Notice and Request for Comment Regarding Compliance Assistance and Civil Penalty Leniency Policies for Small Entities

FEDERAL TRADE COMMISSION

Notice and Request for Comment Regarding Compliance Assistance

and Civil Penalty Leniency Policies for Small Entities

AGENCY: Federal Trade Commission.

ACTION: Notice of policies and request for comment.

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SUMMARY: The Federal Trade Commission is issuing two statements

describing its policies for assisting small businesses and other small

entities. These policy statements implement requirements of the Small

Business Regulatory Enforcement Fairness Act of 1996. The first policy

statement discusses the variety of mechanisms available for small

entities to obtain advice about their obligations under statutes and

rules enforced by the Commission. The second policy statement describes

the Commission's approach to reduction or waiver of civil penalties for

small entities in various mitigating circumstances.

Although these statements reflect policies that are already in

effect, the Commission is soliciting comments about them from

interested persons. If, after considering any comments, the Commission

determines to revise either policy, it will publish a revised policy

statement.

DATES: The policy statements were effective on March 28, 1997. Comments

will be received until May 12, 1997.

ADDRESSES: Comments should be identified as Small Business Policy

Comments, and sent to: Secretary, FTC, Room H-159, Sixth and

Pennsylvania Ave., N.W., Washington, D.C. 20580. Comments will be

entered on the public record of the Commission and will be available

for public inspection in Room 130 during the hours of 9 a.m. to 5 p.m.

FOR FURTHER INFORMATION CONTACT: Mary K. Engle, 202-326-3161,

Enforcement Division, Bureau of Consumer Protection; or Neil W.

Averitt, 202-326-2885, Office of Policy and Evaluation, Bureau of

Competition.

SUPPLEMENTARY INFORMATION: Part A, the statement of the Small Entity

Compliance Assistance Policy, is intended to explain to small

businesses and other small entities what assistance is available to

them from the Commission and its staff to help them understand and

comply with obligations imposed by the statutes and rules enforced by

the Commission. Part B, the statement of the Civil Penalty Leniency

Policy, discusses how the Commission expects to consider mitigating

factors in matters where small entities are subject to civil penalties.

These statements are issued in implementation of sections 213 and 223

of the Small Business Regulatory Enforcement Fairness Act (``SBREFA''),

Pub. L. No. 104-121, enacted March 29, 1996.

These policy statements provide guidance and information only, and

do not create any rights, duties, obligations, or defenses, implied or

otherwise. The Commission specifically retains its discretion for

determining how to proceed in particular cases. Also, while the

statements are drafted specifically with respect to small entities in

order to

[[Page 16810]]

provide clear information to those entities about the applicable

policies, comparable methods of providing compliance assistance, and

comparable factors for selecting civil penalty amounts (as applied to

the individual facts), may be used for larger entities as appropriate.

Part A--Small Business Compliance Assistance Policy

Under Section 213 of SBREFA, agencies regulating the activities of

small entities must establish a program to answer small entities'

inquiries and provide information and advice on compliance in

particular circumstances, when appropriate. Section 213 provides as

follows: Whenever appropriate in the interest of administering statutes

and regulations within the jurisdiction of an agency which regulates

small entities, it shall be the practice of the agency to answer

inquiries by small entities concerning information on, and advice

about, compliance with such statutes and regulations, interpreting and

applying the law to specific sets of facts supplied by the small

entity. In any civil or administrative action against a small entity,

guidance given by an agency applying the law to facts provided by the

small entity may be considered as evidence of the reasonableness or

appropriateness of any proposed fines, penalties or damages sought

against such small entity.

As discussed below, the Commission offers a comprehensive array of

services, involving both general guidance and individualized advice, to

help small entities understand their obligations under the laws and

regulations administered by the Commission.

(1) General Guidance

The Commission offers general information in a variety of forms to

address issues and questions that small entities frequently encounter.

Such guidance frequently will satisfy the needs of small entities for

guidance as to their own obligations. For example:

(i) The Commission has issued a brochure, entitled ``A Guide to the

Federal Trade Commission,'' that includes brief descriptions of the

principal antitrust statutes and consumer protection laws enforced by

the agency.

