Rules of Practice

FEDERAL TRADE COMMISSION

16 CFR Part 3

Rules of Practice

AGENCY: Federal Trade Commission (FTC).

ACTION: Final rule, with request for public comment.

-----------------------------------------------------------------------

SUMMARY: This document amends Commission Rule 3.11A (16 CFR 3.11A),

which establishes ``fast-track'' procedures applicable in certain FTC

adjudicatory proceedings. Under the amended rule, a respondent will

have the option of electing these procedures in certain cases where the

procedures have not previously been available. Amendments have also

been made to improve and clarify notice procedures and other technical

provisions of the Rule.

EFFECTIVE DATE: February 13, 1998. Public comments will be received

until March 16, 1998.

ADDRESSES: Send comments to the Office of the Secretary, Federal Trade

Commission, Room 159-H, Sixth Street and Pennsylvania Avenue, NW.,

Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Cynthia Hogue Levy, (202) 326-2158, or

Alex Tang, (202) 326-2447, Attorneys, Office of General Counsel, FTC,

Sixth Street and Pennsylvania Avenue, NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION: On September 26, 1996, the Commission

published and sought public comment on interim amendments to the rules

governing the Commission's adjudicatory proceedings, 61 FR 50640. The

interim amendments included a new Rule 3.11A, which makes expedited

(``fast-track'') procedures available to respondents in certain

Commission adjudicatory proceedings challenging conduct that has been

preliminarily enjoined by a federal court. The public comment period on

the interim rule amendments ended November 25, 1996. The amendments

became fully applicable to all proceedings commenced on or after

January 1, 1997. The one public comment received by the Commission did

not discuss Rule 3.11A.1

---------------------------------------------------------------------------

\1\ The Commission will address that comment when it completes

its full review of the rules' impact.

---------------------------------------------------------------------------

The Commission has determined that the Rule should make the fast-

track option expressly available in certain circumstances even where no

preliminary injunction of the challenged conduct has been issued. As

the Commission observed in its statement accompanying the Rule, the

Administrative Law Judge presiding over an adjudicatory proceeding may,

in his or her discretion, treat discovery from the preliminary

injunction hearing and transcripts of testimony in the preliminary

injunction proceeding as if the material had been discovered and

presented in the administrative proceeding. 61 FR at 50641. The

Commission concludes that, where no preliminary injunction has been

issued, implementation of an expedited schedule in the administrative

proceeding nonetheless may be appropriate where the evidentiary record

from the federal court injunctive proceeding is likely materially to

facilitate prompt resolution of the adjudicatory proceeding.

Accordingly, the Commission is amending the Rule to expand the

availability of the fast-track procedures to cases in which the

Commission determines that such circumstances exist. The Commission

believes that this expansion of the Rule is in the public interest

because it would foster expeditious resolution of allegations of

possible law violations and reduce uncertainty for the affected

respondent.

To accomplish expansion of the Rule, paragraph (b) has been

bifurcated to address separately the conditions under which the fast-

track option will be available and the mechanics of electing the

procedure. Amended paragraph (b)(1) provides that a respondent may

elect fast-track procedures either (i) if a federal court enters

preliminary injunctive relief against some or all of the conduct

alleged in the Commission's administrative complaint, or (ii) where no

such injunction is issued, if the Commission determines that the

evidentiary record resulting from the court proceeding is likely

materially to facilitate the resolution of the administrative

adjudication in accordance with the expedited schedule set forth in the

Rule. In making the latter determination, the Commission will consider,

inter alia, whether significant discovery has occurred in the federal

court proceeding.

A conforming change has been made in paragraph (a) of the Rule by

deleting language that preserved the Commission's discretion to take

``appropriate action'' in cases where ``the preliminary injunction'' is

vacated. A preliminary injunction will not necessarily have been issued

in every case where fast-track procedures may now apply. Further, even

in cases where such an injunction is vacated after fast-track

proceedings have been initiated, the Commission concludes that such

proceedings should ordinarily continue to be conducted on an expedited

basis. The Commission, however, retains its discretion under the Rule

to extend the 13-month deadline specified for issuance of a final order

and opinion where, inter alia, adherence to the deadline would result

in a miscarriage of justice due to circumstances unforeseen at the time

that the respondent elected fast-track procedures. Sec. 3.11A(c)(3).

