Rules of Practice

Federal RegisterJan 13, 2009

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FEDERAL TRADE COMMISSION

16 CFR Parts 3 and 4

Rules of Practice

AGENCY:

Federal Trade Commission (“Commission” or “FTC”).

ACTION:

Interim final rules with request for comment.

SUMMARY:

The FTC is amending Parts 3 and 4 of its Rules of Practice, 16 CFR Parts 3 and 4, in order to further expedite its adjudicative proceedings, improve the quality of adjudicative decision making, and clarify the respective roles of the Administrative Law Judge (“ALJ”) and the Commission in Part 3 proceedings.

DATES:

These interim final rules are effective on January 13, 2009. These amendments will govern all Commission adjudicatory proceedings that are commenced after January 13, 2009 The rules that were in effect before January 13, 2009 will govern all currently pending Commission adjudicatory proceedings. Written comments must be received on or before February 12, 2009.

ADDRESSES:

Interested parties are invited to submit written comments electronically or in paper form. Comments should refer to “Parts 3 and 4 Rules of Practice Rulemaking - P072104” to facilitate the organization of comments. Please note that comments will be placed on the public record of this proceeding—including on the publicly accessible FTC website at (

http://www.ftc.gov/os/publiccomments.shtm

) — and therefore should not include any sensitive or confidential information. In particular, comments should not include any sensitive personal information, such as an individual’s Social Security number; date of birth; driver’s license number or other state identification number, or foreign country equivalent; passport number; financial account number; or credit or debit card number. Comments also should not include any sensitive health information, such as medical records and other individually identifiable health information. In addition, comments should not include any “[t]rade secret or any commercial or financial information which is obtained from any person and which is privileged or confidential. * * *,” as provided in Section 6(f) of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. 46(f), and Commission Rule 4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which confidential treatment is requested must be filed in paper form, must be clearly labeled “Confidential,” and must comply with Commission Rule 4.9(c).

The comment must be accompanied by an explicit request for confidential treatment, including the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. The request will be granted or denied by the Commission’s General Counsel, consistent with applicable law and the public interest.

See

Commission Rule 4.9(c), 16 CFR 4.9(c).

Because paper mail in the Washington area, and specifically to the FTC, is subject to delay due to heightened security screening, please consider submitting your comments in electronic form. Comments filed in electronic form should be submitted by using the following weblink: (

https://secure.commentworks.com/ftc-part3rules

) (and following the instructions on the web-based form). To ensure that the Commission considers an electronic comment, you must file it on the web-based form at the weblink: (

https://secure.commentworks.com/ftc-part3rules

). If this document appears at (

http://www.regulations.gov/search/index.jsp

), you may also file an electronic comment through that website. The Commission will consider all comments that regulations.gov forwards to it. You may also visit the FTC website at

www.ftc.gov

to read this document and the news release describing it.

A comment filed in paper form should include the “Parts 3 and 4 Rules of Practice Rulemaking - P072104” reference both in the text and on the envelope, and should be mailed or delivered by courier to the following address: Federal Trade Commission, Office of the Secretary, Room H-135 (Annex R), 600 Pennsylvania Avenue, NW, Washington, DC 20580.

The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. The Commission will consider all timely and responsive public comments that it receives, whether filed in paper or electronic form. Comments received will be available to the public on the FTC website, to the extent practicable, at (

http://www.ftc.gov/os/publiccomments.shtm

). As a matter of discretion, the Commission makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC website. More information, including routine uses permitted by the Privacy Act, may be found in the FTC’s privacy policy, at (

http://www.ftc.gov/ftc/privacy.shtm

FOR FURTHER INFORMATION CONTACT:

Michael D. Bergman, Attorney, (202) 326-3184, or Lisa M. Harrison, Attorney, (202) 326-3204, Office of the General Counsel, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington DC 20580.

SUPPLEMENTARY INFORMATION:

This discussion contains the following sections:

I. Overview of Proposal and Comments Received

II. Section-by-Section Analysis of Interim Final Rule Revisions

III. Invitation to Comment

IV. Interim Final Rule Revisions

I. Overview of Proposal and Comments Received

In its October 7, 2008, Notice of Proposed Rulemaking (“NPRM”),

the Commission invited public comment on proposed amendments to its Rules of Practice governing formal adjudicatory (“Part 3”) proceedings. This public comment period closed on November 6, 2008. The Commission observed in the NPRM that it has periodically engaged in reform efforts to minimize delay and improve the quality of the administrative decisionmaking process in a fair manner fully consistent with the Administrative Procedure Act (“APA”)

without prejudicing the due process rights of the parties in these proceedings. Past reforms and the ones proposed in the NPRM have primarily dealt with the long-standing concerns of the courts and the bar that the Commission’s Part 3 adjudicatory process has been too protracted.