(ii) The Commission also issues many types of publications designed

to explain how small entities and others can conduct their affairs in

compliance with the laws and regulations administered by the FTC.\1\

These include materials specifically directed to businesses, such as:

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\1\ Currently, more than 50 such publications are available.

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(a) Business compliance guides explaining the requirements of

specific Commission rules in a non-technical manner;\2\

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\2\ The Commission has published compliance guides for many of

its Rules affecting small businesses, including the Franchise Rule,

Funeral Rule, Telemarketing Sales Rule, Telephone Disclosure and

Dispute Resolution (``900'' Number) Rule, and Used Car Rule.

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(b) Industry guides addressing common compliance issues under the

Federal Trade Commission Act, as applied to particular industries or

particular practices;\3\ and

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\3\ Over 20 such guides are available, including guides for the

use of environmental marketing claims, the feather and down products

industry, the household furniture industry, and the jewelry

industry.

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(c) Guidelines and policy statements explaining the application of

antitrust laws to particular practices or industries.\4\

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\4\ The Commission, jointly with the Department of Justice

(``DOJ''), has issued guidance on such issues as health care,

international operations, licensing of intellectual property, and

horizontal mergers. The Commission has separately issued guidelines

on promotional allowances and services.

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The Commission's industry guides and other guidelines frequently

contain specific examples and illustrative fact patterns that show how

the agency would apply the law to a particular set of facts.\5\

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\5\ For example, in the area of medicine and health care, the

FTC and DOJ have jointly issued guidelines discussing nine

frequently encountered subjects, such as physician network joint

ventures, and hospital joint ventures involving specialized clinical

or other expensive health care services.

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(iii) The Commission also produces and disseminates over 175 print

and broadcast materials that, while directed to consumers, can benefit

small businesses by identifying the practices that generate consumer

protection issues between businesses and their customers.\6\

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\6\ For example, in fiscal year 1996 the Commission distributed

3,970,828 copies of its print materials. Also, small businesses are

frequently consumers themselves; in particular, materials on such

topics as disclosures to prospective franchisees and office supply

scams that ship and bill for unordered merchandise can help small

businesses avoid problems.

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(iv) All these materials are readily available to small businesses

and other small entities through a variety of sources, including:

(a) Directly from the Commission. Materials on both competition and

consumer protection issues can be obtained by writing Public Reference,

Room 130, Federal Trade Commission, Washington, DC 20580, or by

telephoning the Public Reference Room at (202) 326-2222.

(b) Most Commission items are available through the Internet, at

the Commission's website at http://www.ftc.gov. The Commission is in

the process of making all of its business compliance guides and its

antitrust guidelines and policy statements, as well as its consumer

materials, available on the Internet. Industry guides, as well as

Commission Rules, published in the Code of Federal Regulations are

available at the U.S. House of Representatives Internet Law Library's

website at http://law.house.gov/cfr.htm.

(c) Materials also are available for distribution from the Small

Business Administration regional centers, and the Consumer Information

Center in Pueblo, Colorado.

(d) The BusinessLine section of the Commission's website provides

online access to all of the Commission's business education

publications. Similarly, the Commission's ConsumerLine provides online

access to all of the Commission's consumer education publications, as

well as the business education publications. In addition to being

accessible through personal computers, the ConsumerLine may be reached

from online services provided to the public at the offices of the Small

Business Administration and the U.S. Department of Commerce.

(e) Materials are made available to state agencies, the military,

schools and libraries, financial institutions, the media, and consumer

and non-profit organizations.

(f) Materials are made available to industry trade associations and

other business organizations. Frequently, business publications obtain

and publish Commission guidance, such as advisory opinion letters

(discussed below), in order to make the compliance information readily

available to industry members.

(g) Commission guidance can often be found in commercial

publications describing the Commission and its enforcement activities.

For example, the Statements of Antitrust Enforcement Policy in Health

Care are published at 4 CCH Trade Regulation Reporter para. 13,153.

(v) Other sources of information about the Commission and its

policies include staff and Commission advisory opinions, proposed

Commission consent agreements, final orders, and other formal

documents. These are available in the Commission's Public Reference

Room or by mail from Public Reference. Many are available from the

Commission's Internet website as well.

