aru geCehee ene sery et 5

pee SN, OPT hu ooo 6 hice Kaeo seek seve 5
D.C. Code, Consumer Credit Protection Act, §§ 28-

ES Sa kcawensec ceskeu sy cesuah ener cevens 5

Uniform Commercial Code ........ccsscccccscescocs 4,10

Uniform Consumer Credit Code, National Conference
of Commissioners on Uniform State Laws,
approved by the American Bar Association,
po rer rr Tyrer rr ree 5

Colorado Rev. Stat. § 73-1-101;
Idaho Laws 1971, Ch. 299;

fi

Index Continued lii

Page

Indiana Code of 1971 § 19-21-101;

Oklahoma Laws 1969, Title 14A §1-101;

Utah Code Annotated, Ch. 9;

Wyoming Code Annotated, §§ 40-1-101 to 40-9-103.

Brus, HEARINGS, AND REPORTS:

Consumer Product Warranties—FTC Improvements:
S. 986, 92d Cong., 1st Sess., February 25,1971... 14
H.R. 4809, 92d Cong., 1st Sess., February 23, 1971 14

H.R. 20, 93d Cong., Ist Sess., January 3, 1973. .3, 9-10
and

H.R. 5021, 93d Cong., Ist Sess., March 1, 1973:

Hearings before the Subcommittee on Com-
merce and Finance of the House Committee
on Interstate and Foreign Commerce, Serial

No. 93-17, at 80, 88, March 19, 1973 ....... 3, 10
S. 356, 98d Cong., Ist Sess., January 12, 1973. .9, 13-14
S. Rep. No. 93-151, May 14, 1973 ............ 13
S. Rep. No. 93-280, June 28, 1973 ........... 14

119 Cong. Ree. 16421 (daily ed., September
BED ukcsceteinse vans cs Cesnsaarunen 14

HLR. 7917, 93d Cong., 1st Sess., May 17, 1973. .9, 13-14

Fair Credit Billing:
S. 2101, 93d Cong., Ist Sess., June 28, 1973 ...... 5,9
119 Cong. Ree. $14403 (daily ed., July 23,1973) 5

Hearings before a Subcommittee of the House Com-
mittee on Appropriations on Agriculture—En-
vironmental and Consumer Protection Appropria-
tions for 1974, 93d Cong., 1st Sess., Part 6,
Consumer Programs, at 926 ...........ccecee: 10

Index Continued
Page
REGULATIONS:
FTC Rules of Practice
Be ee Se Sa ED ed cicbscacdncestucncencue 6
FTC Trade Regulation Rules (16 C.F.R. §§ 400-429
Cigarette Labeling, 16 C.F.R. § 408 (superseded
2 Bf oe.) MR ees Renee 8
Games of Chance in the Food Retailing and Gaso-
line Industries, 16 C.F.R. § 419 ............ 8
Mailing of Unsolicited Credit Cards, 16 C.F.R.
§ 421, 35 Fed. Reg. 4614 (superseded by 15
es ee ED cactecutusuadeneavanacusoen 8
Octane Posting, 16 C.F.R. § 422 ............... 1-2,8
2 err 1
SP SU SGD ov dckaccdecuseacasecbaches 2
Fe ES EE Wa awdeoeatacesaaeunenod 2
Pe PE NEE. coucncebeorececcscsncces 2
Door-to-Door Sales, 16 C.F.R. § 429 (effective date
OS: TP GI ncn ssalschelesecesasucuss &

Proposed FTC Trade Regulation Rules
Sale of Franchises, 36 Fed. Reg. 21607, 22187 .... 8
Preservation of Buyers’ Claims and Defenses in

Consumer Installment Sales ............ 3-6, 8, 10
36 Fed. Reg. 1211, 6592, and 7865 ........... 4
Re Fe SO UD wsdcovacsencesaadisecaseuaus +
MISCELLANEOUS:
SS Tae Wetinas Romer Ge ccc cccessckcisccucces 5
FTC Press Release dated July 17, 1973 .............. 8-9
Report of the National Commission on Consumer
gS, Rr ee 14

fe RE TE [> I OT Re ge PR Sr Gee MS EE IE IESG GA POOL IRE 1 EE

IN THE

Supreme Court of the United States

OcrToBEeR TERM, 1973
No. 73-806

NATIONAL PETROLEUM REFINERS ASSOCIATION, ET AL.
. . ?
Petitioners,
V.