73 FR 58832 (Oct. 7, 2008).

5 U.S.C. 551

et seq.

See, e.g.

FTC v. Freeman Hosp

., 911 F. Supp. 1213, 1228 n.8 (W.D. Mo. 1995) (“The average time from the issuance of a complaint by the FTC to an initial decision by an administrative law judge averaged nearly three years in 1988. Moreover, additional time will be required if that initial decision is appealed.”),

aff’d

, 69 F.3d 260 (8th Cir. 1995);

see also Vermont Yankee

Nuclear Power Corp. v. Natural Res. Def. Council, Inc

., 435 U.S. 519, 524 (1978) (holding that agencies have discretion to enact procedures where Congress provided agencies with “the responsibility for substantive judgments.”).

16 CFR 3.42(c).

The proposed amendments announced in the October 7, 2008, NPRM were the culmination of a recent broad and systematic internal review to improve the Commission’s Part 3 practices and procedures in light of recent adjudicatory experiences. The Commission undertook this effort in order to improve the Part 3 process through a comprehensive review, rather than piecemeal modifications of a limited number of rules, which would ensure that the rules are consistent with one another and that they are workable in practice. Input was obtained from various bureaus and offices within the Commission and staff further reviewed the APA’s legal standards, the rules and procedures of the federal courts, and other agencies’ adjudicative procedures.

The Commission intended for the proposed amendments to balance three important interests: the public interest in a high quality decisionmaking process, the interests of justice in an expeditious resolution of litigated matters, and the interest of the parties in litigating matters without unnecessary expense. For example, in principle, expedited adjudications, while maintaining the high quality of the proceeding, may impose costs on the parties or the agency that they may not need bear if the demands of a given case permit a more leisurely adjudicative process. Alternatively, attempts to increase efficiency or decrease costs to those involved could lead to trade offs in the quality of the ultimate result.

The most significant of the proposals in the NPRM included tighter time limits during the adjudicatory process leading up to the issuance of the initial decision, changes to ensure that the Commission can appropriately apply its legal and policy expertise earlier in the adjudicatory process, reforms in discovery and motions practice, the streamlining and expedition of evidentiary hearings, and a change in the Commission’s process for handling motions to dismiss or to withdraw a case from administrative adjudication after a federal court’s denial of a preliminary injunction in an action brought by the Commission.

The Commission received eight comments on the proposed amendments from seven individuals or entities: a joint comment from Robert Pitofsky

and Michael N. Sohn,

the Section of Antitrust Law of the American Bar Association (“Section”), Whole Foods Market, Inc. (“Whole Foods”) (two comments), Linda Blumkin,

the Chamber of Commerce of the United States of America (“Chamber”), Stephen Nagin,

and Richard Hallberg. Some commenters endorsed the objectives of the Commission’s proposed amendments. The Section commented that it “supports the Commission’s efforts to expedite certain adjudicative proceedings, improve the quality of its adjudicative decision making, and clarify the respective roles” of the Commission and the ALJ. The Pitofsky-Sohn comment noted that “expediting Part 3 proceedings is a step in the right direction.”

Counsel to Arnold & Porter LLP and Sheehy Professor of Trade Regulation Law, Georgetown University Law Center. Mr. Pitofsky served as Chairman of the Commission and previously held other positions in the agency.

Senior Partner, Arnold & Porter LLP and former General Counsel of the Commission.

Former Assistant Director for General Litigation in the Bureau of Competition.

Nagin, Gallup & Figueredo, PA.

But these and other commenters objected to various specific proposals and the absence of any proposal that would set a deadline on the Commission itself, in particular:

(i) the proposed time limits did not set deadlines for the Commission to resolve appeals from initial decisions; (ii) the time limits imposed on ALJs were too rigid and might deprive respondents in some proceedings of their due process right to be heard; (iii) the proposals enabled the Commission to decide dispositive motions while a case is pending before an ALJ and would, therefore, undermine the ALJ’s

independence; (iv) the Commission was changing its policy on when it would pursue a case after a denial of a preliminary injunction; and (v) the proposed rule explicitly stating that the Commission or a designated Commissioner could oversee portions of the pretrial process infringed on the ALJ’s independence. Several commenters argued that the 30-day comment period was inadequate.

i) Deadlines on Commission decision making.