(vi) Commissioners and Commission staff members frequently give

speeches to business groups, and conduct programs geared to explaining

statutory and regulatory requirements and to

[[Page 16811]]

answering attendees' questions. Where the topics are of particular

interest to small business, these speeches may involve appearances

before groups representing small-business interests. Small business

groups may request speakers by contacting directly the office at the

Commission that specializes in the subject matter of interest. Business

groups may also request speakers by contacting the Commission's Bureau

of Competition, (202) 326-3300, or Bureau of Consumer Protection, (202)

326-3238. Copies of major speeches are available from the Office of

Public Affairs, (202) 326-2180, and also on the Internet at the

Commission's website.

(2) Individual Advice

(i) Small entities may also ask specific questions of the

Commission or its staff. Each substantive area under the Commission's

laws and regulations has one or more staff members who are responsible

for responding to compliance inquiries. A staff member may determine

that the agency's published material provides the assistance sought and

send that material to the inquirer. Where the sources of general

information are insufficient to provide the needed guidance or

assistance, the staff member may provide specific, informal advice or

arrange for a more formal response.

(ii) Small entities may make inquiries of the Commission by

telephone, letter, fax, or e-mail. Inquiry by telephone rather than in

writing is encouraged, since it is the agency's experience that the

give-and-take of a conversation facilitates understanding an issue. If

it appears that more detailed or complex information is needed to

address an issue, the FTC staff may then ask the caller to provide a

supplementary letter.

(a) Telephone inquiries regarding competition issues may be made to

the general inquiries number of the Bureau of Competition, at (202)

326-3300; and calls regarding consumer protection issues may be made to

the Bureau of Consumer Protection, at (202) 326-3238. From these

contact points, calls will be forwarded to the staff member best able

to address the particular issues presented.

(b) Written questions or comments regarding competition matters may

be mailed to the Office of Policy and Evaluation, Bureau of

Competition, Federal Trade Commission, Washington, DC 20580. Inquiries

may be sent by fax to (202) 326-2884.

(c) Written questions or comments regarding consumer protection

matters may be mailed to the Bureau of Consumer Protection, Federal

Trade Commission, Washington, D.C. 20580. Inquiries may be sent by fax

to (202) 326-3799.

(d) Persons who are uncertain which of these offices to contact may

write or call the Office of the Secretary, Federal Trade Commission,

Washington, D.C. 20580, (202) 326-2515. Inquiries may be sent by fax to

(202) 326-2496.

(e) Inquiries can also be sent by e-mail to the address of

``[email protected],'' where they will be reviewed and forwarded to the

appropriate staff person. E-mail requests for advice should include the

inquiring party's telephone number, again because it is the agency's

experience that a telephone conversation is often needed to resolve an

issue.

(f) In addition to the above sources of information, the

Commission's ten regional offices, which are listed below, also may be

contacted for information and materials regarding consumer protection

or competition issues:

Atlanta Regional Office, Suite 5M35, Midrise Building, 60 Forsyth St.,

S.W., Atlanta, GA 30303, (404) 656-1390 FAX: (404) 656-1379

Boston Regional Office, 101 Merrimac St., Suite 810, Boston, MA 02114-

4719, (617) 424-5960 FAX: (617) 424-5998

Chicago Regional Office, 55 E. Monroe St., Suite 1860, Chicago, IL

60603, (312) 353-8156 FAX: (312) 353-4438

Cleveland Regional Office, 668 Euclid Ave., Suite 520-A, Cleveland, OH

44114, (216) 522-4210 FAX: (216) 522-7239

Dallas Regional Office, 1999 Bryan St., Suite 2150, Dallas, TX 75201,

(214) 979-9350 FAX: (214) 953-3079

Denver Regional Office, 1961 Stout St., Suite 1523, Denver, CO 80294-

0101, (303) 844-2272 FAX: (303) 844-3599

Los Angeles Regional Office, 11000 Wilshire Blvd., Suite 13209, Los

Angeles, CA 90024, (310) 235-4040 FAX: (310) 235-7976

New York Regional Office, 150 William St., 13th Floor, New York, NY

10038, (212) 264-8290 FAX: (212) 264-0459

San Francisco Regional Office, 901 Market St., Suite 570, San

Francisco, CA 94103, (415) 356-5284 FAX: (415) 356-5284

Seattle Regional Office, 915 Second Ave., Suite 2896, Seattle, WA

98174, (206) 220-6366 FAX: (206) 220-6366

(iii) The FTC's Bureau of Competition has a special program to

provide advice to firms that must give premerger notification pursuant

to the terms of the Hart-Scott-Rodino Act. While premerger notification

is generally required only for larger transactions valued at more than

$15 million, some parties to such transactions may still come within

the definition of ``small businesses.'' Any firm required to give

notification (or that thinks it might be required to give notification)

may receive guidance on the proper procedures from the Premerger

Notification Office, in writing or by telephone, at (202) 326-3100.