Amended paragraph (b)(2), dealing with timing of the respondent's

fast-track election, has also been conformed to include a reference to

the evidentiary record determination made by the Commission under

paragraph (b)(1)(ii) of the Rule. Further, language in former paragraph

(b) providing that the fast-track election could be made ``after

service of the administrative complaint challenging the merger or

acquisition'' has been modified in paragraph (b)(2) to refer simply to

service of the ``administrative complaint.'' This amendment makes fast-

track procedures available in any appropriate administrative case,

including cases under the Commission's authority respecting unfair or

deceptive acts and cases involving anticompetitive practices other than

mergers, provided that the Commission has filed a collateral action

seeking preliminary injunctive relief against conduct alleged in the

administrative complaint. Thus, Rule 3.11A is not restricted to cases

involving mergers or acquisitions. As the Commission has previously

indicated, however, 61 FR at 50641 n.2, fast-track procedures are

likely as a practical matter to be available most often to respondents

in cases involving mergers.

The Commission also notes that respondents may make a fast-track

election under paragraph (b)(2) of the Rule before the necessary

conditions specified in paragraph (b)(1) for fast-track treatment have

been fulfilled. In such cases, the election will become effective only

if a federal court thereafter issues a preliminary injunction, as

required by paragraph (b)(1)(i), or the Commission determines that the

evidentiary record from the federal court injunctive proceeding is

likely materially to facilitate the expedited resolution of the

administrative adjudication, as required by paragraph (b)(1)(ii).

The Rule provisions specifying the procedural deadlines for

administrative cases in which fast-track scheduling applies are now

consolidated in paragraph (c). Amended paragraph (c)(1) sets out the

``triggering events,'' formerly found in paragraph (a), that

[[Page 7527]]

specify the dates upon which the fast-track deadlines are based. The

triggering events have been expanded to include evidentiary record

determinations made by the Commission under paragraph (b)(1)(ii).

Amended paragraph (c)(2), which is the list of deadlines applicable to

fast-track proceedings before the Administrative Law Judge, formerly

comprised paragraph (c). Amended paragraph (c)(3) contains the 13-month

deadline for issuance of a final order and opinion by the Commission

that previously appeared in paragraph (a). Paragraph (c)(3) also

contains new language explaining the effect on the 13-month deadline if

an automatic stay of the adjudicatory proceeding is triggered by a

motion to dismiss under Rule 3.26. As amended, the Rule explicitly

provides that the 13-month deadline will be tolled for as long as the

Rule 3.26 stay remains in effect.

Several clarifying changes have been made in the Rule. Amended

paragraph (a) provides that, when the Commission designates a case as

appropriate for election of fast-track procedures by a respondent

(subject to the conditions set forth in paragraph (b)(1)), written

notice of the Commission's designation will be provided. The notice

will be given to the respondent (or to the potential respondent, if the

administrative complaint has not yet been issued) at the time that it

is served with the Commission's complaint for injunctive relief. These

requirements are designed to forestall questions concerning whether and

when the agency provided the notice specified in the Rule. The

Commission continues to believe that certain cases may appear too

complex at the outset to be designated as appropriate for the fast-

track schedule. 61 FR at 50641. In such instances, the Commission will

not notify the respondent of an option to elect fast-track procedures.

This aspect of the Rule remains unchanged.

The revised Rule also clarifies that a respondent may elect fast-

track procedures in cases where a preliminary injunction has been

issued in a collateral federal court proceeding even if the injunction

addresses only part of the conduct alleged in the Commission's

administrative complaint. The Commission also intends that, under the

revised Rule, a respondent will have an opportunity to elect fast-track

procedures if injunctive relief is initially denied by the district

court but later ordered as the result of judicial review. The amended

Rule's reference to the court's entry of preliminary injunctive relief

is intended to be consistent with the usage of the term ``entry'' in

the Federal Rules of Civil Procedure. See Fed. R. Civ. P. 58, 79.

Finally, paragraph (d) of the Rule, dealing with discovery procedures

in fast-track cases, has been deleted, and the text incorporated into

paragraph (a). Various typographical and stylistic changes have been

made throughout the Rule.

Because these amendments relate solely to agency practice, they are

not subject to the notice-and-comment requirements of the

Administrative Procedure Act, 5 U.S.C. 553(b)(A), or to the

requirements of the Regulatory Flexibility Act, 5 U.S.C. 601(2). The

amendments do not impose information collection requirements under the

Paperwork Reduction Act. 44 U.S.C. 3501-3520.

List of Subjects in 16 CFR Part 3

Administrative practice and procedure, Claims, Equal access to

justice, Lawyers

For the reasons set forth in the preamble, the Federal Trade

Commission amends Title 16, Chapter I, Subchapter A of the Code of

Federal Regulations, as follows:

PART 3--RULES OF PRACTICE FOR ADJUDICATIVE PROCEEDINGS

1. The authority for Part 3 continues to read as follows:

Authority: Sec. 6, 38 Stat. 721 (15 U.S.C. 46), unless otherwise

noted.

2. Section 3.11A is revised to read as follows:

Sec. 3.11A Fast-track proceedings.