Upon consideration of the various comments, the Commission agrees that the proposed rules should set deadlines on the Commission to act on appeals of initial decisions. The Commission is now adopting in Rule 3.52 tight deadlines on its resolution of appeals. For cases in which the Commission seeks preliminary relief under Section 13(b) of the FTC Act, 15 U.S.C. 53(b), there will be automatic Commission review of the initial decision (

i.e.

, no notice of appeal will need to be filed), briefing will be completed within 45 days of the issuance of the initial decision, and the Commission will commit to issue its final decision within 45 days of oral argument (

i.e.

, within 100 days of the initial decision).

For all other cases, an appealing party will need to file its objections to the initial decision by filing a notice of appeal, all briefing will be completed within 67 days of the initial decision, and the Commission will commit to issue its final decision within 100 days of oral argument (

i.e.

, within six months of the initial decision).

The timing deadlines for the Commission’s decisions on appeal or review, as with other rule deadlines, are subject to the timing requirements in Rule 4.3(a), which addresses,

inter alia

, when deadlines fall on a weekend or holiday.

Consistent with the need for expedited procedures, the Commission is also setting deadlines for when it must rule on dispositive motions, applications for interlocutory appeals, and motions to dismiss after the denial of a preliminary injunction.

ii) Deadlines leading up to Initial Decision.

The comments filed so far do not persuade the Commission that its default timing deadlines are unfair. Comments that the revised rules would unduly limit respondents’ ability to engage in adequate discovery or develop their defenses, and, hence, would violate their right to due process, have yet to provide support for this argument. The APA does not expressly require discovery.

See McClelland v. Andrus

, 606 F.2d 1278, 1285 (D.C. Cir. 1979). Although “discovery must be granted if in the particular situation a refusal to do so would so prejudice a party as to deny him due process,”

id.

at 1286, it is difficult to see how the five and eight month deadlines from complaint to hearing, and the duration of pretrial discovery imposed by Rule 3.11(b), fail to satisfy due process. The comments thus far fail to demonstrate that respondents would not have adequate time to pursue broad discovery. Indeed, the revised rules allow the parties to move for more time upon a showing of good cause. Antitrust cases in federal court, such as the government’s monopoly case against Microsoft and its merger case against Oracle, have gone to trial on roughly similar schedules, suggesting the reasonableness of such time frames.

See, e.g.

United States v. Microsoft

, 253 F.3d 34 (D.C. Cir. 2001);

United States v. Oracle Corp

., 331 F. Supp. 2d 1098 (N.D. Cal. 2004).

Further, the criticism in the comments received thus far that the time limits are too short fails to give adequate weight to provisions that authorize the Commission to grant extensions for “good cause.” The Commission anticipates that this authority will be used sparingly but is determined to use this authority whenever necessary to ensure that the parties have adequate time to prepare for trial and to present their case.

iii) Dispositive motions.

Commenters’ concerns about the role of the Commission in deciding legal and policy issues early in the proceeding have not demonstrated that early Commission involvement improperly interferes with the independence of the ALJ. This is especially true in view of the role that Congress envisioned for the Commission as an expert adjudicator. Moreover, as explained in the analysis of Rule 3.22, while the APA does confer a variety of powers on the ALJ primarily during and after the conduct of the evidentiary hearing, this does not include the authority to rule on prehearing motions that turn on legal and policy determinations.

Rather, the ALJ’s authority to rule on such motions depends on whether an agency has provided the ALJ with this power in an agency rule. Commission Rule 3.22 previously granted ALJ’s this power, and the Commission plainly has the authority to limit it.

For example, the APA authorizes the ALJ to “dispose of procedural requests or similar matters” during the hearing, subject to the published rules of the agency. 5 U.S.C. 556(c)(9).

iv) 1995 Policy Statement and procedures related to Part 3 proceedings following denial of a preliminary injunction.

The Commission has adopted its proposal to amend Rule 3.26 to eliminate automatic withdrawals from adjudication or stays of Part 3 proceedings when a party files a motion for withdrawal or to dismiss based on the denial of a preliminary injunction in an ancillary federal court action brought by the Commission. The Commission, however, has also amended the Rule to promote more prompt consideration of whether to proceed with Part 3 by providing for the filing of such motions long before the Commission has an opportunity to exhaust its appeals as provided in the previous Rule, and has also set a 30-day deadline for the Commission to decide such motions. The Commission also reaffirms in this document its adherence to its 1995 Policy Statement calling for a case-by-case analysis of whether the Commission should pursue Part 3 litigation after it loses a preliminary injunction.