Interested firms may also obtain from the Premerger Notification Office

a set of written guides describing the program and explaining how to

determine whether a particular firm must file.

(iv) The Commission also has a special procedure to provide advice

to small entities and other persons who are subject to an order of the

Commission. The Compliance Division of the Bureau of Competition and

the Enforcement Division of the Bureau of Consumer Protection are

responsible for overseeing enforcement of and compliance with the

competition and consumer protection administrative orders of the

Commission. The Commission's general practice is to send a letter to

each person subject to an order shortly after the order becomes

effective. In addition to describing the requirements of the order in

general terms, the letter also identifies and provides the telephone

number for a specific staff person who has responsibilities for the

matter. Staff of the Compliance and Enforcement Divisions are available

to handle telephone and written inquiries concerning outstanding

orders. For any small entity uncertain of which staff person is

responsible for its order, questions concerning the requirements or

scope of a competition order may be sent to: Compliance Division,

Bureau of Competition, Federal Trade Commission, Washington, D.C.

20580, and questions regarding a consumer protection order to:

Enforcement Division, Bureau of Consumer Protection, Washington, D.C.

20580. Telephone inquiries may be made to the Bureau of Competition

Compliance Division at (202) 326-2687, and to the Bureau of Consumer

Protection Enforcement Division at (202) 326-2996.

(v) If the above sources of advice are insufficient for the

inquirer's purpose, the Commission has procedures for providing, where

appropriate, either a Commission advisory opinion or, more commonly, a

staff advisory opinion.7

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\7\ 16 CFR 1.1-1.4.

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(a) Advisory opinions are intended to clarify the law applicable to

a course of action that the inquiring firm proposes to undertake, and

ordinarily are not appropriate where the requester is already engaged

in that course of action.

[[Page 16812]]

(b) An advisory opinion from the Commission may be appropriate

where the matter involves a substantial or novel question of fact or

law and there is no clear Commission or court precedent; or the subject

matter of the request and consequent publication of Commission advice

is of significant public interest. Otherwise, the staff will provide a

staff advisory opinion where practicable and appropriate.

(c) An advisory opinion, whether from staff or the Commission, will

ordinarily be considered inappropriate if the same or substantially the

same course of action is already under investigation or is or has been

the subject of current governmental proceedings; or an informed opinion

cannot be made, or could be made only after extensive investigation,

clinical study, testing, or collateral inquiry. Advisory opinions do

not answer hypothetical questions.8

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\8\ As previously noted, Commission staff on an informal basis

provide advice or guidance in response to inquiries.

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(d) The Commission may at any time reconsider the questions

involved and rescind any advice it gives in a Commission advisory

opinion. Nevertheless, the Commission will not proceed against the

requester of the advice respecting an action taken in good faith

reliance on the advice, so long as the requester presented all relevant

facts fully and accurately and discontinues the action promptly upon

notification that the advice has been rescinded. Advice rendered in a

staff advisory opinion does not bar the Commission from rescinding it

and, where appropriate, initiating an enforcement action.

(e) The advice given to a small entity may be considered in an

enforcement action as evidence of the reasonableness or appropriateness

of any proposed fine, penalty, or damages sought against that small

entity.

(f) It is often most efficient to make a telephone inquiry to the

staff person responsible for the relevant area, as described above,

before deciding whether to seek a formal advisory opinion. Persons

wishing to request an advisory opinion should submit a statement

identifying the requester and stating the question, the relevant

provision of law, and all material facts. The request and two copies

should be submitted to the Office of the Secretary, Federal Trade

Commission, Washington D.C. 20580. For further information, that office

may be reached by telephone at (202) 326-2515.

