Rules of Practice Amendments

FEDERAL TRADE COMMISSION

16 CFR Parts 2, 3 and 4

Rules of Practice Amendments

AGENCY: Federal Trade Commission (FTC).

ACTION: Final rules with request for comments.

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SUMMARY: To streamline the process of providing effective relief where

parties consent to the entry of a cease and desist order, the FTC is

amending its Rules of Practice to shorten the period for public comment

on consent settlements from 60 days to 30 days. The amended rules also

provide for more effective interim relief in cases involving mergers or

acquisitions, by providing that hold-separate or asset-

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maintenance orders will be made immediately effective when the

Commission accepts the consent agreement or settlement proposal for

public comment.

DATES: These rule amendments are effective on August 25, 1999.

Agreements that have been executed by any or all respondents before the

effective date will not be affected by these amendments without the

consent of the parties.

Comments must be received on or before September 24, 1999.

ADDRESSES: Written comment on these rule revisions must be submitted in

20 copies to the Office of the Secretary, Room 159, Federal Trade

Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580.

Individuals filing comments need not submit multiple copies.

FOR FURTHER INFORMATION CONTACT: Christian S. White, Assistant General

Counsel for Legal Counsel, (202) 326-2476, Office of the General

Counsel, FTC, 600 Pennsylvania Avenue, NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION: The Commission considers it important to

solicit public comment on consent agreements. Nonetheless, the current

comment period of 60 days unduly delays implementation of consent

orders and the benefits to the public of addressing the conduct alleged

to be unlawful in the Commission's complaint. Neither the

Administrative Procedure Act, 5 U.S.C. 551, nor the FTC Act, 15 U.S.C.

41-58, requires agencies to offer a public comment period on

administrative settlements.1 Accordingly, the Commission has

decided to shorten the comment period to 30 days, as it was before

1974. The 30-day comment period will begin on the date the Commission

issues a press release announcing that the Commission has accepted the

agreement and placed it on the public record for comment. Press

releases are ordinarily posted on the Commission's Web site the day

they are released. The Commission believes that the shorter period

generally will be sufficient to allow thoughtful public comment. The

Commission may lengthen or shorten the 30-day comment period in the

public interest. The Commission also retains discretion to make an

order final after acceptance but before the comment period starts but

it contemplates doing so only in exceptional cases where, for example,

it believes that the allegedly unlawful conduct to be prohibited

threatens substantial and imminent public harm. If, in such cases, the

Commission, after the comment period, believes that modifications to

the order would be appropriate, it will (absent agreement by

respondents to the modifications) initiate a proceeding to reopen and

modify the order pursuant to Rule 3.72(b) or issue a new administrative

complaint to commence a new administrative proceeding in accordance

with Rule 3.11.

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\1\ Although public comment periods on consent agreements are

not required, the Commission has followed this practice for many

years. The Commission's procedure for considering administrative

consent orders has existed in one form or another since at least

1939. The procedure did not include a public comment period until

1967, when the Commission promulgated Rule 2.34, providing for a

comment period of 30 days. 32 FR 8448-49 (June 13, 1967). In 1974,

the Commission extended the comment period from 30 to 60 days. The

Commission added a companion provision, Rule 3.25, in 1975 to

establish an identical comment procedure for consent agreements in

Part 3 matters. 40 FR 15235-36 (April 4, 1975).

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With regard to competition cases involving planned mergers and

acquisitions, when staff negotiates a hold-separate or asset-

maintenance agreement, the Commission will issue the agreement as an

immediately effective order when it accepts the consent agreement for

comment. Although it is the Commission's view that hold-separate

agreements, as currently structured, are immediately enforceable,

treating such agreements as final Commission orders will make clear

that violations are punishable by civil penalties.2

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\2\ The amendment to Sec. 2.34 specifies that any hold-separate

or asset-maintenance orders will be accompanied by an administrative

complaint, but that the complaint will neither initiate an

adjudicatory proceeding nor trigger the application of the

prohibitions on ex parte communications in Sec. 4.7.

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These changes require amending Rules 2.32, 2.34 and 3.25. Technical

conforming changes also are being made to Rule 4.9 respecting the

Commission's public record. The Commission believes these amendments

will improve the protection of consumers and competition by

accelerating the effectiveness of Commission consent orders and by

increasing incentives to preserve the status quo pending final

resolution of planned and allegedly anticompetitive mergers and

acquisitions.

These rule revisions relate solely to agency practice and,

therefore, are not subject to the notice and comment requirements of

the Administrative Procedure Act, 5 U.S.C. 553(a)(2), or to the

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

revisions do not involve the collection of information subject to the

Paperwork Reduction Act, 44 U.S.C. Chapter 35. Although the revisions

are effective as stated in the previous section, the Commission

welcomes comment on them and will consider further revision as

appropriate.

List of Subjects

16 CFR Part 2

Administrative practice and procedure, Consent agreements,

Investigations.

16 CFR Part 3

Administrative practice and procedure, Consent agreements.