60 FR 39741 (Aug. 3, 1995).

v) The proposed amendment providing express authority for the Commission or a Commissioner to preside over prehearing procedures.

Commenters criticized as infringing on the independence of the ALJ proposed Rule 3.42(a) that would have made explicit the authority of the Commission or one of its members to preside over discovery or certain other prehearing procedures before transferring the matter to the ALJ. The Commission or its members have the authority to preside over prehearing procedures under the APA, 5 U.S.C. 556(b), as well as unamended Rule 3.42, and the collection of rule revisions adopted today reduce the need for early Commission involvement in case management. For these reasons, and to ensure there is no public misperception that the proposed revision unfairly enlarged the Commission’s authority, the Commission has decided not to adopt the proposed revision to this rule.

vi) Improving Part 3 litigation while protecting the rights of the parties.

Upon consideration of all the comments received so far, the Commission believes that the rules will improve the Part 3 litigation process. The timing deadlines, while aggressive, are consistent with the manner in which federal courts can move in complex antitrust cases, and parties can seek to extend them when necessary. The rules

bring the Commission’s expertise to bear sooner in the process, which can be expected to streamline cases, especially where the principal issue is legal not factual, while ensuring that the ALJs will continue to play the dominant role in managing the litigation and overseeing the evidentiary hearing.

vii) Comment periods.

As stated in the NPRM, the Commission sought public comment even though the proposed rule revisions relate solely to agency practice, and thus are not subject to the notice and comment requirements of the APA, 5 U.S.C. 553(b)(A). The Commission has been well served by the public comment period and the quality of many of the criticisms and suggestions undercuts the argument of some commenters that the 30-day comment period was too short. In any event, the rule amendments published in this notice are being issued only on an interim basis, and any rules that the Commission re-promulgates after the current comment period are not necessarily permanent. Instead, the Commission is instructing its internal Standing Committee on the Part 3 rules, as announced in the NPRM, to make recommendations bi-annually to the Commission on the need for changes to the Part 3 rules, including the rule revisions that become effective today and any rules that the Commission re-promulgates after the current comment period.

In view of the many modifications and additions to rule amendments proposed in the NPRM and described in Part II of this document, the Commission is requesting further comments on its adjudicatory reforms. The Commission will consider comments on any of the rule revisions issued today, but will especially welcome comment on any amendments that were not proposed in the NPRM.

The comments are addressed in more detail in the following section-by-section analysis of the interim final rule revisions.

The final rule amendments are not subject to the requirements of the Regulatory Flexibility Act, 5 U.S.C. 601(2) or the requirements of the Paperwork Reduction Act, 44 U.S.C. 3518(c)(1)(B)(ii); 5 CFR 1320.4 (exempting information collected during the conduct of administrative proceedings or investigations).

II. Section-by-Section Analysis of Interim Final Rule Revisions

Subpart A—Scope of Rules; Nature of Adjudicative Proceedings

Section 3.1: Scope of the rules in this part.

The proposed amendment would have allowed the ALJ or the Commission to shorten time periods set by the Rule, provided that the shortened time periods would not unfairly prejudice any party. This authority is intended for use in proceedings where expedited procedures would serve the public interest (

e.g.

, unconsummated mergers) or where the issues do not require elaborate discovery or evidentiary hearings (

e.g.

, cases where the parties agree that a copious evidentiary record already exists that merely needs to be supplemented). In response to a comment, the Commission is amending the Rule to provide that the ALJ or the Commission may shorten time periods with the consent of the parties. Because consent will be required, the Commission is eliminating as unnecessary the qualifications that the shortening of a time period must not “unfairly prejudice any party” and not violate a party’s legal rights. The Commission has also amended the Rule to state that the Part 3 rules generally apply only to “formal” adjudicative proceedings,

i.e.

, those actions that are governed by the adjudicatory provisions of the APA, 5 U.S.C. 554, 556-57.

Section 3.2: Nature of adjudicative proceedings.

The Commission proposed technical revisions to this Rule that would clarify that Commission consideration of consent orders—in addition to negotiations of consent orders—are not adjudicative proceedings. The proposed changes also omitted from the list of excluded items proceedings under specific statutes that have rarely occurred in recent decades. No comments were received on the proposed revisions, and the Commission adopts them as proposed.

Subpart B—Pleadings

Section 3.11: Commencement of proceedings.

The Commission proposed amending Rule 3.11(b) to specify that the actual date for the evidentiary hearing would be five months from the date the complaint is issued in merger cases and eight months from the date of the complaint in all other cases, while allowing the Commission discretion to determine a different date for the evidentiary hearing when it issues the complaint. The Commission would also be able to extend the date of the evidentiary hearing upon a good cause showing by movants, as set out in proposed Rule 3.21(c).