(g) For inquiries involving most types of issues under the Health

Care Guidelines, the agency has committed itself to preparing advisory

opinions within 90 days of the time that all necessary information has

been submitted.9 For matters on other topics, the time for reply

will depend on the complexity and novelty of the issues raised.

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\9\ See Introduction, Statements of Antitrust Enforcement Policy

in Health Care, 4 CCH Trade Reg. Rep. para. 13,153 at p. 20,800.

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These wide-ranging programs are provided by the Commission to

assist small entities in understanding their obligations under the laws

and regulations administered by the Commission.

Part B--Civil Penalty Leniency Program

Under Section 223 of SBREFA, agencies regulating the activities of

small entities must establish, by March 29, 1997, a policy or program

for ``the reduction, and under appropriate circumstances for the

waiver, of civil penalties for violations of a statutory or regulatory

requirement by a small entity.'' The statute suggests that ``[u]nder

appropriate circumstances, an agency may consider ability to pay in

determining penalty assessments.'' The statute further provides that

the policy or program shall contain conditions or exclusions, which may

include, but shall not be limited to:

(1) Requiring the small entity to correct the violation within a

reasonable correction period;

(2) Limiting the applicability to violations discovered through

participation by the small entity in a compliance assistance or audit

program operated or supported by the agency or a State;

(3) Excluding from the program small entities that have been

subject to multiple enforcement actions by the agency;

(4) Excluding violations involving willful or criminal conduct;

(5) Excluding violations that pose serious health, safety, or

environmental threats; and

(6) Requiring a good-faith effort to comply with the law.

Section 223 provides that the policy or program is ``[s]ubject to

the requirements of other statutes,'' and thus does not supersede

existing law on penalties. Also, because the leniency policy is

prescribed only for civil penalties for violations of a statutory or

regulatory requirement, it does not apply to Commission cease and

desist orders, federal court injunctions, affirmative requirements for

fencing-in or redress contained in Commission orders, or civil penalty

actions under Section 5(l), 15 U.S.C. 45(l), for violations of

Commission orders.

None of the statutes or rules enforced by the Commission provide

for the mandatory imposition of non-discretionary penalties. In most

instances, as discussed below, the Commission is not authorized to

assess civil penalties itself, but rather selects a civil penalty

amount to be sought in a federal court action brought by the Department

of Justice. In developing a policy statement that describes generally

how the Commission will exercise its discretion in selecting penalty

amounts for small entities, the Commission considered that it already

exercises its discretion in a wide variety of contexts to consider

mitigating factors when selecting penalty amounts. The Commission

believes that this experience suggests a list of factors suitable for

selecting the penalties appropriate to small entities.

First, Section 5(m)(1)(A) of the FTC Act, 15 U.S.C. 45(m)(1)(A),

authorizes the Commission to seek, in federal district courts, up to

$11,000 per violation of certain Commission rules.\10\ Such a civil

penalty is assessable only if the defendant knew or should have known

that its acts violated the rule. In determining the appropriate amount

of a penalty, the courts are directed by Section 5(m)(1)(C), 15 U.S.C.

45(m)(1)(C), to take into account the degree of culpability; any

history of prior such conduct; ability to pay; effect on ability to

continue to do business; and such other matters as justice may require.

The Commission also evaluates these factors to determine appropriate

penalties in cases that are not litigated.

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\10\ The Commission recently issued a rule implementing the Debt

Collection Improvement Act of 1996 (Pub. L. 104-134) by making

inflation adjustments in the dollar amounts prescribed for each type

of violation established by the statutory civil penalty provisions

within the FTC's jurisdiction. See 61 FR 54548 (Oct. 21, 1996).

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Second, one Commission rule has a separate enforcement mechanism.

Under the Energy Policy and Conservation Act, 42 U.S.C. 6303(a), the

Commission has authority to assess administrative civil penalties, up

to $110 per violation, for violations of its Appliance Labeling Rule,

16 CFR Part 305. The Commission's Rules of Practice provide that

factors to be considered in determining the amount of penalty include

the respondent's size and ability to pay; the respondent's good faith;

any history of previous violations; the deterrent effect of the penalty

action; the length of time involved before the Commission was made

aware of the violation; the gravity of the violation, including the

amount of harm to

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consumers and the public caused by the violation; and such other

matters as justice may require.\11\

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\10\ The criteria for assessing penalties for violations of the

Appliance Labeling Rule are set forth in Subpart K of Part 1 of the

Commission's Rules of Practice, 16 CFR 1.92-1.97.