FepERAL TRADE CoMMISSION, ET AL., Respondents

BRIEF ON BEHALF OF
THE AMERICAN BANKERS ASSOCIATION
AS AMICUS CURIAE IN SUPPORT OF
PETITION FOR WRIT OF CERTIORARI

GENERAL STATEMENT

On June 30, 1969, the Federal Trade Commission
(FTC) published a proposed Trade Regulation Rule
(34 Fed. Reg. 12449) declaring that failure to post
octane numbers on gasoline pumps at service stations
would be an ‘‘unfair method of competition”? and a
‘*deceptive act or practice’? within the meaning of
section 5 of the Federal Trade Commission Act (15
U.S.C. §45). Following hearings and the sub-

PPE Oe, EPEC TON

2

mission of comments by interested parties, and is-
suance of a revised Rule (36 Fed. Reg. 354, December
30, 1970), later postponed (36 Fed. Reg. 7309), a
substantially revised Octane Posting Rule was issued
on December 16, 1971, to be effective March 15, 1972
(36 Fed. Reg. 23871).

This case was instituted on March 29, 1971 by two
trade associations and 34 gasoline refining companies
in order to test the authority of the FTC to promulgate
legislative rules such as the Octane Posting Rule. The
District Court for the District of Columbia granted
plaintiffs’ motion for summary judgment on April 4,
1972 (340 F.Supp. 1343). The Court of Appeals for
the District of Columbia, on June 27, 1973, reversed the
District Court, holding that the FTC has power to
issue such legislative rules (482 F.2d 672).

The plaintiffs have petitioned this Court for a writ
of certiorari, filed November 20, 1973. The American
Bankers Association submits this brief as amicus
curiae in support of the request for review of the
decision of the Court of Appeals. Consent of the
Government and of the petitioners has been obtained
by letters dated November 14, 1973.

INTEREST OF AMICUS CURIAE

The American Bankers Association is a_ trade
association having as its members some 13,500 banks.
About 4,500 of these banks are national banking as-
sociations, chartered, examined, and supervised by
the Comptroller of the Currency under the National
Bank Act, and about 9,000 are State banks chartered
under the banking codes of the several States and
examined and supervised both by the appropriate
State banking supervisory officials and, in most cases,

3

also either by the Beard of Governors of the Federal
Reserve System (in the case of State member banks)

or by the Federal Deposit Insurance Corporation (in
the case of State nonmember insured banks).

Even though expressly exempted from the FTC
Act (15 U.S.C. § 45 (a) (6) ), banks can be substantially
affected by rules of the Federal Trade Commission. *
For example, in 1971 the FTC published a proposed
Trade Regulation Rule entitled ‘Preservation of

1In a statement supplied by the FTC for the record after its
testimony had been completed at the 1973 hearings on the Con-
sumer Product Warranties—FTC Improvements bills, the FTC
has taken an extremely narrow view of the exemption for banks.

Opinion as to Whether Rulemaking Extends to
Financial Institutions

In providing the Commission jurisdiction over unfair
methods of competition and unfair or deceptive act or prac-
tices in commerce, Section 5 of the Federal Trade Commission
Act excepts ‘‘banks’’ and a number of other specific categories
of business from the Commission’s enforcement authority
under that section. No exception is made by Section 5 for
financial institutions other than banks.