The Section and Whole Foods asserted that the five and eight month deadlines, along with the deadlines in other rules, are “one-size-fits-all” rules. These comments overlooked the Commission’s ability to extend the hearing date for all types of cases where a party can show that it needs more time to prepare for trial. The Commission, in its discretion, could also consider other factors in determining whether to find good cause to extend the hearing date, for example, if a respondent agrees not to consummate a merger that has not been enjoined by a court during the pendency of the Part 3 proceeding.

The Section stated further that the five month deadline for consummated merger cases “may be appropriate in some cases and not in other cases” and that “whether the matter was the subject of a preliminary injunction hearing” should be one of the factors considered in setting the hearing date for consummated mergers. The Commission believes this comment has merit and is revising the Rule so that only those cases in connection with which the Commission has sought or is seeking relief under Section 13(b) of the FTC Act

will be subject to the five month deadline, unless of course the Commission sets a different date for the evidentiary hearing when it issues the complaint.The eight month deadline will apply to all other cases unless the Commission sets a different deadline when it issues the complaint. For example, it is possible that the Commission might set a consummated merger case, that was not the subject of a Section 13(b) action, under the five month schedule if an expedited schedule would be in the public interest.

15 U.S.C. 53(b).

The Commission typically seeks preliminary injunctive relief under Section 13(b) when it challenges an unconsummated merger, and the Part 3 proceedings in these cases are frequently the ones that are most in need of expedition. As noted above, parties have argued that protracted proceedings for merger cases could result in their abandoning transactions before their antitrust merits can be adjudicated. The interim final Rule, like the proposed Rule, provides the Commission discretion to determine a different date for the evidentiary hearing when it issues the complaint, and Rule 3.21(c) provides that the Commission

may subsequently extend the date of the hearing upon a good cause showing by movants.

The Chamber and Whole Foods asserted that rules expediting proceedings may violate due process if they deny respondents a fair opportunity to develop their defense. Whole Foods stated further that the deadlines favor complaint counsel because respondents do not share complaint counsel’s power to obtain fact discovery during the pre-complaint investigation conducted pursuant to Part 2 of the Commission’s Rules of Practice.

The five and eight month pretrial periods, however, should provide sufficient time for respondents to obtain discovery. Rule 3.31(a) requires both complaint counsel and respondent’s counsel to make comprehensive initial disclosures within five days of receipt of respondent’s answer to the complaint. These disclosures include documents complaint counsel has obtained from third parties, subject to the limitations on discovery in Rule 3.31(c)(2). The rules allow respondents to serve immediately on other parties interrogatories and requests for production of documents. Further, the rules allow respondents to issue immediately subpoenas for discovery, subject to the restrictions of Rules 3.36 and 3.31(c)(2). In the unlikely event that a respondent does not have adequate time for discovery, the respondent may file a motion with the Commission to delay the hearing date.

16 CFR 2.1

et seq.

Further, the APA does not expressly provide for discovery, and as at least two appellate courts have observed:

The extent of discovery to which a party to an administrative proceeding is entitled is primarily determined by the particular agency. . . . [C]ourts have consistently held that agencies need not observe all the rules and formalities applicable to courtroom proceedings. If an agency has adopted rules providing for discovery in its proceedings, the agency is bound by those rules and must ensure that its procedures meet due process requirements.

Pacific Gas & Elec. Co. v. FERC

, 746 F.2d 1383, 1387-88 (9th Cir. 1984) (citing

McClelland v. Andrus

, 606 F.2d 1278, 1285 (D.C. Cir. 1979)).

As demonstrated above, and based on the comments received thus far, the five and eight month deadlines more than satisfy due process requirements because respondent will have ample time for broad discovery and a respondent may also move for more time upon a showing of good cause under Rule 3.21(c).

The deadlines in Rule 3.11 are similar to the schedules established in some complex antitrust cases in federal district court, some of which have gone to trial in five months or less.

Moreover, other federal agencies provide limits on the pretrial process. For example, the Securities and Exchange Commission (“SEC”) puts cases on one of three tracks when it issues an order instituting administrative proceedings. For the longest track, SEC rules require that the hearing commence approximately four months from the date of the order.

See, e.g.

United States v. Microsoft

, 253 F.3d 34 (D.C. Cir. 2001);

United States v. Oracle Corp.

, 331 F. Supp. 2d 1098 (N.D. Cal. 2004).