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Third, civil penalties may also be imposed for violations of the

Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. 18a

(``HSR Act''). Under the HSR Act, acquisitions above a certain

size,\12\ involving entities above certain sizes,\13\ cannot be

consummated unless certain information is filed with the Commission and

with the Department of Justice and certain waiting periods are

observed. By statute, civil penalties of up to $11,000 for each day a

person is in violation of the HSR Act may be imposed in a federal court

action brought by DOJ. The Commission is charged with administering the

premerger notification program established by the HSR Act, and

recommends actions and penalty amounts to DOJ. The Commission generally

will consider the firm's ability to pay when recommending appropriate

penalties. The Commission generally will not seek an enforcement action

for a violation of the HSR Act that appears to be truly inadvertent and

where the filing is made promptly after discovery of the oversight. If

the violation is the firm's first, and is not the result of gross

negligence or a reckless disregard for the filing obligation, the

Commission staff generally sends a letter calling attention to the

filing obligation but indicating that no further action will be taken

if the filing requirement is promptly met.

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\12\ Generally, at least $15 million.

\13\ Generally, one of the entities must have sales or assets

above $100 million and the other must have sales or assets above $10

million. Because of the ``size of person'' and ``size of

transaction'' thresholds, many small businesses are not subject to

the premerger notification reporting requirements of the HSR Act.

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Fourth, judicial opinions interpreting Section 5(l) of the FTC Act,

which provides for civil penalties of up to $11,000 per violation of

FTC administrative orders, are instructive.14 The statute does not

set forth criteria for assessing specific penalties for Section 5(l)

violations, but the Third Circuit Court of Appeals in United States v.

Reader's Digest Ass'n, 662 F.2d 955, 967 (3d Cir. 1981), cert. denied,

455 U.S. 908 (1982), set out five factors bearing on the selection of

an appropriate civil penalty or remedy: the good or bad faith of the

respondent; the injury to the public; the respondent's ability to pay;

the desire to eliminate the benefits derived from the violations; and

the necessity of vindicating the Commission's authority. In each

penalty case, the Commission selects an appropriate penalty amount

after weighing the above factors, along with the litigation risks and

penalties imposed in similar cases.

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14 The Commission's order enforcement cases are not

included in the SBREFA civil penalty leniency program because, as

noted above, SBREFA only refers to entities accused of violating

statutes and rules, not orders. Moreover, Section 5(l) defendants

are, by definition, allegedly repeat offenders, and therefore are

unlikely to be good candidates for leniency. (As in all cases,

however, the agency would consider individual facts that may affect

the penalty to be sought in each particular case.)

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Finally, the Commission has undertaken an innovative approach to

achieve compliance with one of its rules. In early 1996, the Commission

approved a new program to increase compliance with its Funeral Industry

Practices Rule, 16 CFR Part 453, which, among other things, requires

funeral homes to give consumers a list of prices for various goods and

services offered. The Funeral Rule Offenders Program, implemented

jointly by the Commission and the National Funeral Directors

Association (``NFDA''), offers to certain businesses that appear to

have violated the Rule an alternative to a federal court enforcement

action. Funeral firms entering the alternative program make a voluntary

payment to the U.S. Treasury in an amount lower than would be sought in

a civil penalty action. The NFDA then will review the firm's practices,

revise those practices to comply with the Rule, and conduct on-site

training and testing for all licensed employees. The NFDA also will

provide follow-up training, and conduct testing each year for five

years.

In light of the Commission's experience exercising its discretion

to consider mitigating factors when selecting appropriate penalty

amounts, the innovative approach taken to achieve compliance with one

rule, and the factors suggested in SBREFA itself, the Commission adopts

the following policy for reducing, or in appropriate circumstances

waiving, civil penalties for violations of a statutory or regulatory

requirement by a small entity.

