Brief for Respondent — Federal Trade Commission v. Flotill Products, Inc.

Supreme Court brief1967

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"INDEX ett

| . ae ~~ Page

. Question presented Lieenese eka ek aaeanta ene

‘Statement » > the case ....... etAe See Fer kriteinanver ;

‘Summary of argument“... » ae a Soo Sucggmenbewint

Argument oes ares sala hace Lege peters

I. There is no statutory authorindion for a minority

) of two of the five members of the Federal. Trade

' Commission to issue adjudicatory orders .......

“A. Congress, in the FTC’s enabling statute, dele-

; gated all judicial. powers to a five-member bi-

partisan commission to secure the benefits of .

the collective and impartial judgment of a

body of experts acting independently of execu-_

tive WUEDGE 5 occ cccacchabanisadacdvaevhiens>

B. The statutory provision governing the rule-

making power of the FTC does not authorige a

| =—* . minority of t re: to issue an ad-—

: , FOOTY GEE: iio cand leetsicseseisies

C. The decisional law “does not show that Con-

. gress authorized .a minority of the FTC to

"+ Issue adjudicatory ‘ordefs, .'....5.. aotside ve

wo Np. The common law does not sanction decision-

making by less than a majority of a tribunal

_ exercising judicial:functions ...... yest

A, The inaction of Congress since’1914 does pot

constitute ‘implicit approval’? of the Commis-.'

- sion’s practice of i issuing adjudicatory orders

bya minority of its members ...:.....4..4.

Il. Important policy considerations, and sound ad-"

_ mninistrative practice iii the concurrence-of- °

_a-majority rule - renee eee ener eee eeeeneeseseege

Conclusion cooeneseeoeeeesesen . eee . oeeeee Wi'sekekuwee

. , . . t >

: 7

("Index Cdatinned

™%

‘ Casi: ye: soar ete wank: Page

ya Adkins v. Citizens’ Board of City of Huntington, 112

‘W.Va. ies si S.E. 893 (Sup. Ct. App. a.

“ 1932) ches core es ok c ce CARE Coneasaeaaert.

Specter. Seated 339° U8. Re) a IR

’ Atlantic Refining Co. v. FEC, 344 e 2d 599. (6th Gir,

*. 1965), cert. denied, 382 U.S. 939 (1965) ..5,8, 9, 22, 31

‘Barnert y. City of Paterson, 48 N.J.L. 399, 6 Atl. 45 ".

vs (Sup. Ct. NS. RE RRO a epee oy. 25

'\, Beatrice Foods Co., FTC Dkt. No. 6653, Trade Reg.

*. “ «Rep. {17,949 (1967), akeG niin ckeincs bal oe aes a 42, 43

‘Borough of Oakland v oard of Giaservhiion: & De-

2 >< velopment, 98 N.J. x 806, 122 Atl. 311 (Err. & Ap. .

MNS, EDs Bl eng SepGad vcdesnvcpacsscanteecess 26

ie ye Tne.. Y. CAB, No. 20,160 (D.C. Cir. i.

Scr Rr hee 5G 1 bac cnc ewants t calius

Bray v Barry, 91 R.I. 34, ‘160 A.2d 577 (Sup. Ct: R.I.

DY % GES Oe 6h oie ebk en ckab Sbceceeaaneh<e , 25

Briscoe v. Commonwealth’ s Bank, 8 Pet. 118 (1834) .. 29°.

Brown v. District of Columbia, 127 U.S. 579 (1888) ... 25

Le . Codman v. Crocker, 203 Mass. 146, 89 N.E: 177, (Sup. ,

‘sae. Jud. Ct..Mass: 1909). : dak RTO fe Reg 2 235. °

Commonwealth v. Mathues, 210 Pa. ‘379, 59 Atl. 961

i > SD Cl OS are ast AREA 27

Cooley v..0’Connor, 12 Wall. 391 (1871) -..... 9S Pe -—

‘ County of Marin v. United States, 356'U.S: 412 (1958) 19

Davidson v. we pa 221 ‘NE. ad ous . ee. Ct. Ind. . \.

‘Holm, 307 Minn. 52,-33 NW. 2d 831 (Sup. oo

SMI iis co Sue Ua casdecahaiestccccstshss 26

Drath v.- FTC, 239 F.2a 452 (DG. Gir. 1956), cert.

“, 5 denied, 353 U.S. 917 (1957) .....:....4,5, 8, 9, 21, 22

East Texas Motor Freight Lines v. Frozen Food Ex-

} press, 361.08. @ (1956)... 5... ccc ccc ce ace 140 -

_ Empire Rayon Yarn Co. v. American Viscose Corp. i

* No. 29,554 (2d Cir. art ie Maan baWibake eked ~ 41>

_ » Floyd v. Quinn, 24 RI. 147, 52 Atl. 880 (Sup. Ct. RI.

2 SRE. Sas RaU RES aes eees babar ks ieee wks acenak bes 26

; Frise her & Co., Inc. v. Bakelite Corp., 39 F.2d. 247

is (C.OP.A. 1930), cert. deméd, 282 US. 852 (1930) = |

- 4, 5, 8, 9, 19, 20, 21, 24, 25;28, 30 j

FTC v. Ruberoid Co. sed US. 470 (2952). cheeabawie 17

- Nu

Index ,Continued . Ss =

| | Page

| Gearhart & Otis, Iné. v. SEC, 348 F. 2d 798 (D. C. Cir.

PS ait: he a, ee ee

Green v. Biddle; 21 U-S. 1.(1823) .. 6... ...0..0 eee 29

Gunnip v. Lantenklos, 33 Del. Ch. 415, o4 A.2d 712 (Ct.

‘of Chancery | Del. ss) eee eee ee

ae City of Mezia, 290 S.W.. 792 (Tex. Civ. App.

| Oa eee ds eee cine ceed en

Humphrey v. United States, 295 U.S. 602 (1935) ..8, 13,20 ©

Johnson v. State ex rel. Brannon, 1 Ga: 271 (1846) . 2

‘Kaiser v. Real Estate Commission of District of Co-

lumbia, 155 A.2d 715:(Mun. Ct. App. D.C. 1959),

aff’d. 286 F.2d 642 (D.C. Gir. IOSD) 35. 00000 25

LaPeyre v. FTC, 366 F.2d 117 (5th Cir. 1966) ..... +9, 23

Luria Bros., 62 F.T.C. 243; AEDGBE iso sipayhiousvgcess 18

‘Martin v. Lemon, 26 Conn: 192 (Sup. Ct. Conn. i857) 25

“Missouri Pacific Ry. Co. ve ‘Kansas, 248 U.S. 276

| (1919) eee cece ee eee eee eee eee nee eee, 26

* Mountain States Tel..é Tel. Co. v. Peoees 68 Colo. ;

487,°190 P. 513 (1920) eM atckiacuse tte etbbes . 216 28

New York v. Miln, 9 Pet. 85 (1835) ‘deanauis cpeueé’s .2B:.

Norwegian Nitrogen Products Co. v. United States, |

* 968 USB. SOR CUBGB) oe. series cele cicascss. 20

Oakley v. Aspimvall, 3 N.Y. 547 (Ct. App. N.Y. 1850) 28

_E: C. Olsen Co.-v. State Tax Comm’n, 109 Utah 563, |

168 P.2d 324 (Sup. Ct. Utah 1946) ......... lags 26

Paine.v. Foster, 9'Okla. 213, 53 P. 109 (1896) ........ 28

Plymouth Coal Co. v. Pennsylvania, 232 U.S. 531 (1914) 25

' . Power Reactor Dev. Co. v. International Union of .

- Elec. Workers, 367 U.S. 396 (1961). ............. 30

_ Factietee Products, Inc. v. FTC, No. 61 (October .

Worm, 1006) 3560 ci.c cs csccecesessvstecsvccvncs 16.

¢ H. Robinson Co. and Nash-Finch Co. FTC Dkt. No.

cre Trade Reg. Rep. 1965-67 Transfer Binder,

WUE. boc cnosc0cceé be cnstacvedenbensreas nets 6, 41

Rollins .v. Halverson, 257 Ia.. 399,° 132 NW. 2d° 465.

(Sup.-Ct. Towa 1965) 2.0... ce eee ee ee eee eee +.B 2D -

Social Security Board v. Nierotko, 327 U.S. 358 (1946 14-—

* State ex rel. Green v. Edmondson, 23, Ohio Dec. 85

(Ohio Common Pleas, 1912) ..............6... 25

State ex rel. Hill v. Ponder, 221 N.C. 58, 19 S.B.2d 5 =

(Sup. Ct.. N.C. 1942) 20. ccc reese cseeceenees 25 -

State v. Lane, 26 hiss 434 fica. Ct. N.C. atea Aneta

WIBC, Inc..v. FCC, 259 F.2d 941 (D.C. Cir. 1958) .

Zoning Comm’n v. Ogden, 307 Ky. 362, 210 S.W. Sa.

by sc e, ae ‘ Index Continued

.. | Pons

The Telephone Cases, occupying ‘volume 126 USS.

SE anc kaka nase Geach, Sudanese kan week eee 28 .

T.1.M.E., Inc. v. United States, 359 U.S. 464 (1959) 19

q Tobin v. Ramey; 206 F.2d 505° (5th Cir. 1958) ..... ws

: United States v. Ballin, 144 US. 1 (1892) ........ 26°

| United States v. Carolina Fretght Carriers Corp., 315

Uh, COMED x on cu ood anne uckideces ues =

771 (Ct. App. Ky. 1948) ..... ‘cvanteaess ra 7

SraTuTEs, ReorcaNization Puans anv Rute:

Act, of February 24, 1855, ch. 122, 10 Stat. 612 ....... (82

'. . _. Aet of August 6, 1856, ch. 81, 11 Stat. 30°...... aes a

s Act ‘of March 3, 1863, ch. 92, 12 Stat. 765........ est 32

2 " Act-of April 10, 1869, c. 22, ¢1, 16 Stat. 44 ........ ae

}. _Aet of June 23, 1874, ch. 468, 18 Stat. 252............ $2.

<6 “Act of February 4, 1887, ch. 104 Pt. I, §17, 24 Stat. |

ae 4 EC aa kates ehieserkh en ck bean enw es Sore 33

“Act, of August 5, 1909, ch 6, 36 Stat. 105 .......0.... 32

Act of July 5, 1935, ch. 372, § 3,49 Stat. 451 :.....5.. 33

Act of June 29, 1936, ch. 858, § 201, 49 Stat. 1985 . 34 ©

Act .of June 23, sali ch. 120, Title I, §101, 61 Stat ?