17 CFR 201.360(a)(2).

In contrast to the concerns raised by the Chamber and Whole Foods, the Section supported a far more accelerated pretrial schedule for unconsummated mergers. The Section advocated a five month period from complaint issuance to

final Commission order

for these cases. The Section’s recommendation was based on its concern, shared by the Pitofsky-Sohn comment, that the proposed rules “will not expedite Part 3 proceedings nearly enough to make them practicable for unconsummated mergers.”

Both sets of comments noted that the proposed Rule fails to address a substantial source of delay—the time it takes the Commission to issue a final decision. As discussed below in the analysis of Rule 3.52, the Commission is responding to this concern by adopting rules that will expedite Commission review of initial decisions in all cases.

The Commission also proposed deleting Rule 3.11(c), which allowed the respondent to file a motion for more definite statement. These motions are seldom filed and even less likely to be granted because Commission complaints are typically very detailed. Moreover, under previous Rule 3.12, if a respondent elected to file a motion for more definite statement, the motion tolled the deadline for the answer to the complaint and would result in substantial delay in the proceedings. As noted below, respondents may still raise similar objections in a motion to dismiss. The Commission therefore adopts this change.

Section 3.12: Answer.

Proposed Rule 3.12(a) shortened the deadline for filing an answer from 20 to 14 days. The Section opposed a reduction in the time to answer the complaint, arguing that complaints can be very detailed and that respondents need adequate time to analyze the factual and legal allegations to respond properly, while the time saved by the Rule is modest. The Commission continues to believe, however, that 14 days to answer the complaint are sufficient for respondents who have become familiar with the issues during the Part 2 precomplaint investigation. While the Section argues that Part 2 “is not a substitute for” Part 3 proceedings and that respondents often are not made aware of “the full range of facts” or gain a complete understanding of the Commission’s legal theory during Part 2, the fact remains that very few, if any, Part 3 cases are ever initiated without the respondent having had extensive meetings with the Commissioners and staff. By the time the Commission issues a complaint, the parties should be well aware of the agency’s factual and legal assertions. Further, if necessary, the Commission may exercise its authority to extend the 14 days for good cause.

See

Rule 4.3(b). The Commission is adopting the revision as proposed.

Proposed Rule 3.12(a) also eliminated the provision in the Rule that allowed the filing of any motion to toll the deadline for respondents to file an answer to the complaint.

The Commission was concerned that this provision too broadly permitted the filing of any motion, regardless of its merit or requested relief, to substantially delay the beginning of the Part 3 proceeding. The Section objected that no answer should be required until, at least, resolution of a motion for a more definite statement or to strike that challenges the sufficiency of a complaint. The Commission notes that its complaints tend to be highly detailed and that motions for a more definite statement are rarely filed and more rarely granted. Respondents may, however, always file a motion to dismiss to challenge the sufficiency of the complaint if necessary. The revisions to Rule 3.12(a) will ensure an earlier prehearing conference, earlier discovery, and will expedite the ultimate resolution of the proceeding. The Commission adopts the revisions to Rule 3.12(a) as proposed.

This provision had been added by the Commission in its 2001 Rule amendments.

See

66 FR 17622 (Apr. 3, 2001).

The Commission also proposed in Rule 3.12(b) and (c) to eliminate the ALJ’s authority to render an initial decision when the allegations of the complaint are admitted or there is a default. In those cases, the Commission would issue a final decision on the basis of the facts alleged in the complaint. While the Section suggested that a decision by an independent ALJ can be useful even without a record to review, the Commission believes that in these

circumstances cases can be resolved more expeditiously without the intermediate step of an ALJ’s initial decision; the only issues in such cases are legal or policy ones, in which the Commission’s expertise is most relevant. The proposed revisions are adopted.

Subpart C—Prehearing Procedures; Motions: Interlocutory Appeals; Summary Decisions

Rule 3.21: Prehearing procedures.

The Commission proposed amendments to Rule 3.21 that would impose tighter deadlines on prehearing procedures. No comments on this Rule were received, and the Commission adopts the rule revisions as proposed. Rule 3.21(a) requires that the parties’ initial meet-and-confer session take place within five days of the answer and requires the parties to discuss electronically stored information (“ESI”) at that time, including the scope of and the time period for the exchange of ESI and the format for exchanging such information. This change is intended to help expedite the case and facilitate resolution of production issues in ways that minimize costs. Rule 3.21(a) is also modified by deleting a phrase that suggested the parties should discuss a proposed hearing date because that date will already have been set by the Commission when it issued the complaint and the date can be modified only by the Commission upon a showing of good cause. Rule 3.21(a), as amended, specifies broad subjects to be discussed at the parties’ meet-and-confer session(s) before the scheduling conference.