When the Commission identifies a small entity as not being in

compliance with a statutory or regulatory requirement within the

Commission's jurisdiction, the Commission will consider the propriety

of penalty waiver or reduction. The following factors will weigh in

favor of leniency:

1. The small entity reported the violation to the Commission

promptly after discovering it.

2. The small entity corrected the violation within a reasonable

time, if feasible.

3. The small entity had a low degree of culpability. The degree of

culpability reflects the efforts taken by the entity to determine and

meet its legal obligations. These efforts are judged in light of such

factors as the size of the business; the sophistication and experience

of its owners, officers, and managers; the length of time it has been

in operation; the availability of relevant compliance information; the

clarity of its legal obligations; and any active attempts to clarify

any uncertainties regarding its obligations.

4. The small entity is financially unable to pay the usual penalty,

or the usual penalty would impair the small entity's ability to do

business or to compete effectively.

5. The small entity has not been subject to any previous

enforcement action by the Commission or other federal, state, or local

law enforcement jurisdiction for the same or similar conduct for which

the small entity is being considered for leniency. Where there have

been prior enforcement actions, however, the Commission may take into

consideration, as possible mitigating factors, when the previous

enforcement action occurred, and whether the small entity's management

has changed since the previous enforcement action.

6. The small entity's violations did not involve willful or

criminal conduct.

7. The violations did not pose a serious health, safety,

environmental, or economic threat to consumers or the public.

Each factor need not necessarily be present for a small entity to

qualify for leniency, and, depending upon the particular circumstances,

some factors may be weighed more heavily than others. Also, any other

factors relevant in particular circumstances will be considered, as

appropriate.

The above criteria include most of the factors suggested in SBREFA.

The one suggested factor that the Commission is not including is one

that would limit the penalty reduction policy or program to violations

discovered by the small entity through participation in an agency-run

or state-run compliance assistance or audit program. The Commission

does not have formal compliance assistance or audit programs. Given the

variety and scope of the rules and statutes that the Commission

enforces, imposing some parallel requirement, such as a self-auditing

program, would unnecessarily restrict the availability of penalty

waiver or reduction.

In addition, the Commission has expanded somewhat the scope of two

of the factors suggested in SBREFA. First, SBREFA suggests excluding

entities that have been subject to multiple enforcement actions by the

agency. The

[[Page 16814]]

Commission has broadened this category to include entities that have

been subject to actions for the same or similar conduct by other

federal agencies or state or local agencies. The law violations

prosecuted by the Commission are frequently very similar to violations

prosecuted by other federal, state, and local law enforcement

agencies.15 It is therefore appropriate, in considering whether to

exclude entities from lenient treatment, to consider whether similar

conduct has been subject to enforcement efforts by such agencies.

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15 In addition, the Commission often works with the State

Attorneys General and other federal agencies, such as the United

States Post Office, to investigate conduct that may violate laws

enforced by the Commission. In cases where we work with certain

agencies, the Commission must often enter conduct Orders to ensure

that the violative behavior is prohibited nationwide.

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Second, SBREFA also suggests excluding violations that pose serious

health, safety, or environmental threats. The Commission will, in

addition to such risks, also consider serious economic injury, as that

form of injury is the type most often encountered in Commission cases,

and in many instances may cause as much serious injury as that arising

from health, safety, or environmental threats.

Part C--Request for Comments

Members of the public are invited to comment on any issues or

concerns that they believe are relevant or appropriate to the policies

described above. The Commission requests that factual data upon which

the comments are based be submitted with the comments. In this section,

the Commission identifies specific issues on which it solicits public

comments. The identification of issues is designed to assist the public

and should not be construed as a limitation on the issues on which

public comment may be submitted.

Questions

(1) Should the Commission revise in any way the policies that it

has adopted to assist small businesses and other small entities? If so,

please provide specific suggestions.

(2) How would the revisions affect the benefits provided by the

current policies?

(3) Are any of the criteria or means of guidance that the

Commission has used in establishing small business compliance

assistance and civil penalty leniency policies for small businesses and

other small entities inappropriate? If so, please explain.

(4) Are there any other criteria or economical means of guidance

that the Commission should use? If so, please elaborate.

Authority: Secs. 213 and 223, Pub. L. 104-121, 110 Stat. 847.

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 97-8941 Filed 4-7-97; 8:45 am]

BILLING CODE 6750-01-P