SE bape ch se Rak nade SOABEG NRA IA SASS se <a ae

Clayton Act, Sections 2(c) and 9(d), as amended by the

a Robinson-Patman Act (49 Stat. 1526) as amended, :

15 U.S.C. §§ 13(c) and (d) ........ 2, 3, 4, 5, 6,7, 41, 42 .

~ Federal Trade Commission .Act, 38 Stat. 717, as

SU, Be UR BSE an xs wsnnixeccccccnnacs 10

2 el! . eerrrrrrerr er 03. 16 ©

DE, UE oo nk nics cxnceddecasweeseen 36, 37, 38

BP. SER WUE. wcu sneer dsnecbasncs er Ty eee eon 34

8 LS 2 ERS RRP reer a 7 vane ein Alle hey 28

ee onc Cisse un sc beaks dau wkhtenWabewar 31

ee EE ks cn wa coe ead in sdausns euudalcck 32

Awe “a —— Bina j ‘i as Rb We eee erica anne OS Rn el inc SE Aes RI panes

| Page

es 7a) reer ery rer. Serer rs 39

BD UB. GIGB1 2... icc cence ences eg scccerececces 33

Oe Vee SB OAE Rack ke de ncn Or eh Oa eee 34

Bis FoR | Pere errr ere Terre yreccrc © 34

OD Tie BERTIE) AOE) 5 oo eke cciscesysss Rr eee oe 33

is ee pS re Selb een chase fe

50 U.S.C. App. § 1217(b) (1951) ........ cece een ees 33

FETC Rules of Practice for Adjudicative Proceedings, 4"

"16 C.F.R. §§:4.20-4.22 (Supp. 1963) ............ 38

Reorganization Plan of 1950, eff. May 24, 1950, 15 F. R.

7 ER ge ere eer eee 34

Reorganizatiori Plan No. 4 “i fea ee .30, 38.

Reorganization Plan No. 7 of 1961, eff. aed 12, 1961, R

~ 26 F.R. 7315, 75 Stat. 840 apr Cee Pee ce 34

Miscinzanaous: : | oo oe tee

51 Cong. Ree. 11089 (1914) .....-... Pre Pe errr “12

_ §1 Cong. Rec. 11092 (1914) ........ baneeea as eek a 13

61 Cong. Ree. 12150 (IDLE): . oo re cece seceee as we:

51 Cong. Rec. 12623 (1914) ........ Cindwheseies <a. oes

‘Cushman, Constitutianal Decisions by. a Bare Major-__.

wy of the Court, 19 Mich. L. Rev. 771 (1921) . 29

Coskinni, The Independent Regulatery Commissions

(1951) kh dk Ohh die CAPPS UN O06 4A es Cas « ke 11, 12,13

Warren, Legislative and ‘Judicial Attacks on the Su-

preme Court of'the United States—A History of

the Twenty-Fifth Section of the Judiciary ae oF

Amer. L. Rev. 1, 23, 165 (1918) .

IN THE |

"Supreme Court of the Yrdited States

- OcTOBER TERM, 1967

No. 20°

— - :

_~ -~FeperaL TraDE Commission, Petitioner,

o. : v.

FLotiL, Propvcts, Inc., Respondent.

.On Writ of ienaak: to the United States Comat of Appeals

. ' . > for the Ninth Circuit |

‘BRIEF FOR RESPONDENT

‘

. QUESTION PRESEN TED.

Whether a minority consisting of two members of

the five-member Federal'Trade Commission is’ author-

ized by. statute to issue an enforceable adjudicatory

order of the Commission.

STATEMENT OF THE CASE

This is an administrative proceeding arising upon a

petition to review and set aside or modify an,order to

cease and desist issued by the. Federal ‘Trade. Commis-

sion, petitioner, against Flotill Products, Ine. (‘‘Flo- -

eae

6 : ss \

| ; 2.

é ‘

till’’), respondent,! fer violating Sections 2(c) and

2(d)} of the Clayton Act, as amended by the Robinson-

Patman ‘Act (49 Stat."1526; 15 U.S.C. 13(¢) and (d)). |

On August 6, 1958, the Commission issued.a.two-

canner of fruits and vegetaNes, with having made

payments ‘in lieu of brokerage ™& violation of Section’

count complaint. charging ‘aes a small California

— e).and discriminatory promotional payments i in vio-

. fation of Section 2(d) of the Robinson-Patman Act.

After full allministrative proceedings, the Commis-

sion, on June 26, 1964, issued a ‘‘final order’? dgainst

-‘Floiill for violations of these two a of the Act.

_ (R, 1-2)*

. Only three . Commissioners participated in the de-

-eision culminating: in the issuance of the order of the

Commission. Each filed a separate opinion. } Chair-

‘man Dixen’s opinion. purported to be the opinion of

the Commission, Hut neither of the other two Com-

missioners joined in it; each separately concurred in

and dissented from different parts of the Chairman’s

opinion. (R. 4-42)

With respect to Section 2(c), Chairman Dixgp and

Commissioner Elman agreed with the examiner’s find-

‘1 hree of its officers were also named individually as respond-

ents, but the Court of Appeals dismissed the complaint as to them.

(R. 57- 8) Sincé no appeal has been taken from that part of the

order below, these individuals are no longer parties to this case,

although the Commission’s brief in this Court sossiealoeeed lists ‘,

them in the caption. (See Com. Br. 5, n. 3).

20Qn that date, there were four active members on the Com-,

mission: Paul Rand Dixon, Chairman, Philip Elman, Everette

MacIntyre, and John R. Reilly. The single vacancy was filled on

Qetober 17, 1964, with the recess samme of ss Gardiner

J ones.

‘

. ings and conclusion that. certain transactions involving

- field brokers did not violate Seetion 2(¢), though they

did so for differeyt ‘reasons. (R. 5-10, 34-36) Com-

: missioner MacIntyre, in a separate opinion, dissented

from this holding. (R. 40-42) . ies

On another portion of the Section 2(¢) charge, how-

ever, Chairman Dixon’s opinion, with Commissioner

MacIntyre: concurring, concluded that a 214 per cent

allowance for advertising and prdémotion paid by Flo-

till to one customer (Nash-Finch Company) in 1955 ©

~ Yeally constituted ..an unlawful payment ‘‘in lieu of

brokerage’? in violation of Section 2(¢). (R. 10-19, _

40). Ina dissenting opinion, Commissioner Elman dis-

agreed, finding nothing in the record to show that the:

‘proyiotional allowance, given. by Flotill to Nash-Finch, ~

was an unlawful allowance in lieu of brokerage. (R..

36-39) -Thus, a minority of only two of the five-mem-

ber Commission found Flstill guilty of a violation of

; Section 2(c).*

' Commissioner Reilly did not participate in the ease °

‘for the reason he did not hear oral argument.’’ (R. :

3) Commissioner Jones had not yet been appointed to

the. Commission. — : es 3

; o.* ¢. .

Flotill filed a petition for reconsideration of the

opinions and order of the Commission, pointing out

_ that the order relating to Section 2(c)- was invalid. be-

cause it was not supported by a majority of the. Com-

mission, and urging “that_the Commission reconsider .

the Chairman’s opinion and the order .issued. there-

~ * 8On the Section 2(d) issue, Chairman Dixon and Commissioner

MacIntyre agreed that a violation had been established (R. 19-24) ;

Commissioner Elman did*not join in the Chairman’s opinion but

concurred in the result. © (R. 39, n. 13) enge

undér, that the Commisaion hear reargument before

4 the full Commission, and that Commissioner Reilly and . *,

| oo the fifth Commissioner, if appointed, participate in a

. reconsideration of the case whether or not reargument

is granted. (Record in Court of Appeals, vol. 1, p..125).

“The Comfnission, however, with ““Commissione? Elman

- not coneurring’’, denied the petition on September 3,°

1964. (R. 43) .Whilé acknowledging that only’two of. | oe

three participating Commissioners had eoncurred’ in‘ ’

a... - the finding of a violation of Sectien 2(c), the order of .

\.° >. + denial stated: ¢ | >

These three participating ‘Commissioners cénsti-

* tuted a quorum for the transaction of business in

accordance with the Commission’ s rules and in

the absence of a statutory provision relating there- —

~ to.. Drafh v. Federal Trade Commission, 239 F.2d

; @ 452 (D, . Cir. 1956), cert. denied, 353 U.S. 917.

4 A ma jotity of a quorum; is éufficient to sustain the *

a validity of a final order of an administrative ey

' Frischer v. Bakelite Corp., C. C.P.A. (Patent 4a

39 F. 2d 247 (1930), et “denied, 282 U.S. 852.

Since two of the three participating Commissioners

: a goncurred in the issuance of the final order, re--

; ' spondents’ argument on this point must be de- -

nied. (R. 43). |

On review, the Court of Appeal for the Ninth Cir-

cuit réfused to affirm that part of the orfler relating

_ to Section 2(e) because it was not, supported: ‘by..a °

majority of the Commission. -(R. 45- 60). After ex- ;

amining the authorities and arguments: put forth by

the parties, the court below dé@vided that ‘‘three mem- .* °, *

bers of 4 five member commission must concur in order °

to enter a binding order on behalf of the commission.’’

(R. 48) J

In its opinion, the Osaet of Appeals considered the =~

_ decisions relied upon by the Commission, particularly , * :

= advanced by the Commission (R: 49-52), the Court

‘

. 5

Atlantic Refining. Co. v. FTC, 344 F. 2d 599 (6th Cir.

1965), cert. denied, 382 U.S. 989 (1965), Drath v. FTC,

239 F. 2d 452 (D.C. Cir. 1956), cert. denied,-353 US.

. 917 (1957) and Frischer & Co. v. Bakelite Corp., 39 ¥.

2d 247 (C.C.P.A. 1930), cert. denied, 282 U.S. 852

(1930). In acknowledging the contrary conclusion

reached by the Sixth Circuit in Atlantic Refining. Co. .

-y. FTC, supra, the court. below pointed out that ‘‘the

court in Aflantic Refimng both misconstrued the FTC:

» yule and relied upon a case, Drath, supra, whieh is not .

shown to be in ‘point.’?. -(R. 48-49) In Drath, the

- “issue in the instant case was’ not. raised inasmuch as

three members of the, Commission. had. agreed to the

order issued.‘ In other words, as. the court below .

stated@the two-sentence statement in Atlantic Refin-

ing contained only ‘¢a ‘bare conclusion’’ and the court

- there made ‘“‘no attempt to support its position in

reason.” (R.49) \ A

The Court of Appeals below als§ found the decision

in Frischer c: Co. v. Bakelite Corp., supra, inapposite

because the rule that a majority of a quorum is suffi- —

cient to act’applies only to nonjudicial bodies and

therefore does not ‘govern decisions of a statutorily

created administrative triburial like the Federal Trade

- Commission.” (R. 49) i‘

After discussing and rejecting additional arguments -

of Appeals concluded that the. Section 2(c) segment

of the order was invalid, but it did not set it aside or”:

. deny’ enforcement. (R. 52) Instead, it remanded

‘‘the Section 2(¢) vatithy to the Commission for

~ further hearings to déternifne whether a majority of

the Commission desire to enter such an‘order.”’ (Ibid.)

[In doing so, it added: .