Rule 3.21(b) advances the deadline for the scheduling conference from 14 days after the answer is filed to 10 days after the answer is filed. Although the Commission extended the deadline to 14 days in 2001,

it believes the ten day deadline is reasonable for most cases. The Rule includes additional items to be discussed at the scheduling conference, such as stages of the proceeding that may be expedited. Under the Rule, the Commission contemplates that the parties will inform the ALJ of the results of their initial meeting(s) regarding their proposed discovery plan, including the disclosure of ESI, and that the ALJ will incorporate in the scheduling order a discovery plan that he or she deems appropriate.

Id.

Rule 3.21(c)(1) specifies that the ALJ’s scheduling order will establish a schedule of proceedings that will permit the evidentiary hearing to commence on the date set by the Commission. The Rule also states that the Commission may, upon a showing of good cause, order a later date for the evidentiary hearing than the one specified in the complaint. The deadline for the prehearing scheduling conference and order and the more detailed requirements for both are intended to help keep the prehearing proceedings on track and enable the parties to contribute to a high quality record on which the ALJ can base his or her decisions.

Rule 3.21(c)(2) authorizes the ALJ to extend, upon a showing of good cause, any deadline in the scheduling order other than the date of the evidentiary hearing. Rule 3.21(f) states that the ALJ shall hold additional prehearing and status conferences or enter additional orders as may be needed to “ensure the just and expeditious disposition of the proceeding and to avoid unnecessary cost.” These revisions give the ALJ substantial flexibility and discretion to manage particular cases.

Section 3.22: Motions.

The proposed revision to Rule 3.22(a) provided that the Commission would resolve in the first instance motions to strike, motions for summary decision, and prehearing motions to dismiss, but provided the Commission discretion to refer the motion to the ALJ and to set a deadline in which the ALJ must rule on the motion. Significantly, the Section acknowledged in its comment that “[e]arlier Commission involvement [to resolve dispositive motions] will undoubtedly result in more efficient resolution of these issues. Moreover, it will allow the Commission to apply its antitrust expertise to matters at an earlier stage. Delay occasioned by an erroneous ALJ decision on a dispositive motion * * * provides little benefit and exacts a toll on all participants in the process.”

Nonetheless, commenters (including the Section) criticized the proposed Rule change as unfairly invading the province of the independent ALJ and compromising the Commission’s dual roles as prosecutor and adjudicator. For example, the Section argued that the proposed changes, while “likely [to] reduce or avoid delay,” could raise concerns about the impartiality and fairness of the Part 3 proceeding by permitting the Commission to adjudicate dispositive issues, including motions to dismiss challenging the facial sufficiency of a complaint, shortly after the Commission has voted out the complaint finding that it has “reason to believe” there was a law violation, without the benefit of an opinion by an independent ALJ. The Section added that, while “it may sometimes be desirable for the Commission to address dispositive motions in the first instance, changing the Part 3 rules to make that the default procedure is unnecessary,” and that “concern about improving the quality of Commission decisions is better addressed by enhancing the antitrust expertise of the ALJs.” The Pitofsky-Sohn comment similarly argued that the proposed rules, including Rule 3.22, would arguably infringe on the fairness of the Part 3 proceeding if the Commission more frequently “invades what has heretofore been the province of an independent ALJ.” Whole Foods argued that the rule change would compromise the independence of the ALJ, who will lose the opportunity to “live with the case,” will not write his initial decision on a “clean slate,” but will be unduly influenced by the “entirely transparent views of the Commission delivered on less than a full record,” and will lose his ability to effectively manage discovery. The Chamber and Blumkin comments similarly argued that this change would compromise the ALJ’s independent decision making role.

Commenters, however, provided essentially no legal support for their argument that the Commission’s resolution of dispositive motions in the first instance will unfairly prejudice litigants in Part 3 proceedings or would violate the APA. Most important, these comments failed to undermine the central premise supporting the rule change: that the Commission has the authority and expertise to rule initially on dispositive motions and that doing so will improve the quality of the decisionmaking and (as acknowledged by the Section) will expedite the proceeding.

This is because an erroneous decision by the ALJ on a dispositive motion dismissing the complaint may lead to unnecessary briefing, hearing, and reversal, resulting in substantial costs and delay to the litigants. Moreover, the APA does not confer on an ALJ the specific authority to rule on dispositive motions, and indeed, permits the Commission or Commissioners to act as presiding officers.