The Commission believes, however, that it would clearly
defeat the policy and provisions of the Act to hold that the
exemption accorded to banks must be construed to embrace
even those activities which lie outside the sphere of a bank’s
essential functions and are not incidental to those functions.
We believe, therefore, that our rules of general application do
extend to activities which are carried on by banks in common
with other types of business institutions. (Hearings before
the Subcommittee on Commerce and Finance of the House
Committee on Interstate and Foreign Commerce, on H.R. 20
and H.R. 5021, 93d Cong., Ist Sess., Serial No. 93-17, at 80,
March 19, 1973.)

This Association, of course, disagrees completely with this novel
interpretation. While the scope of the exemption for banks is
not relevant to this ease, the position taken by the FTC in its
opinion gives the members of this Association an additional basis
for interest in the authority of the FTC to issue legislative rules.

4

Buyers’ Claims and Defenses in Consumer Installment
Sales’’ (36 Fed. Reg. 1211, 6592, and 7865, January 26,
April 7, and 27, 1971; 37 Fed. Reg. 892, January 5,
1973), which would have abolished the holder in due
course doctrine and waiver of defense provisions in
consumer installment obligations and credit card
agreements. This Association, the Consumer Bankers
Association, and the two major bank card associations
—Interbank Card Association and National Bank-
Americard, Ine.—filed a total of five statements at
various stages of this proceeding, objecting to the
proposed rule on several grounds including the
argument that the FTC has no authority to issue legis-
lative rules.

The proposed rule would prohibit merchants from
aequiring from customers any obligations subject to
the holder in due course doctrine or any credit card
obligations based on an agreement between the card
issuer and the ecard holder which contained a waiver
of defense provision. While this rule on its face
applies only to the relations between merchants and
their customers, the effect on the banks which have
been financing these transactions by the purchase of
consumer paper or through bank ecard systems is
direct and substantial. The proposal would cut
across the complex and highly integrated network of
State laws applicable to bank transactions, including
the Uniform Commercial Code, and it would require
substantial alterations to bank card arrangements,
possibly to the extent of making bank card systems
unworkable.? The FTC has not yet taken final
action on this rule.

2 Many States have enacted statutes restricting the effectiveness
of the holder in due course doctrine in consumer transactions and
waiver of defense provision in credit card agreements (see, for

id PIE GRE TEL AES III CBS OS Sie

5

The importance of consumer credit to the nation’s
economy, as well as to consumers, may be seen from
the following table.

CREDIT OUTSTANDING TO INDIVIDUALS

($ Billions)

—_ Consumer Credit Outstanding 7 <aoe bt
End Installment Noninstallment Total Outstanding
1939 4.5 2.7 7.2 16.3
1945 2.5 3.2 3.7 18.6
1955 28.9 9.9 38.8 88.2
1965 71.3 19.0 90.3 212.9
1970 101.2 25.6 126.8 280.2
1971 109.5 27.7 137.2 307.8
1972 127.3 30.2 157.5 346.1

Source: Federal Reserve Board

The rule on Preservation of Buyers’ Claims and
Defenses would affect consumer transactions. The
rulemaking authority of the FTC, as interpreted by
the Court of Appeals, would apply equally to industrial
and commercial activities of all sorts (other than those
of the exempted concerns), and indirect effects on

example, Calif. Civil Code § 1747.90, § 1804.1, 2, § 1810.7, and
§ 2983.5, 7; D. C. Code §$28-3807-3809). The National Conference
of Commissioners on Uniform State Laws spent years in drafting
the Uniform Consumer Credit Code, approved by the Conference
and the American Bar Association in 1968, in an effort to present a
balanced and integrated proposal for the reform of consumer credit
laws, including restrictions on the holder in due course and waiver
of defense doctrines. This Code has been adopted in six States
(28 The Business Lawyer 641, footnote 6). The Senate on July 23,
1973, passed S. 2101, 93d Congress, which would impose restrictions
on waiver of defense provisions in credit card transactions (119
Cong. Rece., p. $14403, daily ed., July 23, 1973).