( :

. o's ° .

\ bad >

7 » ‘ »

e ” x : -

. .

- , 2 ad

. .

Se RAT LO ate) Eo oe tated waeecend Ye Cte at tives 27S lated ytlerabtaes WED ss hele BE VI

. .

e «th

“¢

“Le i ee ee )

‘We express"no doubt as to the validity of the

Commission’s practice of conducting hearings be-

fore less than the full membership. ..We sa aay only .

‘that an order of the Commission must: be sup-

_portéd-by three members in order to constitute an:

enforceable order of the FTC. Two of five i is too.

‘few.”* (BR. 52)

Ina brief’ dissenting pias) Judge Hamley stated

that it was ‘‘too late in-the day’ “to. ‘challenge a Com-

mission practice ‘‘in effect for forty . years”’ ’ where

‘*Congress has not seen fit to negate. that construction

by enacting-égislation expressly prohibiting the. Com-

- mission from acting through a majority of a three-

member quorum, ” (CR. 58) © | oe

On. petition ‘of the’ Commission: for a rehearing en

bane, the Ninth Circuit, yoting five to our, ‘affirmed

the panel decision per curiam. €R. 61-6

In the meahtime, while this cdse was on appéal, the —

- - Commission initiated action against Nash-Finch Com> -

pany in an enforcement proceeding on the identical ~

- transactiop relied upon by the two Commissioners ‘in

Flotill for the Section 2(¢) violatioh. See C. H. Robin-

son Co. and Nash-Finch Co., FTC Dkt. No. 4589, The

only difference’ between the two proceedings was that

in Flotill the Commission proceeded against the seller,

- Flotill, whereas:in the second case it proceeded against

the buyer, Nash-Finch Company. In the second pro-

ceeding, the same documents were introduced and the

same witnesses testified, or had their testimony *stipu-

lated; as appeared in Flofill. When on: February 7,

1967 the Nash-Finch Company’s case came before the

Commission, this time four Commissioners MacIntyre

_ not participating) consideréd the same evidence and

"ordered the ease closed. (A summary of the order is

itt .

spotted in Trade Reg. Rep. 1965-@ Transfer Binder, |

, ‘ ° 17,842.) Thus, on the identical transaction, two Com- |

_ missioners (Dixon, and. MacIntyre) in 1965 found a

violation of Section 2(c), whereas’21% years later four

Commissioners (Dixon, , Elman, Reilly and J ones)

did not find any violation.

be,

SUMMARY OF ARGUMENT

Federal .Trade Commission authorized that body to

issue finial adjudicatory orders by less than a concur-

rence of a majority: of its constituted membership. In"

the 1914 organic act establishing the Commission, Con- °

. Bress created a quasi-judicial body, delicately-balanced

in political representation so'as to preserve its inde- ° .

pendence and prestige. in refidering decisions in the -

‘enforcement of broad prohibitions against unfair com- ©

- . petition, tradg’ restraints and discriminatory practices. °

Congress desired that the- Commission’s decisions be

thade by collective and representative juidgment so that:

they would command publie confidence, particularly on

the part of the business world. By staggering the

terms of office of the Commissioners, limiting. the con-

ditions. of removal, and.. other provisions, Congress

further sought to protect the stability, objectivity, and

- competenc&of the Commission as a body in the exercise *

‘of its vast-judicial powers. To this body of experts

' Congress delegated all powers, to be exercised solely by

_ the Commission as a whole, expressly providing as the ;

. only exception the existence of ‘‘a vacancy.’’ Thus,

for the Commission to exercise its judicial powers by

a minority of two of its five Commissioners is plat

Po o This easepesent a. basic issue of statutory juris- ;

-diction“whether the statute ereating the five-metnber ng

4 ‘\

contrary, to bad: statute’s Jurisdictional language, its .

| fee ; ° ie Vie ie ; 4

} “ , @. °

—overall - design _ ‘the poliey ebjectives embodied a

therein. |

The Commission edintt that there 3 is nothing in the-

enabling statute expressly authorizing action by only

two Commissioners, but’ argues that such jurisdictional

authorization has been granted by implication. (Com.

Br. 9) First, it contends that sueh authority should be .

.implied from the provision conferring power on the

Commission to make -rules and regulations governing

.. its- procedures. .But, as the ‘court below correctly

pointed out, ‘a “question of basic statutory jurisdietion

- cannot be decided by, reference to procedural rule-

making authority. ~ (R. 51) In any event, the quorum

“rule adopted by the Commission in: 1915 does not

answer the jurisdictional question here ; the rule relates

only to. actions by a majority of the Commission’s five

‘members, not to minority actions on a two-to-one basis.

Nor is there support in the decisional law for the

‘minority rule: In the very decision relied upon by the

Commission; Prischer & Co., Inc. v. Bakelite Corp., 39

F.2a-947 (C.C.P.A. 1930), cert. denied, 282 U.S. 852

. (1930), the court distinguished. between minority de-

cisions rendered by adjudicatory bodies—which are

improper absent statutory authority— and such de- |

cisions by other governmental bodies and corporations.

This Court ha8 ong recognized the. ‘‘predominantly

‘© quasi-judicial”. character of the FTC’s work. See

Hapnrey v. United States, 295 U.S. 602,624 (1935).

"As for the three federal appellate decisions involving

the FTC, they are either not helpful or. irrelevant.

Drath v. FTE, 239. F.2d 452 (D.C. Cir. 1956), cert.

denied, 353.U.S. 917 (1957) ; Atlantic Refining Co. ar

FTC, 344 F.2d 599 (6th Cir. 1965), cert. denied, 382.

; 3 R

U. S. 939. (1965); : Bivens v. FTC, 366 F.2d 117 (5th

Cir. 1966). The-first (Drath) is plainly inapposite, as

it irfvolved a decjsion in which three Commissioners ~

had eoncurred; the second (Atlantic Refining) reached

a conclusion contrary to that of the court below by ‘mis-

construing the Drath decision ; and the third (LaPeyre)

also involved an order in which three Commissioners. -

had concurred.

This is not a case in which it,is necessary to refer to,

the cOmmon law to interpret the. enabling statute, since

it fixes the jurisdictional bounds of the FTC by vest-

ing all powers in the Commission as a body. However,

if reference is made- to the gommon law, the proper

rule is (contrary ,to the claim$ of the Commission) that

~ ‘stated by the Frischer court for judicial bodies—that ~

_ absent statutory or constitutional provision, a majerity

of the membership is necessary for binding legal de- _

cisions by the body. . >

Ineredibly, the Commission argues that congressional

‘ailenos since 1915 constitutes ‘‘implied approval” of

the Commission’s minority- -decision practice. The mat-

ter has’ never been brought to the attention of Congress. °

- In fact, while it is not known when the*FTC started

‘its two-to-one voting practice (the earliest case dis-

‘closed is 1963), the issue was first raised outside the

Commission i in 1965.

BM a Equally without merit i is the attenipt to ‘cimply ap- i.

proval”’ from the fact that Congress has provided for ”

— quorum requirements—in statutes dealing with other 2

. courts and -administrative agencies. .Indeed, if any

inference is to be drawn from the pattern of legisla-

tion, it is that since Congress has not fixed-a quorum

permitting the FTC to act by less than a majority, it

t- . ‘é é

WI ALI SS oi sah 00s IE Gk |

eo. Pe Oe ene ere

plainly intended that the Commission should act only

~ by the concurrence of a majority of its full mem-

bership.

* Finally,.after exhausting all arguments based on the

theory of implication, the Commission falls back on

the assertion that administrative practicalities of

‘Commission operations require decision-making on a

_ two-to-one basis. The'argument simply does not with-

stand analysis. The Commission’s own compilation of.

its two-to-one decisions discloses their inherent weak-

ness. They.are almost invariably. appealed, and in the

large majority of cases reversed in whole or in part.

The result is only delay, expense and uncertainty. ©

Moreover, other five-member courts and agencies (€é.g.,

the Court of Claims for over 90 years) have operated

with the majority-of-the-membership rule without en- _

countering the difficulties imagined by the Commission. -

. ARGUMENT

ae THERE IS NO STATUTORY AUTHORIZATION FOR A MINOR-

_ ITY OF TWO OF THE FIVE MEMBERS OF. THE FEDERAL |

-- TRADE COMMISSION TO ISSUE ADJUDICATORY ORDERS. .

A. Congress, in the FTC’s Enabling Statute, Delegated All J u-

dicial Powers to a Five-Member Bipartisan Commission to

‘ Secure the Benefits of the Collective and Impartial Judg- .

ment of a Body of Experts Acting ey of Execu- .

tive Control.:

The Federal ‘tet Commission was established by

‘Congress in 1914 as an independent regulatory agency.

The enabling statute provides for the organization of

the Commission. (38 Stat. 717, as.amended, 15 U.S:C.

§41) It-creates a Commission composed of five mem-

bers appointed by the’ President and confirmed by: the

Senate for a term of seven years. The terms are so

’ arranged that no two terms expire in the same year.

The Comtniinaidingrs are nat subject to removal by. the

President except ‘‘for inefficiency, neglect of duty, or

malfeasance in office.’? _Not more than three Commis-.

sioners may be members of the same political party.

Originally the Chairman of the Commission was elected _

‘from the membership to serve for one,year but since

1950 the President has designated one of the Commis-

_ sioners to serve'as Chairman. The organi¢.act further |

| provides: ‘SA vaeancy in the commission shall not —

impair the right of the remaining commissioners 0

exercise all the powers of the commission.”? (Ibid.)

These various provisions in the enabling statute dis-

close that Congress, in settfng up the Commission, de- ©

signed a delicately-balanced body composed of five

metners. In deciding in favor of a body composed of

‘‘several persons’’, Congress sought to guarantee the

prestige and independence,.as well as the, impartiality, |

of the Commission. The terms of the five Commission-

ers w deliberately staggered so as to achieve sta-

bility, continuity ‘and consistency in the — work

- of the body of Commissioners.

In his classic work on the independent regulatory

commissions, Professor Robert E. Cushman quotes at .

considerable. length from the legislative history °

_ ing to the formation of the Federal Trade Commission,

‘ showing the reasons why Congress decided in favor of

a multi-headed commission instead of a single-headed

agency to regulate the conditions of eémpetition in-the

economy. (See Cushman, The Independent Regulatory

~ Commissions €1951), esp. pp. 177-213.) In the Senate.

Report, on the Federal Trade. Commission ae ice is

stated: | | °

f One of the chief advantages of the proposed

commission over the Bureau of Corporations lies

cd .