16 CFR Part 4

Administrative practice and procedure, Public record.

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 2--NONADJUDICATIVE PROCEDURES

1. Revise the authority citation for part 2 to read:

Authority: 15 U.S.C. 46.

Subpart C--Consent Order Procedure

2. Revise Sec. 2.32 to read as follows:

Sec. 2.32 Agreement.

Every agreement in settlement of a Commission complaint shall

contain, in addition to an appropriate proposed order, either an

admission of the proposed findings of fact and conclusions of law

submitted simultaneously by the Commission's staff or an admission of

all jurisdictional facts and an express waiver of the requirement that

the Commission's decision contain a statement of findings of fact and

conclusions of law. Every agreement also shall waive further procedural

steps and all rights to seek judicial review or otherwise to challenge

or contest the validity of the order. In addition, where appropriate,

every agreement in settlement of a Commission complaint challenging the

lawfulness of a proposed merger or acquisition shall also contain a

hold-separate or asset-maintenance order. The agreement may state that

the signing thereof is for settlement purposes only and does not

constitute an admission by any party that the law has been violated as

alleged in the complaint. Every agreement shall provide that:

(a) The complaint may be used in construing the terms of the order;

(b) No agreement, understanding, representation, or interpretation

not

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contained in the order or the aforementioned agreement may be used to

vary or to contradict the terms of the order;

(c) The order will have the same force and effect and may be

altered, modified or set aside in the same manner provided by statute

for Commission orders issued on a litigated or stipulated record;

(d) Except as provided by order of the Commission, any order issued

pursuant to the agreement will become final upon service;

(e) The agreement will not become a part of the public record

unless and until it is accepted by the Commission; and

(f) If the Commission accepts the agreement, further proceedings

will be governed by Sec. 2.34.

3. Revise Sec. 2.34 to read as follows:

Sec. 2.34 Disposition.

(a) Acceptance of proposed consent agreement. The Commission may

accept or refuse to accept a proposed consent agreement. Except as

otherwise provided in paragraph (c) of this section, acceptance does

not constitute final approval, but it serves as the basis for further

actions leading to final disposition of the matter.

(b) Effectiveness of hold-separate or asset-maintenance order.

Following acceptance of a consent agreement, the Commission will, if it

deems a hold-separate or asset-maintenance order appropriate, issue a

complaint and such an order as agreed to by the parties. Such order

will be final upon service. The issuance of a complaint under this

paragraph will neither commence an adjudicatory proceeding subject to

part 3 of this chapter nor subject the consent agreement proceeding to

the prohibitions specified in Sec. 4.7 of this chapter.

(c) Public comment. Promptly after its acceptance of the consent

agreement, the Commission will place the order contained in the consent

agreement, the complaint, and the consent agreement on the public

record for a period of 30 days, or such other period as the Commission

may specify, for the receipt of comments or views from any interested

person. At the same time, the Commission will place on the public

record an explanation of the provisions of the order and the relief to

be obtained thereby and any other information that it believes may help

interested persons understand the order. The Commission also will

publish the explanation in the Federal Register. The Commission retains

the discretion to issue a complaint and a Final Decision and Order,

incorporating the order contained in a consent agreement, in

appropriate cases before seeking public comment. Unless directed

otherwise by the Commission, such Decision and Order will be final upon

service.

(d) Comment on initial compliance report. If respondents have filed

an initial report of compliance pursuant to Sec. 2.33, the Commission

will place that report on the public record, except for portions, if

any, granted confidential treatment pursuant to Sec. 4.9(c) of this

chapter, with the complaint, the order, and the consent agreement.

(e) Action following comment period. (1) Following the comment

period, on the basis of comments received or otherwise, the Commission

may either withdraw its acceptance of the agreement and so notify

respondents, in which event it will take such other action as it may

consider appropriate, or issue and serve its complaint in such form as

the circumstances may require and its decision in disposition of the

proceeding.

(2) The Commission, following the comment period, may determine, on

the basis of the comments or otherwise, that a Final Decision and Order

that was issued in advance of the comment period should be modified.

Absent agreement by respondents to the modifications, the Commission

may initiate a proceeding to reopen and modify the decision and order

in accordance with Sec. 3.72(b) of this chapter or commence a new

administrative proceeding by issuing a complaint in accordance with

Sec. 3.11 of this chapter.

PART 3--RULES OF PRACTICE FOR ADJUDICATIVE PROCEEDINGS

4. Revise the authority citation for part 3 to read as follows:

Authority: 15 U.S.C. 46, unless otherwise noted.

Subpart C--Prehearing Procedures; Motions; Interlocutory Appeals;

Summary Decisions

5. Amend Sec. 3.25 by revising paragraph (f) to read as follows:

Sec. 3.25 Consent agreement settlements.