DEE SE LOS NG OEY PRO ee QE I 5
PASSA ‘ rex
_ :

6

banks and other exempt industries can be expected as
in the case of that Rule.

Accordingly, in spite of the exemption for banks
expressly provided in the FTC Act, the banks which
are members of this Association have a real and sub-
stantial interest in the question of the authority of
the FTC to issue legislative rules.

THE SIGNIFICANCE OF THE DECISION OF THE COURT
OF APPEALS THAT THE FTC HAS AUTHORITY TO
ISSUE LEGISLATIVE RULES

Up until some 10 years ago the FTC limited its
enforcement activities under the FTC Act to quasi-
judicial proceedings, directed at individual concerns,
on the basis of specific charges, responses, and
adversary hearings, as expressly provided in section
5 of the Act. *

In 1962 the FTC formally announced that it would
undertake rulemaking proceedings and would issue
Trade Regulation Rules, which it is now clear would
be generally applicable and would have the force and
effect of law (27 Fed. Reg. 4636, 4796).

In this case for the first time since the creation of
the FTC the courts are faced with the question

3 The FTC was specifically granted authority to issue rules and
regulations under several statutes which declared that misbranding
or false labeling of certain products was an unfair method of com-
petition and an unfair and deceptive act or practice and therefore
unlawful under the FTC Act, and which authorized FTC to spell
out in rules what was correct and what was false labeling: for
example, the Fur Products Labeling Act, 15 U.S.C. § 69 (1951) ; the
Flammable Fabries Act, 15 U.S.C. §§ 1191 ff. (1953) ; and the Fair
Packaging and Labeling Act, 15 U.S.C. §§ 1451 ff. (1966).

———

eee

7

whether the FTC Act permits this new departure from
its original practice. ‘

Section 5 of the FTC Act, as enacted in 1914,
declared ‘‘unfair methods of competition in com-
merce’’ unlawful, and authorized the FTC to prevent
persons, partnerships, or corporations, except banks
and common earriers subject to the Interstate Com-
meree Act, from using such methods; it also directed
the FTC to initiate a proceeding against any such
person, partnership or corporation which it has reason
to believe is or has been using ‘‘any unfair method of
competition’’ (38 Stat. 717). In 1938 the section was
amended by adding to the proscribed activities ‘‘ unfair
or deceptive acts or practices’? and any ‘‘unfair or
deceptive act or practice’? (52 Stat. 111). The
exemption for banks and common earriers has been
broadened to inelude certain regulated air carriers
and certain regulated packers and stockyards.

The field of authority of the FTC covers the entire
sweep of the commerce clause, with these very limited
exceptions. The FTC’s power within this field is
equally broad—to prevent ‘‘any unfair method of
competition’’, or any ‘‘unfair or deceptive act or
practice’’.

The authority to institute specific quasi-judicial pro-
ceedings against unfair methods of competition under
this authority is a powerful instrument, which was
felt to be necessary in 1914 because formal judicial

*In Bristol-Myers Co. v. FTC, 284 F.Supp. 745 (D.D.C. 1968),
aff’d in pertinent part, 424 F.2d 935 (D.C. Cir. 1970), cert. denied,
400 U.S. 824 (1970); and Lever Bros. v. FTC, 325 F.Supp. 371
(D. Me. 1971), the courts refused to enjoin proceedings preliminary
to the issuance of Trade Regulation Rules, because the proposed
rules, prior to promulgation, were not ripe for adjudication.

BE FB OE POO POI RTL POSES III PEI BEL ORLA NE O

8

proceedings under the Sherman Anti-Trust Act had
not accomplished all that the Congress felt was needed.
Its effectiveness was increased in 1938, when unfair or
deceptive practices were also prohibited.