> ae

in the fact that it will have netes prestige and

independence, and its decisions, coming from a’

board of several persons, will be more réadily ac- ~

cepted as impartial and well considered. For this |

-. reason also it is essential that it should not be open

to the suspicion of partisan.“direction, and this

bill provides, therefore, that not more than three

members of the commission shall belong to any. one

political party. (51 Cong. Rec. 11089 (1914),

quoted in Cushman, supra, pp. 195-96) *

Professor Cushman cites other. legislative history ,

showing that the elements of ‘Atability and continuity

were ‘among the major reasons.for the proposed set-up

ofa five-member commission: ‘‘With an independent

regulatory body whose members held for - substantial

and overlapping terms of office; continuity of policy

and stability of administration methods could be built

up. In no other way could there be secured the ‘con-

tinuous, consecutive, consistent administration of the

antitrust law.’ ’’ (Cushman, supra, at P. 192, se 57.

— Cong. Ree. at 12623 (1914).)

The quasi-ju icial nature of the proposed trade com-

mission’s work constituted a further argument for its

independence. Senator Newlands® had from.the be-

ginning regarded this as a basic reason for creating an

independent body. He-expressed this view in 1911, and

in 1914 he repeated it as follows:

; ' The first question is: Shall an Linherebiite trade

commission of some kind be organized ? Ti imagine -

*As Cushman states : «The two ideas,'a commission and in-

dependence for the commission, ee bound together. aie

(Cushman, supra, p. 188)

5 Senator Francis T. Newlands of Nevada was the ‘earliest. and

most influential’ sponsor of the federal: trade commission idea.”’

(Cushman, supra, p. 181) - .

OBS Tit ee hm tis De tates it REAR CE ic th a i is al De ntew Mode mK é PTE ae OR aR RL DLR BO AE nb LN

amy,

ania ASD loc Sana nas na A el TS sate Datei tt ones

| 13.

that there can hardly be any differences of opinion

on the point that there shall be an administrative .

tribunal of high character, nonpartisan, or,. rather,

bipartisan, and independent of any department of

‘the Government. I assume also that there should

be a commission rather than one executive official,

because there are powers of judgment and powers

of discretion to be exercised. The organization

should be quasi-judicial in character. We want

traditions; . . ..we-want a body of administrative

law built up. This can not be well done by the

"single occupant of: an office, subject to constant -

. changes in its incumbency and subject to- higher.

executive authority. Such work must be done by

a board or commission of dignity,. permanence, °

and ability, independent of executive authority,

ex cept in its selection, and independent in ¢har-

acter. (51 Cong. Ree. 11092 (1914), quoted ‘in

Qushman, supra, p. 190) - *-

This Court, toa, in Humphrey v. United States, 295

U.S. 602 ( 1935), stressed the judicial character of the

Commission’s work‘ and the various ways in which “

_ Congress protected the Commission’s independence

from -executive_and legislative control. As stated by.

this Court: “ The Commission is to be nonpartisan ;

and it must, from the very nature of its duties, act

with entire impartiality. ‘It is charged with the en- -

forcement of no policy except the policy of the law. -

Its duties are neither political nor executive, but pre-

dominantly: quasi-judicial and quasi-legislative. ” Ud.

at 624) Additionally, this Court stated ‘‘that the com-

mission should not be open to the suspicion of partisan.

direction’? but, in the words. of Senator Newlands, ~~

should be ‘‘a board of commission of: dignity, perma-

nence and ability, indeperident of executive authority, ’

except in its selection, and independent i in character. sat

(Id.-at ea : :

“ae

a- o

| SS is settled law that the ‘Commission, as a creation

Congress, has only the powers bestowed upon it by

its constituent legislation.* Congress specifically pro-

vided -that the Commissionshould be a quasi-judicial

body composed of five members, not dominated by any -

; political party, and able to continue functioning even

in the case of a vacancy. It proyided ffirther that the

; Commission should act as a body or en banc, not in

ae panels, thus assuring that its decisions would be ren-

| dered by at least a concurrence ef a majority of the

entire body. Congress did not in any way authorize

the Commission to act through a nfinority of its mem-

-_..... bers. . It did not specify any quorum rule which would

.° permit valid action by concurrence of.a mere minority .

of two of the Cor mission’s five members.’ ;

“Indeed, to alloAv a minority of two Commissioners to

‘act on behalf. of the entire five-member Commission in

the carrying out of its judicial functions would defeat

the very ends which Congress sought to achieve in the

earefully-drafted enabling statute; namely, ‘the i impar-

tiality, independence, continuity, and consistency in

the judicial work of thesCommission. in applying the ©

antitrust laws. A decision by only two members could

.qn no sense be regarded as the impartial judgment of

Pe entire body of experts. Certainly; as for the parties -

Affected, they would not, in the words of the Senate Re-

port, supra, p. 12, ‘‘readily accept”’ a decision- of .only

_.two members of ‘the Commission “fas impartial and ©

~ well considered.” Nor would cue) decision be ac--

; “6 See, e.g., East Texas Motor “Freight Lines v. Frozen Food Ex- ©

’ press, 351 U.S. 49, 54 (1956); Social Security Board v. Nierotko;

.3827 U.S. 358, 368- 70 (1946) ; United States v. Carolina Freight Car-

riers Corp., 315 U.S. 475, 489 Sasol ar

a . prinnsidedet tind a 5s MR ANE IAT NN i ign tt i C3 EDO BA 3 5s hari ‘

Se nia hn att Stas ia eh act

’

cepted as from ‘‘suspicion of partisan direction.”’

In partichlar, where the two controlling Commissioners

happen to be from the same political party, the decision —

would not be regarded as being either bipartisan or

nonpartisan since any opposing views would be de-

' prived effective expression. And if the opposing views

were expressed in a lone dissent, this wéuld-only-ac- .”

-centuate the partisan quality of the decision, since the

dissent could not possibly affect the 2 outcome until the ©

next time the same issue was presented in another case

to the full Commission. In recognition of these factors,

. . the Court of Appeals below rightly said: ‘‘It is difficult

to believe that Congress conceived. of five-member

FTC. with its politically balanced make- , permitting

two of its members to’speak for the Commission, and

failed to specifically provide enabling legislation.’ "

(R. 61)

_ Moreover, a rule sanctioning decision-making by a

-, minority of two Commissioners would open the door, |

to executive control, thereby: jeopardizing the very

independence of the Commission which Congress sought

to preserve by warious safeguards in the enabling stat- .

ute. In any situation where a minority of two Com-

' missioners gained control of the Commission, the Presi-

dent could perpetuate this condition by simply taking’

no action in the appointment of new Commissioners to

fill existing vacancies. A practice of decision-making.

by two Commissioners also threatens the important

values of continuity. and consistency in thd judicial

work of the Commission. Obviously, a decision on an -—

important or novel question of law; such as the broker-

age.issue involved-in the instarit case, when rendered

by only two of the five members of the Commission, is

inherently unstable and subject to reversal or modifica-

- —- a ; ®

a ah ees 16

_ tion on the next occasion when a majority of the Com-

mission renders a decision on the same question.

We submit that it. is clear that Congress, in creating

the FTC, vested all powers in the Commission as a

body, contemplating that its judicial functions would

be exercised by the’ Commission acting en bane and—

with at least a coneyrrence of a majority of its mem-

bers. Nothing i in the statute, either in its wording, its

essential design, or its basie policy objectives, supports

a conclusion-that Congress intended that a minority of

two Commissioners should be permitted .to act, on be-

half of the.entire Corgmission.

B. The Statutory Provision Governing the Rule-Making Power

of the FTC Does Not Authorize a Minority of the Commis-

sion to Issue Adjudicatory Orders. :

The Commission admits that there is nothing in the

enabling statute expressly authorizing two Commis- |

sioners to, act on behalf of the Commission, but argues

that such authorizatio“ should be inferred from the

commonplace statutory. provision (15 U.S.C. § 46(x))

‘governing the Commission’s power to ‘‘make rules a

_regulations for the purpose of carrying out the pro-- .

visions’’ of ‘the statute. (Com. Br. 9).

The question of whether a majority or minority. of

- the Commission must concur in the exercise of its

judicial functions does not involve a simple matter of ©

_ procedural rule-making. It involves instead a basic

question of statutory jurisdiction. The Solicitor Gen-

eral advised this Court, in Purolator. Products, Inc. v.

FTC, No. 61 (October: Term, 1966), that: it would be-

appropriate to consider the less-than-majority issue

also posed in- that éase, even though the petitioner had

not raised the point in the Court of Appeals, since ‘‘the «

lashes PROT ee Ty eee Pa Ea ee eee ee ee

17 eat

question whether the C6mmission’s: order was valid

because-a majority of its members had not concurred

‘therein may4nvolve the juri diction,of the Commission —

.”? (Supp. Memorandum, \p. 2; see also p. 3) (em--

phasis added):

+ The court hallow also adhered to this hisdtenkakal

distinction. ‘While recognizing the propriety of an :

administrative agency to determine its own procedures,

the court pointed out that the-sqme principle did not

apply in the case ‘‘where the php

51): Here we are not dealing with matters peculiarly

within the expertise of the Commission-or involving a

broad statement of policy which Congress has assigned *.

to the Commission for detailed interpretation: (See

: FTC v. Ruberowd Co., 343 U.S. 470, (484-87 (1952). )

The Commission further seeks to validate the minor-

= ity-supported order on the ground that the Gommission

has had a rule in effect since 1915 that a majority of

-the Commissioners constitute a quorum for the trans-

action of business. (Com. DF. 14) * This argument

‘raises a false issue. Flotill has never ‘contended, nor

for that matter did the Court of Appeals below hold,’

that a majority. of the: Commission could not transact

business when there were vacancies on the Commission.

"The validity of that proposition is really not in issue

“in this case. As-thé Court of Appeals stated in’ its —

opinion below: ‘We express no doubt as to the vakidity

_ of the Commission’s practice of conducting hearings be-

fore less than the full membershiyi. We say only that

an order of the Commission must be supported by three’

members in order to constitute an enforceable order of

the FTC.’’ (CR. 52) |

blem: relates to the ;

interpretation of the FTC’s enabling legislation.’’ (R. .-

eign areata

xt Shi at SNR RRWA biel ket aia ICO

‘

a ET eT

“18 °

Despite ‘this explicit statement by the court’ below,

the Commissioh, in its brief in this Court, erects’

elaborate series’ of arguments (some advanced fo the

of the Gommissioners may lawfully transact business.

-None of these arguments goes to the real issue; namely,

- first time) to defend the préposition that a majority |

whether a minority of two Commissioners may act for ’

the Conimission ‘when only three Commissioners par.

- ticipate in the proceeding.

The problem arises not fro the Commission-made

quorum rule itself, but from the interpretation which

the Commission now gives to its quorum rule. It claims

that not only .i is a majority of the Commission entitled

to transact business, for the Commission but “that a

“majority of a quorum of three may issue ‘a valid ad- |

judicatory order. “By giving this interpretation to its

quorum rule, the Commission tries to justify action ©

by a minority ef two Commissioners where only three

Commissioners participate in an adjudicatory pro-' .

_. eeeding. :

Adtualiy, we do not know. when. the ideation. first’ .