(a) Scope and applicability. This section governs the availability

of fast-track procedures in administrative cases where the Commission

files a collateral federal district court complaint that seeks

preliminary injunctive relief against some or all of the conduct

alleged in the Commission's administrative complaint. The Commission

will afford the respondent the opportunity to elect such fast-track

procedures, subject to the conditions set forth in paragraph (b)(1) of

this section, in cases that the Commission designates as appropriate.

In cases so designated, the Commission will provide written notice to

each respondent at the time that it is served with the Commission's

federal district court complaint for preliminary injunctive relief.

Except as modified by this section, the rules contained in subparts A

through I of part 3 of this chapter will govern fast-track procedures

in adjudicative proceedings. Discovery will be governed by subpart D of

this part, and the Administrative Law Judge may exercise his plenary

authority under Sec. 3.42(c)(6) to establish limitations on the number

of depositions, witnesses, or any document production.

(b)(1) Conditions. In cases designated as appropriate by the

Commission pursuant to paragraph (a) of this section, a respondent may

elect fast-track procedures:

(i) if a federal court enters a preliminary injunction against some

or all of the conduct alleged in the Commission's administrative

complaint; or,

(ii) where no such injunction is entered, if the Commission

determines that the Federal court proceeding has resulted in an

evidentiary record that is likely materially to facilitate resolution

of the administrative proceeding in accordance with the expedited

schedule set forth in this section. The Commission will provide each

respondent with written notice of any such determination.

(2) Election. A respondent that determines to elect fast-track

procedures shall file a notice of such election with the Secretary by

the latest of: three days after entry of a preliminary injunction as

described in paragraph (b)(1)(i) of this section; three days after the

respondent is served with notice of the Commission's determination

under paragraph (b)(1)(ii) of this section; or three days after the

respondent is served with the Commission's administrative complaint in

the adjudicative proceeding. In proceedings involving multiple

respondents, the fast-track procedures set forth in this section will

not apply unless the procedures are elected by all respondents.

(c) Deadlines in fast-track proceedings.

(1) For purposes of this paragraph, ``triggering event'' means the

latest of: entry of a preliminary injunction as described in paragraph

(b)(1)(i) of this section; service on the last respondent of notice of

the Commission's determination under paragraph (b)(1)(ii) of this

section; service on the last respondent of the Commission's

administrative complaint in the adjudicative proceeding; or filing with

the Secretary by the last respondent of a notice electing fast-track

procedures.

(2) Proceedings before the Administrative Law Judge. In fast-track

proceedings covered by this section:

(i) The scheduling conference required by Sec. 3.21(b) shall be

held not later than three days after the triggering event.

(ii) Respondent's answer shall be filed within 14 days after the

triggering event.

(iii) The Administrative Law Judge shall file an initial decision

within 56 days following the conclusion of the evidentiary hearing. The

initial decision

[[Page 7528]]

shall be filed no later than 195 days after the triggering event.

(iv) Any party wishing to appeal an initial decision to the

Commission shall file a notice of appeal with the Secretary within

three days after service of the initial decision. The notice shall

comply with Sec. 3.52(a) in all other respects.

(v) The appeal shall be in the form of a brief, filed within 21

days after service of the initial decision, and shall comply with

Sec. 3.52(b) in all other respects. All issues raised on appeal shall

be presented in the party's appeal brief.

(vi) Within 14 days after service of the appeal brief, the appellee

may file an answering brief, which shall comply with Sec. 3.52(c).

Cross-appeals, as permitted in Sec. 3.52(c), may not be raised in an

appellee's answering brief.

(vii) Within five days after service of the appellee's answering

brief, the appellant may file a reply brief, in accordance with

Sec. 3.52(d) in all other respects.

(3) Proceedings before the Commission. In fast-track proceedings

covered by this section, the Commission will issue a final order and

opinion within 13 months after the triggering event. If the

adjudicative proceeding is stayed pursuant to a motion filed under

Sec. 3.26, the 13-month deadline will be tolled for as long as the

proceeding is stayed. The Commission may extend the date for issuance

of the Commission's final order and opinion in the following

circumstances: if necessary to permit the Commission to provide

submitters of in camera material or information with advance notice of

the Commission's intention to disclose all or portions of such material

or information in the Commission's final order or opinion; or if the

Commission determines that adherence to the 13-month deadline would

result in a miscarriage of justice due to circumstances unforeseen at

the time of respondent's election of fast-track procedures.

By direction of the Commission, Commissioner Azcuenaga not

participating.

Donald S. Clark,

Secretary.

[FR Doc. 98-3506 Filed 2-12-98; 8:45 am]

BILLING CODE 6750-01-P