To transform the FTC’s authority to conduct these
case-by-case quasi-judicial proceedings into a dele-
gation of Congressional legislative authority to issue
legislative rules covering virtually the entire field of
commerce and any unfair method of competition and
any unfair or deceptive act or practice is a major step,
with inealeulable effects on the nation’s economy, on
Congressional responsibilities, and on Federal-State
relationships.

The extraordinary scope of the authority claimed,
and its virtually limitless effect on the nation’s
economy and on the Federal system of government,
may be judged by a few examples of the kinds of
situations where the FTC has already asserted that the
authority would permit them to act: cigarette labeling
(16 C.F.R. § 408, superseded by 15 U.S.C. § 1331);
games of chance in the food retailing and gasoline
industries (16 C.F.R. § 419); mailing unsolicited
credit ecards (16 C.F.R. § 421, superseded by 15 U.S.C.
§ 1642); Cooling Off Period for Door-to-Door Sales
(16 C.F.R. § 429, effective date to be announced) ; the
proposed rule on Preservation of Buyers’ Claims and
Defenses in Consumer Installment Sales, discussed
above; a proposed rule on the sale of franchises (36
Fed. Reg. 21607, 22187) ; and the Octane Posting Rule
involved in the present case (16 C.F.R. § 422). (For
other examples, see 16 C.F.R. §§ 400-429.)

The FTC has made it clear, in a press release issued
July 17, 1973 announcing a realignment of its Bureau

9

of Consumer Protection, that it plans to make full
use of this rulemaking authority:

In view of the recent Court of Appeals’ de-
cision in the Octane trade regulation rule pro-
ceeding, a main thrust of the Bureau’s work
should be a definitional one—further fleshing out
the meaning of ‘‘unfairness’’ and ‘‘deception.”’
Effective use of our rulemaking authority is
absolutely essential to carry out this assignment.

Since rulemaking is so essential to the work
of the entire Bureau, the separate division which
has handled it exclusively has been eliminated
and instead the various operating divisions will
be responsible for developing rules. This will
give all Bureau attorneys the option to proceed
either by rulemaking or by litigation in the areas
where they have developed substantive expertise.

The authority claimed by the FTC to issue legis-
lative rules covering any unfair method of competition
and any unfair or deceptive acts or practices in com-
meree would appear to enable the FTC to regulate
almost all of the economy of the United States. It
would enable the FTC to take over a substantial part
of Congressional responsibilities—for example, it
would seem that most disclosure provisions in the
Truth in Lending Act (15 U.S.C. §§ 1601 ff.) and
the Securities Act of 1933 (15 U.S.C. §§ 77a ff.), and
many provisions of pending bills, for example, the
Fair Credit Billing bill (S. 2101, 98d Congress), and
the Consumer Product Warranties bills (S. 356, H. R.
20, H.R. 7917, 93d Congress) might well have been or
could be issued as Trade Regulation Rules under the
FTC’s assertion of authority.

In addition it would seem that the authority claimed
by the FTC would enable it to negate or supersede

eee

10

many State laws. The proposal on Preservation of
Buyers’ Claims and Defenses would supersede parts
of the Uniform Commercial Code. It has been
suggested that the FTC might issue rules concerning
the interest practices of lending institutions, presum-
ably superseding State usury statutes. °

The FTC has reported to the House Appropriations
Committee, in its budget request for FY 1974, that it
is making a study of the debtor-creditor relationship,
including the fairness of such remedies as blanket
security interests, repossessions, deficiency judgments,
wage assignments, cognovit notes, and acceleration
clauses. The FTC went on to indicate that it might
issue rules covering the field of creditors’ remedies
and other aspects of consumer contracts.