_-attached this interpretation to its quorum rule and

. _ started issuing adjudicatory orders concurred in by

only two Commissioners. On the basis of the informa-

tion contained in the Commission’s brief, the earliest

~ eited case. of such a two-to-one order is Luria Bros. a

‘ Bip. 3 243, decide in 1963. (See Com. Br. > APP.

B at.p. 33).

In any event, the fact that the Commission ee been vi

_ engaged in the practice of minority decision-making

” for five, or even more year's, does not provide a basis _

. for asserting that Congress intended the Commission to. :

. oc

~ 3

so act. ‘It is ail recognized that an pilsainigtentive

interpretation, regardless of the time it may have been

in effect, does: not become the ruling law on the issue

‘if the initial interpretation was erroneous or ‘without

. authority. See 7..M.E., Inc. v. United States, 359~ —

U.S. 464, 475-78 (1959) ; County of Marin v. United —

States, 356U.S. 412, 420 (1958).

C, The Decisional Law Does Not Show That Congress Au-

thorized a Minority of the FTC to Issue Adjudicatory

Orders.

“Contrary to the Commission’ s position i in this Court

- and below, the Federal decisions repeatedly cited by it

do not ‘constitute ‘express judicial. sanction’”’ for. the

Commission’s minority practice, nor do they show that.

_ Congress has indicated its approval of the Commission

practice. ° Although -the Commission’ has placed its.

heaviest reliance upon Frischer & Co., Inc. v. Bakelite

Corp., 39 F.2d 247 (C.C.P.A. 1930), cert. denied, 282

- U.S. 852 (1930), that decision.in fact supports the

- ruling of the court below. In that case the-court enun-

ciated. the following rule applicable to tribunals per-

forming adjudicatory functions:

Where courts are concerned, it has been uniformly

held, so far as we can. ascertain, that a clear ma-

jority of all the legally constituted members there-

_, of shall concur or no valid judgment may be

entered except such as may follow no decision. (Id.

at 255; citing cases) |

In Slacker, the court held that a ‘Tariff Commis-

‘sion’s recommendation to the President signed by three

of six Commissioners was valid even though this was

not a majority of the total membership because the

4 -

q ;

‘.

= x o & ee ee

Raid BT Ee Soataa RRs S ent tn ods - "

“Tariff ‘Commission was not exercising adjudicative

functions.

Aduniiniptresive agencies like the Tatiff iat aia.

the court said, differ from courts in that they ‘exercise

‘only the administrative aarrm delegated’? and are

‘without judicial powers.” (Id. at 254) The signifi--

‘eant distinction under Prischer, therefore, lies in’ the

difference between adjudivatory and administrative d

functions. In. the landmark\case of Humphrey V.

United States, supra, this Court held that the functions

of the Federal Trade Commission were “predominantly

uasi-judicial and quasi-legislative. ” (298 US. at

~ 634) ‘The Commission ‘“‘cannot in any proper sense.

be characterized as an arm or an eye of the executive’ -

and ‘‘[t]o the extent that it exercises any executive,

'' function—as distinguished from executive power in the

constitutional sense—it does so in the discharge and

« . effectuation of ‘its quasi-legislative or quasi-judicial

"«. powers, or as an ageney of the legislative or judicial |

department of the government.” (Jd. at 628)

The clear distinctién. bétween the nature of the func-

tions performed. by the. Tariff Commission, 48 stated in

Frischer, and the functions of adjudicatory agencies

such as the, Federal: Trade Commission, was clearly set

forth by Justice Cardozo in Norwegian Nitrogen Prod-

ucts Co, v. U nited States, 288 U.S: 294 (1933). In that

~ ease this Court, faced with the question of the nature

of the “hearing” that the Tariff Commission was re-

- quired to afford parties, held that the question turned

‘on the nature of the functions performed, i.e., the —

‘procedures ‘‘must be adapfd to the consequences that

- are to follow, to the attack and the review to which ~

their orders will be spe * (id: at 319) The Court —

21.

‘pointed out that 6 rt] he Tariff Commission advises;

these others ordain.’”? (Id, at 318)’ The ‘‘others”’

specifically. referred to by the Court. were. the Inter- —

state Commerce Commission ‘‘when regulating the con-

duct or the charges of interstate carriers, and that of |

the Public Service Commissions of thie states when

regulating the conduct or the charges of public service

Commission with:which Frischer dealt, erigages in non-

adjudicative, or advisory functions, while the Federal

Trade Commission ‘“‘ordains’”’ ‘in the ‘true judicial

sense, issuing cease-and-desist orders ‘comparable to

equity’ injunctions of the-federal courts in enforcement :

of the antitrust statutes.

In the instant case, the Commission was functioning

as a judicial tribunal. It adjudicated Flotill’s tights

- and duties and placed it under an enforceable cease-

-and-desist order running in perpetuity for which civil .

and -criminal penalties may be assessed for violations.

thereof. As recognized by the court in Frischer, such

a tribunal cannot: enter a valid judgment. except upon ~

the concurrence of a ‘‘clear majority of all the legally

. Gonstituted members.’’ (39 F.2d at 255)

The other case upon which the Commission relies

heavily is Drath v. FTC, 239 F.2d 452 (D.C. Cir.

1956), cert. denied, 353 U.S.'917 (1957),® but that case

clearly is not in point. In Drath three Commissioners

(and, therefore, a “males Commission) agreed

7 (Emphasis added) The Court’s reference here is to the fact

that the Tariff Commission dees not adjudicate or make final de-

_ cisions’; it only, makes recommendations to the President, who

may adopt or reject’ them.

8 Frischer and Drath were the only. two decisions cited by the

’ Commission in denying Flotill’s petition. for a Tehearing. (See

R, .43) vs .

_corporations.”” (Id. at 317-18) lainly, the Tariff ©.

OIA AT se OT Sih, OR AR DAES Eg ge Ay tee >

tt ote ad Ms rhe

So cna Banta gerbes hw 2 tee

to the order issued. On appeal Drath. urged that ‘“ex-

cept when there is a vacancy in its membership, the

Commission can act in its adjudicatory capacity only

; when all five members participate.’ ”” (Cd. at 454). The .

issue in this case, however, is whether less than ama-

jority of the Commission has authority to act for and

in the name of the Commission. .

“The Sixth Circuit, in an earlier case (Atlantic Re-

fining Co. v. FTC, 344 F.2d 599 (6th Cir: (1965), cert.

_ denied, 382 U.S. 939 (1965)), did reach a conclusion

: contrary to that of the court below, but as the court

below pointed out, ‘‘the court.in Atlantic Refining

both misconstrued the FTC rule and relied upon a

ease, Drath, supra, which is not shown to be in point.’’ _

(R. 49) In Drath, as noted above; the issue in. the

-instant case was not raised inasmuch as three member's

of the Conimission agreed to the order issued. Thus,

as the court below observed, the two-sentence statement

in Atlantic Refining contained only ‘‘a bare econclu-

sion’’ and made ‘‘no attempt to support its position in

reason.’’ (Jbid.)°

Lastly, the Fifth Circuit, in a case where‘a majority

of three of the five FTC Commissioners concurred in

the final order, mistakenly. said, by way of a dictum,

that ‘‘[t]he rules of the Federal Trade Commission

®.Three other decisions dealing with federal agencies which the

Commission cites are not in point since they deal with concurrences

by a majority of the agencies’ total membership or with a stat-

utory quorum. See Braniff Airways, Inc. v. CAB, No. 20,160

(decided April 12, 1967) (D.C. Cir.) (concurrence of a majority

of three of five members) ; ; Gearhart & Otis, Inc. v. SEC, 348 F.2d

798, 801 (D.C. Cir. 1965) (concurrence of three of the five com-

missioners) ; WIBC, Inc, v. FCC, 259 F.2d 941 (D.C. Cir. 1958),

cert, denied, 358 U. S. 920 (1958) (concurrence of a majority of-a’

statutory quorum ; three of seven commissioners held insufficient).

aa | ae ° =

f > - pans me aah ar og RM ta Sh ee tS, ml Cy ty te

P ‘ay ‘s . Ss GA cin one *

provide for decision by the majority of panels of three

members,”’ LaPeyre v. FTC, 366 F.2d 117, 122° (5th

Cir. 1966). In response the dissenting judge expressed

‘‘disagreement’’ with the court’s statement that “a

_ minority of the Commission can make adjudications’”’,

adding: ‘It seems to me that the Congress gave the

Commission no such power and I think it cannot as-

sume a power not granted.’’? (Jd. at 123)

- D. The Common Law Does Not Sanction Decision-Making By

: Less Than a Majority of a Tribunal Exercising Judicial

Functions. ae

__ Inereating the FTC, Congress in the enabling statute

delegated all powers to a five-member commission as

_ Such, thereby providing that the Commission could not

issue a valid order without the concurrence of a ma-

jority of its members. Hence, this is not a case where

there is an absence of congressional action which re-

) peel court to look to the common law. However,

even if reference is made to the common law rule, that

rule is not the one urged upon the Court by the Com-

‘Mission but rather is one in accord with the result

reached by the court below. .

Referring to the Commission-made quorum rule, the

Commission contends:

’ It is merely an adoption of the traditional common

law rule, applicable to government bodies and cor-

porations—and. even to Congress itself—that,

_ absent specifie statutory provisions to the contrary,

a simple majority of an institutional body consti-

tutes a quorum which can transact business and

bind the body by the concurrence of a majority of

those participating.- (Com. Br. p. 6; emphasis

added) . ,

We do not question-the accuracy of this statement of |

the comnion law as'applied to ‘‘government bodies’’ and ~

corporations, but ‘‘government bodies’’ does not in-

elude tribunals exercising judicial functions. The

FTC, when enforcing the Clayton Act, clearly acts as

an adjudicatory body whose functions arg comparable

to those of a court; they are not comparable to a repre-

‘ sentative or soliGoa! body such as a legislature or town

: psd The functions of a judicial body are markedly

ifferent from those of -a legislature or a private cor-

poration. . The common law recognizes this basic differ-:

. ence-by creating two different rules relating to qiuorums

Ye DeFoster nile dri seit

_—

ac B SRR ALLY A ai ats Ae Mie AG AN aN aD es 5 i tN

. ;

ala tee il i

and the effect of actions by quorum majorities. As

shown earlier, for judicial-tribunals, the common law .

requires a higher standard.than that applicable,to gov-

- ernmental or political bodies. It requires the conecur-

rence of a majority of all the members of the tribunal

_ for binding legal decisions. Therefore, if it is neces-

sary to look to the common law in.this ease, then it is

this common law rule relating to judicial tribunals

_ which must be. applied.