* * * * *

(f) After some or all of allegations in a matter have been

withdrawn from adjudication, the Commission may accept the proposed

consent agreement, reject it and return the matter or affected portions

thereof to adjudication for further proceedings or take such other

action as it may deem appropriate. If the agreement is accepted, it

will be disposed of as provided in Sec. 2.34 of this chapter, except

that if, following the public comment period provided for in Sec. 2.34,

the Commission decides, based on comments received or otherwise, to

withdraw its acceptance of such an agreement, it will so notify the

parties and will return to adjudication any portions of the matter

previously withdrawn from adjudication for further proceedings or take

such other action it considers appropriate.

* * * * *

PART 4--MISCELLANEOUS RULES

6. Revise the authority citation for part 4 to read as follows:

Authority: 15 U.S.C. 46, unless otherwise noted.

7. Amend Sec. 4.9 by revising paragraph (b)(6) to read as follows:

Sec. 4.9 The public record.

* * * * *

(b) * * *

(6) Consent Agreements (16 CFR 2.31 through 2.34, 3.25). (i)

Agreements containing orders, after acceptance by the Commission

pursuant to Secs. 2.34 and 3.25(f) of this chapter;

(ii) Comments and other materials filed or placed on the public

record under Secs. 2.34 and 3.25(f) concerning proposed consent

agreements and related orders; and

(iii) Decisions and orders issued and served under Secs. 2.34 and

3.25(f), including separate statements of Commissioners.

* * * * *

By direction of the Commission.

Donald S. Clark,

Secretary.

Statement of Commissioner Orson Swindle Concerning Amendments to

Commission Rules 2.32, 2.34, 3.25, and 4.9

I have voted for the amendments to the Commission's Rules of

Practice that would shorten the public comment period on consent

agreements and would make hold-separate and asset-maintenance

agreements immediately effective. In my judgment, shortening the

comment period to 30 days achieves a sensible balance between

forestalling violations of Commission orders and affording the

public sufficient time to comment on Commission settlements. I also

see obvious benefits from issuing hold-separate and asset-

maintenance agreements as immediately enforceable orders.

Nevertheless, I would have preferred to subject these rule

revisions to advance public comment, rather than--as the Commission

has done--issuing them as final rules with a request for comments

after the fact. Whatever my judgment (and that of my colleagues)

concerning whether the revisions are prudent and in the public

interest, I would have thought we would also try to appraise the

judgment of the public--those for whom we in government work, and to

whom we are ultimately accountable--before issuing a

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final rule that halves the comment period on consent

agreements.1

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\1\ The Administrative Procedure Act (``APA'') generally

requires that agencies engage in notice-and-comment procedures

before issuing a final rule, 5 U.S.C. 553(c), but rules of agency

procedure or practice are exempt from this requirement. 5 U.S.C.

553(b)(A). Nevertheless, ``[a]lthough the APA provides this

exemption for rules of agency procedure or practice, agency

rulemakers should consider providing notice and an opportunity for

comment where possible if the rules will affect the public.''

Administrative Conference of the United States, A Guide to Federal

Agency Rulemaking 51 (2d ed. 1991) (emphasis added); see also

American Bar Ass'n, Government and Public Sector Lawyers Division

and Section of Administrative Law and Regulatory Practice, A Guide

to Federal Agency Rulemaking 54-55 (3d ed. 1998). Although I do not

believe that the Commission must put every change in its procedural

rules out for public comment, doing so is warranted here because the

proposed change may significantly affect the public.

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One might respond to my concern with the argument that since the

public comment period itself is for the benefit of the Commission

and not of the public, any decision to shorten or eliminate the

period should be in the hands of the sole beneficiary of the public

comment mechanism--the Commission. To argue thus, however, would be

to disregard a core element of our system of government: the

public's stake in the decisions reached by government agencies, and

our responsibility to take the public's views into account. Although

I would not have voted to shorten the comment period to 30 days if I

believed that such an action would nullify the public's role,

getting public comment beforehand on this very issue would have been

valuable.

Instead, the Commission has decided to allow 30 days for public

comment after these final rules have been published in the Federal

Register. I fear that this is not an adequate surrogate for the

advance comment that we should have solicited. Once something such

as an order or a rule revision is issued ``in final,'' it is often a

fait accompli that is unlikely to be undone even in the face of

inexorable logic.2 We should have invited public

participation before taking these steps.

\2\ The courts have recognized that seeking comment after making

a rule change is not usually a substitute for obtaining comment

before such a change is made: ``[A]n agency is not likely to be

receptive to suggested changes once the agency ``put[s] its

credibility on the line in the form of ``final'' rules. People

naturally tend to be more close-minded and defensive once they have

made a ``final'' determination.'''' Air Transport Ass'n of America

v. Dept. of Transp., 900 F.2d 369, 379 (D.C. Cir. 1990) (quoting

National Tour Brokers Ass'n v. United States, 591 F.2d 896, 902

(D.C. Cir. 1978)), cert. denied, 498 U.S. 1023 (1991).

[FR Doc. 99-22015 Filed 8-24-99; 8:45 am]

BILLING CODE 6750-01-P