If the Commission’s rulemaking authority is
reinstated, the results of this study will be utilized
to assist in the development of a model retail
installment contract. Such a contract could be
mandated throughout the industry as a trade
regulation rule... .°

Whatever may be thought of the merits of these
proposals—and this Association has supported many
legislative proposals in this field—it seems clear that
a delegation to an agency which would enable it to
undertake such a broad program of regulation of the
economy, which would enable it to take over such
substantial Congressional functions, and which would

5 Hearings before the Subcommittee on Commerce and Finance
of the House Committee on Interstate and Foreign Commerce, on
H.R. 20 and H.R. 5021, 93d Cong., 1st Sess., Serial No. 93-17, at
88, Mareh 19, 1973.

® Hearings before a Subcommittee of the House Committee on
Appropriations on Agriculture—Environmental and Consumer
Protection Appropriations for 1974, 98d Congress, 1st Session,
Part 6, Consumer Programs, at 926.

11

enable it to supersede such a large body of State legis-
lation, would have the gravest consequences both to
our economy and to our system of government.

Unlike the authority delegated to the FTC to issue
rules filling in the gaps and defining terms within the
framework of fairly detailed and specific statutes like
the Fur Products Labeling Act and the Flammable
Fabrics Act, the broad and sweeping authority asserted
by the FTC is the kind of legislative authority vested
in the Congress and the State legislatures by the
Federal and State constitutions. The issues are true
legislative issues, involving conflicting public interests
of substantial moment, which under the Constitution
have been and should be decided by legislatures elected
by and responsible to the voter.

Such a major delegation of legislative authority
from the Congress to an agency, if such powers can
constitutionally be delegated, should be conferred in
the clearest and most explicit terms; it should not be
inferred from ambiguous provisions in statutes.

Earlier this year this Court considered the Federal
Reserve Board’s authority to issue legislative rules
under the Truth in Lending Act in Mourning v.
Family Publications Services, Inc., 411 U.S. 356
(1973), and upheld the rule involved. The Truth in
Lending Act covers a limited sphere of activity—
principally the disclosure of certain information about
consumer credit—and it contains explicit and detailed
statutory provisions covering much of the field.
Nevertheless, the Committee reports and floor dis-
cussions of the bill make it abundantly clear that legis-
lative rulemaking authority within the specific
framework of the Act was considered essential.
Section 105 of the Act, accordingly, contains a very
broad and very specific provision requiring the Board

12

to prescribe regulations to carry out the purposes of
the Act, with express authorization for such
classifications, differentiations, or other provisions,
and for such adjustments and exceptions, as in the
judgment of the Board may be necessary or proper
to effectuate the purposes of the Act, to prevent cir-
cumvention or evasion or to facilitate compliance.
The provisions for administrative enforcement in
section 108 apply clearly to any requirements imposed
under the Act, and section 112 provides criminal
penalties for a creditor who gives false or inaccurate
information or who fails to provide information ‘‘he is
required to disclose under the provisions of this title or
any regulation issued thereunder.”’ The distinction
between the Board’s legislative rules and the pro-
eedural rules of other agencies is emphasized in
subsection 108(d), which provides that the authority
of the Board to issue regulations does not impair the
authority of any of the enforeement agencies ‘‘to
make rules respecting its own procedures in enforcing
compliance with requirements imposed under this
title’’.

The limited provision in section 6 of the FTC Act
authorizing the FTC to classify corporations and to
make rules and regulations for the purpose of carrying
out the provisions of the Act, included as the seventh
paragraph in a section concerning investigations,
reporting, and other housekeeping matters, contrasts
sharply with the broad and explicit rulemaking
authority granted to the Federal Reserve Board con-
tained in the Truth in Lending Act. The clear intent
in the legislative history of the Truth in Lending Act
to authorize the Board to issue substantive rules con-
trasts just as sharply with the negative legislative
history of the FTC Act.

13

THE CONGRESS NEEDS A DEFINITIVE RULING NOW

A review of the decision of the Court of Appeals
by this Court as to the authority of the FTC would
eliminate the confusion and uncertainty which is
apparent in the legislative proceedings of the current
Congress.