The. critical ‘distinction between. courts and luatine-

tive bodies: other than courts’? was stated. by the’

federal court in Frischer & Co. v. Bakelite Corp.,

supra. There, as pointed out. earlier, the court stated

that in the case of judicial bodies ‘‘it has been uni-

formly held, so far as we can ascertain, that a clear

majority of all the legally constituted members thereof

shall concur or no valid judgment may be rendered

except such as may follow no decision.”” (39 F.2d

at 255) The Frischer court cites numerous cases in.

support of the statement of the common law rule. In

its brief in this Court, the Commission, however, cites

no cases holding that the common law rule applicable

to judicial bodies at the time of the 1914 enactment. of

the FTO Act'is other than that stated in Frischer. We

have éxamined all the cases cited in the text and in

footnotes 8, 9, 10 and 17 of the Commission’s brief and,

‘with one exception, explained later, all of them refer.

to either nonjudicial bodies, such as public works

boards,” real estate commissions,” school boards,”

county zoning commissions,” councils,** transit boards,”

municipal corporations,"* boards of tax commission-

of one member of five-member board of public works held invalid); .

State ex rel. Hill v. Ponder, 221 N.C. 58, 19 S.E.2d 5 (Sup. Ct. N.C.

1942) (county highway commission) ; Plymouth Coal Co. v. Penn.

sylvania, 232 U.S. 531 (1914) (a state tribunal dealing with public

safety in coal mines and composed of an-insSpector and two engi-

‘neers, the inspector and one engineer may act over the dissent of

the other engineer) ; State ex rel. Green v. Edmondson, 23 Ohio

Dec. 85 (Ohio Common Pleas,.1912) (county building commission).

_ 1 Kaiser v. Real Estate Commission of District of Columbia, 155 -

. A.2d 715. (Mun. Ct. App. D.C. 1959), aff'd, 286 F.2d 642 (D.C.

Cir. 1960) (held. proper for two members of a three-member Real

Estate Commission to -conduct business). : :

2 Gunnip v. Lantenklos, 33 Del. Ch. 415, 94 A2d 712 (Ct. of ~

Chancery Del. 1953) (school building program board) ; Bray v.

- Barry, 91 R.I. 34, 160 A2d 577 (Sup. Ct. R.I. 1960) (school com-

mittee) ; Rollins v. Halverson, 257 Ia. 399, 132 N.W.2d 465 (Sup.

Ct. Iowa 1965) (county board of eduction). os

18 Zoning Comm'n v. Ogden, 307 Ky. 362, 210 8.W. 24 771°(Ct.

App. Ky. 1948)° (zoning commission ).

\ Adkins v. Citizens’ Board of City of Huntington, 112 W. Va.

, 171, 163 S.E. 853 (Sup. Ct. App. W. Va. 1932) (a city citizen’s

board. composed of 21. members) ; Martin v, Lemon, 26 Conn. 192.

( Sup. Ct. Conn. 1857) (action of “one member of three-member .-

. town coymittee invalid).

- 5 Codman v. Crocker, 203 Mass. 146, 89 N.E. 177 (Sup. Jud. Ct.

of Mass. 1909) (city transit commission). '

16 Barnert v. City of Paterson, 48 N.J LL, 395, 6 Atl. 15 (Sup. Ct. *

N.J. 1886) (municipal corporation).

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4 3" le gislative bodies" and other nonjudicial bodies,”

| or bas the numerous decisions of two-member quorums

of three -judge . courts * and to decisions of courts ~

where the enacting law provides for a quorum.”

The cases dealing with three-judge courts are of no

- value in deciding the issue in this case, since the ma-

_ jority of the quorum of a three- judge court is the ; same

as the majority of the entire membership. Nor is it

a. C. pene Co. v. State Tax Comm’n, 109 Utah 563, 168 P.2d

324 (Sup. Ct. Utah’ 1946) (state statuté providing that a majority

of the tax commission is a quorum for transacting, business) ;

Cooley v. O’Connor, 12 Wall. 391 (1871) (held proper for two

members of a three-membér board of tax commissioners to econeur

and sign a certificate of sale of land).

18 United States v. Ballin, 144 U.& 1 (1892) (majority vote of a

quorum in Congress) ; Missouri Pacific Ry. Co. v.' Kansas, 248 U.S.

276 (1919) (two-thirds vote a quorum of each House in- Con-

gress in overriding a Presidential veto).

19 Herring v. City of Mexia, 290 S.W. 792: ('Fex. Civ.-App. 1927)

(city commission) ; Borough of Oakland v. Board of Conservation &

Development, 98 N.J.L. 806, 122 Atl. 311 (Err. & Ap. N.J. 1923)

(conservation board) ; ‘Democratic-Farmer-Labor State Central

Comm. w. Holm, 227 Minn. 52, 33 N.W.2d 831 — Ct. Minn.

1948) (political convention).

2% Tobin v. Ramey, 206 F.2d 505 (5th Cir. 1953) (held proper

for two members of a three-judge panel to hear oral argument and

,decide a case, the absent member writing the opinion). :

21 Alltmont v. United States, 177 F.2d 971 (3d Cir. 1949), cert.

denied, 339 U.S. 967 (1950) ( five members of a seven-member court

of appeals comprised a quorum under the federal statute, 28 U.S.C.

% § 46(d), and all fivA were unanimous in their decision) ; Floyd v.

Quinn, 24 R.I. 147, 52 Atl. 880 (Sup. Ct. R.f, 1902) (held constitu-

tional for state legislature to provide’ for the seven-member Su-

preme Court to sit in divisions) ; Davidson v. State, 221 N.E.2d 814

' (Sup. Ct. Ind..1966) (state constitution providing that a major-

. ity of the Supreme Court shall form a quorum, a-two-to-one deci-

sion: may be rendered where the other two members of the five-.

member court are non-participants).

en cites AD wins as astearseo tose

et helpfub to refer to decisions relating to bodies whose

"+ quorums are fixed by statute or constitutional provision.

The lone exception is a split decision by the Supreme

Court of Colorado in 1920—six years after the -pasSage-

of the FTC Act—in Mountain States Tel. ¢ Tel. Co.

: V. People, 68 Colo. 487, 190 P. 513 (1920). In that:

' ease. the court held, in a three-to-two décision, two

judges not ‘participating, that the Colorado constitu-

tional réquirement that the ‘seven-member Supreme ”

Court sit en banc to decide constitutions] issues, did.

not prevent a quorum of five to sit en banc with three .

judges concurring on the decision, The underlying

basis of that decision, however, is such that it is of

no precedential value-in the resolution of the issue

presented in this case.. j ;

In the first place, the decision did not involve the

‘ application of the common law but rather the interpre-

tation of the Colorado Constitution, for which purpose

the court relied on an old State statute requiring the

presence of a quorum of the Supreme Court for the

transaction of business. Secondly, the case authori-

ties relied upon by: the Colorado court do not support :

a rule that the majority of a quorum consisting of ‘a

majority of a court may validly act. Taking up each of ©

the cited cases, the dissenting opinions pointed out that

one involved the decision of a single member of a seven-

judge court,” the other six disqualifying themselves; a

see involved the urfanimous decision of two mem-

hers of a three-judge court; * a third involved a four-. °

’ to-two decision of an eight-member court on a pro-

22 Commonwealth v. Mathues, 210 Pa. 372, 59- Atl. 961 (Sup. Ct.

Pa. 1904). : tes ~

28 State v. Lane, 26 He 434 (Sup. Ct. N.C. 1844).

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cedural question where the State statute specifically

provided for a ‘six-member quorum;* and a fourth

involved a four-to- three decision of this Court under

a congressional statute: providing | for a. six-member

| quorum.”

Finally, the Mountain States decision was, of course, | i

rendered in 1920, so whatever interpretation is placed 4

upon the holding it has no common law relevance at

time of the enactment of the F‘FC Act in914.

On‘'the other hand, there are other decisions and

secondary sources supporting the common law rule

stated in Frischer that courts may act only by a ma-

jority of their legally constituted membership. In

Johnson vy. State ex rel. Brannon, 1 Ga. 271 (1846), the

Georgia Supreme Court, in nullifying an order by a

minority of a ‘five-member court said: ‘‘The law, or-

~ganizing the Inferior Court, constitutes five justices.

the court. We hold a concurrence of the majority of

the whole number necessary to the validity of that ac-

‘tion.”’ (Id. ‘at 274) Similarly, in Paine v. Foster, 9

Okla. 213, 53 P. 109 (1896), where only three members

of a'five-member court were sitting and all three could

not concur on a reversal, the Oklahoma Supreme Court.

affirmet the lower court.

This Court, before Congress -dstablished a specific

statutory quorum,”* adhered to a long-standing rule set —

forth by Chief. J ustice Marshall in New York v. Miln,

= * Oakley v. Aipimoall, 3 NY. 547 (Ct. Naa N.Y. 1850):

aad The Telephone Cases, occupying volume 126 U. gi (1888).

. 26 A quorum of the Supreme Court consists of any six J ustices.

(28 U.S. C. §1) This requirement originated in the Act of April

10, 1869, e. 22 § 1,.16 Stat. 44, and has continued in oe law since

that time.

| 29 |

9 Pet. 85, (1835), and Briscoe v. Commonwealth's.

Bank, 8 Pet..118, (1834) :

‘The practice of this court is not (except in cases

of absolute necessity) to deliver any ‘judgment in

cases where constitutional questions are involved,

unless four judges concur in opinion, thus making»

_ the decision that of a majority of the whole court .

seven at the time]. Tee ai

e need for formalizing such a rule requiring -the

gonecurpenée by a majgrity of the entire membership ~.

of th¢ Supreme Court “when deciding constitutional

issues has been dealt with at’ length by two leading .

“constitutional law authorities: Charles Warren” and . .

Professor Robert E. Cushman.” Historically, the rule

resulted from the public furor which followed the Su-.

preme Court’s decision in Green vy, Biddle, 21 U.S. 1

(1823), that certain Kentucky statutes deading with

land title were unconstitutional. Several charges were

made that the decision Was concurred in by.a minority --

of the Court, although Warren shows that this was not |

actually the case.” In any event, both Warren and *

Cushman aétribute the ““majority-of-the-court”’ rule-

expressed“by Chief J ustice’ Marshall in 1834 to the

. Court, 19 Mich. L. Rev. 771 (1921).

controversy aroused over the ‘‘seemingly”’ minority

decision eleven years earlier in Green v. Biddle, supra.

_. The ‘‘majority-of-a-quorum”’ rule urged by the Com-

mission as applicable to decisions by the five-member

‘

?? Warren, Legislative and Judicial Attacks on the Supreme Court . ~

of the United States—A History of the Twenty-Fifth Section of

the Judiciary Act, 47 Amer. L. Rev. 1, 23, 165 (1913), pase

= Cushman, Constitutional Decisions By a Bare Majority of the i

29 Warren, supra, at p. 23.

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. FTC has no support in the cases or other authorities.

\ cited in its brief. If the common law is to be looked to

at all, then the proper rule is that stated by the Frischer .

‘eohet for judicial bodies—that absent statutory or con-

_ stitutional, provisions as to quorum votes, a majority

— the membership is necessary for banding: legal <a

cisions by the body-- .