On September 12, 1973 the Senate passed a bill,
S. 356, 93d Congress, from which the Senate Com-
merce Committee struck a provision authorizing the
FTC to issue legislative rules, under limited and
restricted conditions. The FTC requested this
change in the belief that the Court of Appeals would
decide in this case that the FTC already had the
authority without statutory limitations or restrictions
(Senate Report No. 93-151, pp. 57-58). The Com-
mittee Report does not mention the deletion of the
rulemaking provision, and it gives no indication
whether the members of the Committee who deleted
the provision shared the FTC’s hope, or whether they
did not want to grant this authority to the FTC, or
whether they were anxious to pass the product war-
ranty provisions of the bill and leave the decision on
the rulemaking authority of the FTC to the courts or
to later Congressional action."

The Committee on Interstate and Foreign Com-
merce of the House of Representatives, on the other
hand, is considering a bill, H.R. 7917, 93d Congress,

7 Reprinting the FTC’s letter in Committee Report No. 93-151
might suggest approval of the position taken in the letter. How-
ever, the following sentence, at page 9 of the same Report, appears
to be a much stronger suggestion that the Senate Commerce Com-
mittee does not think the FTC has legislative rulemaking authority :

‘‘Thus the sole enforcement weapon available to the FTC to
police the vast majority of consumer frauds, deception, and
cheating has been the cease and desist order.”’

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14

containing a provision similar to the provision deleted
from S. 356, which would specifically authorize the
FTC to issue substantive rules, under limited terms
and conditions.*

Controversy over similar proposals to grant rule-
making authority to FTC was a significant factor in
the failure of the 92d Congress to enact a Consumer
Product Warranties bill (see S. 986 and H.R. 4809,
92d Congress).

Until the Congress has a clear and definitive state-
ment from this Court as to whether the FTC already
has legislative rulemaking authority under the ex-
isting FTC Act, it cannot legislate rationally in this
field. A legislator who votes for S. 356 cannot know
whether this vote is a vote for unrestricted legislative
rulemaking authority for the FTC or a vote against any
legislative rulemaking authority at allin the FTC. A
legislator who votes for H.R. 7917 cannot know whether
this vote is a vote to grant limited legislative rule-
making authority to the FTC or a vote to restrict ex-

8 A New Title III was added to S. 356 by the Senate Committee
on Banking, Housing and Urban Affairs in lieu of section 212 as
reported in the Commerce Committee. This would give the Federal
Reserve Board rulemaking authority with respect to unfair or
deceptive practices of depository financial institutions, with enforce-
ment delegated to the five supervisory agencies (S. Rep. No. 93-
280). This Association supported this proposal, in the light of
the limited area affected and in the light of the record of the
Board’s imaginative yet restrained rulemaking under the Truth
in Lending Act (Report of the National Commission on Con-
sumer Finance, December 1972, at 57). S. 356 was passed by the
Senate on September 12, 1973 (119 Cong. Ree. $16421, daily ed.,
September 12, 1973). A similar provision was added to H.R. 7917
in the Subcommittee on Commerce and Finance of the House Com-
mittee on Interstate and Foreign Commerce before the bill was
reported to the full Committee on November 12, 1973.

15

isting unlimited legislative rulemaking authority al-
ready in the FTC.

A clear and definitive statement of the effect of
present law would enable the Congress to write into
the new legislation whatever provisions it considers
necessary to carry out its legislative policies.

CONCLUSION

In view of the vital issue raised by the decision of
the Court of Appeals—the sweeping delegation of
legislative rulemaking authority, with incalculable
effects on Congressional responsibility, on Federal-
State relationships, and on commercial activities in
general and on banking in particular—The American
Bankers Association urges this Court to grant the
petition for a writ of certiorari.

Respectfully submitted,

MaTTHEW HALE
General Counsel
The American Bankers
Association
1120 Connecticut Avenue,
N.W.
Washington, D.C. 20036

Attorney for Amicus Curiae
November 30, 1973

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385607_1482%3A3. Public record. Not legal advice.