- *

E. The Inaction of Congress: Since 1914 Does Not Constitute \

“Implicit Approval” of the Commission’s Practice of Is- \

| omy: Adjudicatory Orders by a Minority of Its Members,

; Finding*no express ‘authorization in the. enabling

statute for its minority -practice, the Commission .ad==—-.

‘vances the remarkable contention that congressional

silence since 1914 ‘‘amounts to implicit.approval’? of

the Commission-adopted quorum rule and its two-to-

_- ment, ‘‘Congress cannot be presumed to be ignorant?’ ~

of what the Commission has been doing, yet it has not

. . Sepapsecd any disapproval’’ or “taken any step to.

- curb’’ the Commission’s minority practice, even though «

Congress had ‘“‘an opportunity to do so’? when FTC. .*’

Reorganization Plan No. 4 went-.into effect in 1961.

(Ibid. - In substange, the Commission. claims that

Congress | has acted by taking no action.”

First of all, there is no basis for presuming that Con:

gress knew of, and therefore approved, either implicitly:

or otherwise, the two-to-ene decision practice of the-

30 This contention is made here for the first time. “tt was not, -

. urged below. (See R. 50-51) 2

. 1 As this-Court has counselled, ‘it may often be diaky business |

# to attribute significaf®e to the inaction. of Congress.’’ Power

Reactor Dev. Co. aay ied Union of Elec. Wy erkere, 367 U.S.

396, 409 (1961). “i é

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FTC. In fact, it is not even publicly known when the

Commission first started issuing two-to-one adjudica-

tory orders. The issue first came to Jight outside the

» Commission in 1965 when the legality of such orders

was raised on appeal in Atlantic Refining Co. v. FTC,

supra. ‘As far as we know, at no time, either before

or after 1965, has the question ever been brought to

the attention of Congress. Surely, in these circum-

stances, no valid inference of approval can be drawn’ ~—

from the silence of Congress. eh te

Both before and since the enactment of the FTC Act

“+ in 1914, Congress has enacted} specific~quorum rules

- (permitting concurrence by’ less -than a majority of

members) for courts and for administrative agencies

exercising -judicial authority. If any inference is to

be drawn from the pattern of legislation,. it is that

Congress, not having specified a quorum permitting |.

. action by less than’a majority of bodies plainly in- @

tended that it should act only b he*concurrence of.

majority of ite’ full fnembershiis, Pa 7

_ Congress, in establishing this Court, originally made),

no provision for a statutory quorum. _ In 1869, w- me

_ ever, it fixed the quorum by statute to consist of any

~ quorum for the United States Coutts ‘of Appeals to ~

“consist of a ‘4majority”’ of any panel or en banc court.®

In the case of the United States Court oft Claims?

there is a special history regarding its statutory «

quorum. When the court was first created in 1855, it

32 See nate 26, Dp. 28, supra. t fA

>.9828 U.S.C. § 46(d). | | . ieee

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consisted. of, three members but the statute was silent

onthe matter of a quorum. In 1856, Congress pro-

: vided that any two of the three judges ‘shall consti-_

tute. a quorum, and may hold-a court for the transac-

tion of business.’’* ‘In 1863; the court. was enlarged

_ to five judges but no change was made in the two- ..

judge quorum requirement.*® In 1874, Congress cor-

rected the apparent oversight and provided that any

‘three of the five judges of‘ the court ‘‘shall constitute a

quorum; Provided,.That the concurrence of three —

judges shall be necessary to-the decision of any case,’’

me This quorum rule remained in effect. from 1874 to 1966,

‘when the court was enlarged to seven mémbers with

special quqramn provisions.*

In 1909, when. Congress created the five-member

Court of Customs Appeals, it modelled the quorum rule

after that of the Court’of Claims statute, providing:

‘Any three of the [five] members of said court shall

constitute a. quorum, and the concurrence of three

members of said court shall be necessary to any de-

- eiston thereof.’’ ® This, provision is still in. atiaet

today.

is Congréss has authorized various administrative |

- agencies to act by less than a majority, but.it has al-

‘ways done so by. express statutory provision. The

* * Act of February 24, 1855, ch. 122, 10 Stat: 612. .

5 ‘Act of August 6, 1856, ch. 81, 11 Stat. 30.

86 Act of March 3, 1868, ch. 92, 12 Stat. 765.

87 Act of June 23, ‘1874, ch. 468, 18 Stat. 252.

9828 U.S.C. § 175. é.

eleven-member Interstate Commerce Commission ad

and the five-member National Labor Relations Board *.

“are expressly empowered to delegate authority to

three-member panels. The five-member Atomic Energy

Commission is authorized by statute to transact busi-

ness when there are ‘‘at least three members present”;

‘And its actions ‘*shall be determined by a majority vote

of the-members present.’ * The statute creating the

‘five-member Renegotiation. Board/ specifies that three -

members ‘shall constitute a quorum” and that all -

powers may be exercised ‘““by a majority of the mem-

bers present if the members present constitute at least

4 quorum.’’* In other eases the: statutes simply fix -

statutory quorums: Federal Communications Commis- -

- “The Act of 1887 creating a five-member ICC provided: “

majority of the Commission shall constitute a quorum for. the trans-

action of business.’’ (Act of Feb. 4, 1887, ch. 104, Pt. I, § 17, 24

Stat. 385). In 1906, the membership was increased from 5 to. 7, -

in 1917 from 7 to 9, and in 1920 from 9 to 11. In 1917, the ICC

was authorized to sit’ in three-member ‘panels. On each occasion :

of an increase. in the membership, Congress provided for quorum, .

~~ actions by a majority of thé Commission. Presently the law pro- °

vides that ‘‘A majority of the Commission, of a division, or of a.

“The. Act of 1935. creating a three-member NLRB provided

that ‘‘two. members’’ shall ‘‘constitute-a quorum.”’ (Act of July.

5, 1935, ch. 372, §3, 49 Stat. 451). In 1947, when the Board was

provide that ‘‘three members”? shall ‘‘constitute a quorum.”” The

same act also authorized the Board to set up panels of ‘“three or

"more members,’’ in which case ‘two members shall constitute a

quorum. ”’ (Act of June 23, 1947, ch. 120, Title I, § 101, 61 Stat.

139),

*2 49 U.S.C. § 2081.

**50 U.S.C. App..§ 1217(b) (1951),

‘e

WARRlew ide :

sion (quorum consists of four of seven members) ;

: Civil Aeronauties Board (quorum consists of three of

five members) ; “ Federal Power Commission (quorum is

| consists of three of five members). ia

On the other hand, the law provides that three of

the. five members of the Federal Maritime Commission

“shall constitute a quorum” and that “the affirmative

votes of any three Commissioners shall be sufficient for

the disposition of any matter which aie come before

the Commission.’’ “7

This statutory . survey ‘shows that Congress has not

followed any uniform practice: in fixing statutory \

quorum requirements for the various federal courts \

and administrative agencies. It has set forth specific

_ statutory requirements, depending uporf the tribunal’s

size, composition, functions and overall policy objec-

tives. It is important to. note in this connection that

44 47 U.S.C. § 154(h).

#49 U.S.C. § 1321(e).

4746 U.S.C. § 1111. In 1936, Congress ereated the United States

Maritime Commission, composed of five members, and provided

that *‘three of the members in office shal] constitute a quorum for

the transaction of . . .. business.’? (Act of June 29, 1936, ch. 858,

§ 201, 49 Stat. 1985) In 1950, the functions of the USMC were

transferred to the three-member Federal Maritime Board and it —

was provided that ‘‘any two of the members in office shall con-

. stitute a quorum for the transaction of the. business of the Board,

and the affirmative votes of any two members of the Board shall

be sufficient for the disposition of any matter.’’ (Reorganization

Plan of 1950, eff. May 24, 1950, 15 F.R. ,3178, 64 Stat..1273) In

1961, these functions were transferred ‘back to the five-member

Federal Maritime Commission, with the quorum requirements in-

dicated in the text above. ( Reorganization Plan No. 7 - 1961,

eff. Aug. ™ 1961, 26 F.R. 7315, 75 Stat. ree

. 85

the FTO differs in important respects from other ad-

ministrative agencies exercising judicial powers, For

the most part, the other agencies regulate a single

ee ; e . Y { - @ ;

aspect of.our economy, such as maritime, labor, securi-

- ties, shipping, air ‘travel, communications, power, or

- atomic energy. In the ease of the FTC, however, Con-

gress delegated to it the responsibility of regulating

the condition of competition in our entire economic

system. .The FTC was given unparalleled powers to

adjudicate individual eases and to enforce the broad

_ proscriptions covering ‘unfair methods of competi-

tion”’ and the Specific trade réstraints and .discrimina-

tory ‘practices enumerated in the Clayton Act. For:

this reason, when the Commission acts-in its judicial

capacity, it must speak with the authority of its full

membership.’ As shown by the’ legislative history,

Congress sought to gain the benefits of the expert

knowledge of the five members. of the Commission; it

expected the Commission to act as a bipartisan group,

48 Because the statute granted to the Commission such broad

power to adjudicate ‘‘unfair methods of competition,’”’ some Sena-

tors expressed the view that this awesome power should not be

given even to a majority of three of the five members of the Com-

mission. In the debates in the Senate, Senator Reed,.in directing

‘’ they may not do.’’ Later, while acknowledging the need to enforce

and strengthen the antitrust laws, he added: ‘‘I -would like to

will constitute a majority of the board.’’ (51 Cong. Ree. 12150

(1914). (emphasis added)

ie iti alone

+ 36

reaching collective and impartial judgments that would

be ‘‘readily .accepted”’ by all affected parties in the ;

business community.

. Equally. without merit is. , the contention that Re-

| organization Plan No. 4 of 1961 indicates ‘‘implied -

congressional approval’ of the Commission’s minority

decision practice. (See Com. Br. 17-18; 25-26) This

argument is unconvincing for several reasons:

(1) A. reorganization plan is virtually devoid of.

expressions of congressional intention because of the

special way ‘it becomes law. It does not follow the ~~

regular course of legislation, including the introduc...’

tion of. a bill, committee hearings and reports, debates

on the floor, and votes on passage, from which expres-

sions of congressional intention are normally derived.

'. Instead, such a plan becomes law. ‘by authority of the

Reorganization Act of 1945, as amended, under which

the President prepares and transmits the plan to the

- . Congress and_if no action of disapproval is taken by.

.. Congress within sixty days then the plan eevee ened

becomes law.”

(2) Reorgaitization Plan iis, 4 does sullonttak the

delegation -of authority within the FTC but only on

condition that such delegated action be brought before

- the Commission for review by ‘‘the vote of a majority

of the Commission less one’’ or upon the Commission’s

_ own initiative or upon the petition of a party or inter-

- venor in the action.” -Consequently, the full Commis-

sion is held responsible for any final’ action; even

though initially —s under the _— In trans-

495°U.S.C. § 1332-1-15..

80 Tbid. ea /

mitting the Plan to Congress, President Kennedy par-

ticularly stressed this safeguard guaranteeing review .

by the full Commission, stating that the Plan explicitly |

provides there is “‘reserved to the Commission as a:

whole the right to-review”’ any decision made pursuant

to delegated authority, either upon. the Commiission’s

Mitiative or upon the petition of a party or inter-.

// (emphasis added) He -added -that provision ,

is ‘‘afso made, in order to maintain the fundamental |

_ bipartisan concept explicit in the basic statute creating

decision radii the vote of a majority of the Com-

7 Nunissions; €ss one member.”?*? as

} In other words, if any inference js to be drawn from

the provisions of. the Reorganization Plan, it-is that

when Congress has authorized a delegation of authority

\ be exercised by less than a majority of the Commis-

‘sion, it his done so on the explicit condition that ‘such

‘delegated action be subject to final review by “‘the .

Commission as a whole.’’ i Pies |

(3) In all-events, the application of Reorganization

Plan No. 4 is academi here, for ‘the Commission did-

‘not act in this case under any authority ‘to delegate.

The Commission admits this fact. In this case the

Commission acted under its statutory authority to issue

a ndjudieatiry orders and under its own procedural *

. rules, in effect then and now, assuring respondents an -

" appeal from the initial decision to the: Commission for

- “815 U.S.C.A. § 1337-15,

"82. 1bid, |

58 Sée Com. Br. 18; n. 16: ‘‘The Commission’ did not purport to

act in this case under the authority: of Reorganization Plan No. 4

of 1961.’’ . a

iE ces a 2

plenary, de novo review by the full Commission.* Of

course, even if the Commission had acted pursuant to

delegated authority under Plan No. 4, it would have

had to do so ‘‘by published order or rule”’ and in ac-

cordance with the provisions in the Plan providing for

final review ‘‘by the Commissign as a whole.’’® ,

Il. IMPORTANT POLICY CONSIDERATIONS AND SOUND AD-

MINISTRATIVE PRACTICE SUPPORT THE CONCURRENCE-

OF-A-MAJORITY RULE. ~ . :

, As a last resort, the Commission tries to deferid its

two- to-one aedision practice on grounds ‘of administra-

tive necessity and efficiency. These arguments fall of

their own weight. . inistrative necessity and effi-

_-eency in this instance ean no more than administra- .

tive convenience.

Commission in many instances would be ‘‘completely.

unable to act during periods of double vacancy.”’

(Com. Br. 27) This is simply not so. Even in the

relatively rare ‘situation of a double vacancy (the last |

to occur at the FTC was over 30 years ago), the Com-

mission is not impaired from taking action by a con-

currence of three members. “But, it is argued, in such

eases the Commission would. not ‘‘know in advance’’

whether the. three members would concur, and if they

54 See, FTC Rules of Practice for Adjudicative Proceedings, 16

"OER. §§ 4.20-4.22 (Supp. 1963).

55 It is not clear that the authority granted the Commission by

Plan No. 4 to delegate functions ‘‘to a division of the Commission,

an individual Commissioner, a hearing examiner, or an employée

or employee board’’ includes the FTC’s’ basic adjudicatory | func-

tions since.all delegations are limited by the proviso that they shall _

not ‘‘supersede the provisions of ‘section 7(a) of the Administra- -

tive Proceduré Act.’’ (5 U.S.C. §133z-15)

did not concur, then a “‘rehearing”’ would be required,

causing ‘‘delay, expense and frustration.”’ | (Com. Br.

28) But this situation is really no different than that

when four Commissioners sit, or in that instance’ too

the Commission cannot know in advance whether there

will be an even division of two-to-two. And, if that

occurs, the Commission ean take no action. In either

event, whether three or four Commissioners sit, a

concurrence of thr@ is required.”* er ees

Of course, in this case, there was not even a need

to schedule reargument. At the time of the decision _

“'théré Was a’ fourth Commissioner available who could

have participated by merely reviewing the record.’ Yet,

the Commission’ ( Commissioner Elman not concurring)

_ refused to reconsider the case. *.

Actually, no showing -has been made-that the con-

currence-of-a*majority rule will adversely affect the

operations of the Commission. ’ Other five-member

- tribunals have functioned successfully under this rule.

For example, the Court of Claims operated under the

tule as a five-meinber court for over 90 years. So have

other courts and agencies, such as the-Court of Customs

and Patent Appeals (since 1909) and the Federal Mayi-

time Commission. N one of thesk_fiyé-member bodies

has encountered the difficulties imagined by the Com-:

mission.

— On its efficiency ‘point, the Commission refers to a

HS ee Ve ar ae Ty Grea

“40

Commissioners during ithe past § Six years. (Com. Br.

28, App. A) Seventeen of these cases are in no sense:

relevant here, as they all involved a concurrence of |

three members. Only 13.of the cases. were based on

two-to-one decisions. Even so, it is helpful to consider

what has happened to these 30 cases.

In the 13 two-to-one cases, 12 appeals were taketh

| from the’ Commission to the courts. Three appeals are

still pending. In 7 (including this case) of the 9 de-

cided cases; the orders were reversed xT whole or in

part by courts of appeals. Only two cases were

On the: other hand, in the 17 cases wheresthere’ was

a concurrence of three members, only four appeals were

lodged: three were affirmed and one is still pending.

Thus, where three concurred, no psa, eae

Based upon: the Commission’s own six \years of. ex-

pexience, it appears that where ‘orders are supported

by a two-to-one vote appeal is virtually a certainty;

and on appeal the large majority of orders will be

reversed, either in whole or in part. Viewing this: io

record from the Commission’s own point ‘of view, a

minority-supported order is unlikely to survive and

only two such orders have been affirmed on apes oe

the. last six years.

There is, therefore, very Aiiitle that can be asd ip

the name of sound adminiStrative practice for minor-

ity-supported orders; but, much can be said against -

“them. They are inherently unstable, at best temporary

in nature. The parties have no faith in such orders.

; ‘A court appeal is almost invariably taken because the

order does not represent the views of the majority of

the Commission’ and because the Commission may re-

acer

cP,

‘

, =

verse itself ‘on the next occasion when the issue'is pre- _—

' sented to a fully-constituted Commission. A minority-

_~ Supported order, in short; is really not an institutional

order at all. ie a dl “hes,

The instant case well illustrates the weaknesses that

inhere in a two-to-one decision, - After the Commission

_ issued its order in this case and ‘an appeal was taken

| _to the Ninth Circuit, the identical issue. involying the

¢. identical factual transaction and the same evidence

- Was presented in another proceeding td the Commission

(See discussion, p. 6, supra). On February 7, 1967,

the Commission, this time with 4 members participat-

ing, did not find a violation and closed the proceeding.

- - Also, on the point of law involving Section 2(c), the

‘ Commission (in 1966) recognized the correctness of the

dissenting views expressed in this case by Commis-

sioner Elman. In Empire Rayon Yarn Co. v. Ameri-

can Viscose Corp., No. 29,554 (2d Cir.), the Commis-

sion, at the request of the Second Circuit, submitted an

amicus curiae brief (dated May, 1966), in which it

stated : a area. 2

| .

. application «De pom 2(c) toe price differ-

ences, discounts of allowances has been done only

where the circumstances Surrounding the Power

price, discount or allowance granthd to the buyer,

; ‘such as, for example, the prior dealings of the

parties, the brokerage practices followed in the”

‘industry, or the selling methods of the supplier,

all .pointed. to the’ eonclusion that the ‘discount

or concession in reality constituted the passing.on -

to the buyer of g-s ving in a ‘brokerage or sales

commission, or. 4 payment in lieu thereof. (p. 9)

We thus have here a perfect ‘example of the transi-

tory quality of a minority-supported order: In less

than 214 years the Commission, acting through a ma-

Siatisyade me Bstonar

° -

NR Ri vatcled Shea Wile 3 nea alaae SOP Maa lelesa

Ne PERS ae LaKD ieee pa Deore oe De enter Satan | tt RRSP aa ah aii

t . *

oh:

jority; has reversed its prior Section 2(c) ruling in

this case, both ‘on the law and facts. Hence, we must.

assume that if’the full Commission were to decide the

instant, case today, it would-reach an opposite result. ,

Appropriately, thereforé, the Court of Appeals below —

‘remanded the Section 2(e) aspect of this case to the

Commission to determine ‘‘whether-a majority of the

Commission”’ desires to enter such‘an order, (R: 52)

—— Commissioner Ban just recently deplored the un-

fortunate results that .come about when only: two, |

Commissioners act for the entire Commission. | In

Beatrice. Foods Co., FTC Dkt. 6653, the- Commission ¢

instituted one of its most important antimerger cases

~ against the nation’s third largest dairy company. After

proceedings lasting dimost a decade, the Commission,

‘ on April 26, 1965, determined, in a unanimous opinion

of all five Commissioners, that various acquisitions of

the dairy company were illegal. While the order issued

in the gase was on appeal in the Court of Appeals, the

Commission, by a vote of two-to-one, with two members

not participating, accepted a ae order replacing

its original order, even though the action was approved

by only two Commissioners: In.a vigorous dissent,

Commissioner KIman stated, inter alia: a

en shall not discuss the merits of the consent

order, except to note that it falls substantially

short “of the rélief which the Commission, after

-- the most extensive and careful consideration, on ~

the basis of the findings of fact in the record, de-

termined to ve necessary in order to redress the

violations found. There is no reason to anticipate

frat the Commission’s decision and order would

not be sustained on review. It.is most regrettable

that the opportunity for sech review has now been

foreclosed by the action of a bobtailed Commission. _

43 |

‘Businessmen and th® bar, as well as the antitrust

enforcement agencies, would have benefited from a

Supreme Court decision in this test case, settling |

the rules of. law applicabl& to market-extension -

mergers. (Emphasis added) .

Kg 7 rl Rex

See dissenting statemeyit, Beatrice Foods Co.,. FTC

Dkt. No. 6653, Trade Reg. Rep. { 17,949 (1967).

| expediency, mot efficiency, -

ia Seftember 1967.

In-sum, a two-member minoritys opinion and order of

that it has no real precedential value. The respondent .

is virthally forced to take an appeal, thereby. subject-

ing both sides to more costs, delay, ‘and uneertainty.

’

‘On simply pragmatic. grounds, minority aétion is not

defensible or in accord with principles of sound judiciak®

administration, It does not foster efficient’ antitrust,

enforcement. It is, as experience ‘shows, a rule of 4

| CONCLUSION

For these Treagons the decision and judgment of the

Court of Appeals should be affirmed. i

; Respectfully submitted,

WituiaAmM Simon —

| JOHN Bopner, Jr, .

Ray SOBotzz

Howrey, Simon, BAKER .

~< & MurcHIson eo.

1707 H Street, Northwest

Washington, D. C. 20006

JEFFERSON E. Pryser

Suite 1616 Mills Tower

San Francisco, California

Attorneys. for Respondent

€

4 ¢

a ae

—

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