See

5 U.S.C. 556(b).

It is

therefore hard to see how allowing the Commission to rule on dispositive motions deprives an ALJ of the independence conferred by the APA or is unfair to the parties.

The Commission has in recent practice retained jurisdiction to resolve legal issues raised in a dispositive motion.

See, e.g.

In re S. Carolina State Bd. of Dentistry

, 136 F.T.C. 229 (2004) (Commission retained jurisdiction to hear motions to dismiss and denied at that stage respondent’s legal defense that its alleged unlawful activities were protected by the state action doctrine).

Under the APA, the Commission or one of its Commissioners may take evidence at the hearing, 5 U.S.C. 556(b), and the Commission, on appeal or

review, may make its own legal determinations and

de novo

factual findings from the hearing record.

See, e.g.

, 5 U.S.C. 557(b) (“On appeal from or review of the initial decision, the agency has all the powers which it would have in making the initial decision except as it may limit the issues on notice or by rule.”).

Codifying this approach will likely expedite the proceedings and save litigants resources to the extent the case is dismissed or the issues narrowed by the resolution of the legal or public interest issue. For example, a Commission order denying a motion to dismiss can articulate the legal standard to be applied to the facts alleged in the complaint and can be a useful tool to apply as facts are developed during discovery.

Whole Foods mistakenly asserted that by deciding dispositive motions, such as motions for summary decision, the Commission will be taking away the independent role of the ALJ to interpret facts and parse the evidentiary record. On the contrary, such motions inherently do not resolve factual disputes, but rather resolve legal or policy issues where there are no genuine issues of material facts in dispute. This commenter acknowledged that motions raising “purely legal defenses” might be appropriate for the Commission to resolve.

Concerns raised by the Section that this rule change will result in “the practical unavailability of a motion to dismiss” because the Commission had just previously found there to be a “reason to believe” there was a law violation, are without support and are refuted by recent Commission practice.

Further, the logic of the argument about the benefit of delaying the Commission’s involvement with the legal issues in a case would cast doubt on any effort to significantly reduce the time it takes for a case to reach the Commission for a final decision on both the law and the facts of the case. Indeed, the Section’s proposal that the Commission issue a final decision in all unconsummated merger cases within five months after issuance of the complaint would have the Commission resolve the facts and law of the case within a few months after it voted to bring the case.

See

e.g.

S. Carolina State Bd. of Dentistry

, 136 F.T.C. 229 (denying respondent’s motion to dismiss on state action grounds, but refusing to deny respondent’s motion to dismiss on mootness grounds as urged by complaint counsel in favor of remanding to ALJ for limited discovery on mootness issue).

The Commission also proposed in paragraph (a) that rulings on motions to dismiss based on the alleged failure to establish a

prima facie

case would be deferred until after the hearing record is closed, and eliminated the provision in the previous Rule for a recommended ruling by the ALJ when certifying to the Commission a motion outside his or her authority to decide. The Commission received no comments on these proposals and they have been adopted as proposed.

Proposed paragraph (b) required that proceedings before the ALJ not be stayed during the Commission’s consideration of the motion, unless otherwise ordered by the Commission. The Commission has revised the caption of paragraph (b) to “Proceedings not stayed,” to more accurately describe the subject matter of the paragraph. Proposed paragraph (e) required the ALJ to decide all motions within 14 days of the filing of all motion papers unless otherwise provided by rule or if the Commission extends the time for good cause. The purpose of proposed paragraph (b) was to ensure that discovery and other prehearing proceedings continue while the Commission deliberates over the dispositive motions, and paragraph (e) is similarly intended to expedite the proceedings. The Section objected that eliminating the stay for pre-answer motions will result in inadequate review of the sufficiency of a complaint, but as explained above, the Commission’s complaints tend to be highly detailed and, in any event, respondents retain the right to challenge the sufficiency of a complaint by filing a motion to dismiss. Except for the revision of the caption of paragraph (b), paragraphs (b) and (e) are adopted as proposed.

The Section commented, however, that by not staying the Part 3 case during the pendency of a dispositive motion before the Commission and with no deadlines imposed on the Commission to resolve such motions, litigants (and the ALJ) will be disadvantaged by not knowing the precise scope of the issues to be addressed at the hearing or, indeed, whether there will be any hearing at all. The Commission agrees and has therefore revised paragraph (a) to require that the Commission resolve any dispositive motion within 45 days of the filing of the motion papers unless it finds there to be good cause for an extension. In those cases where the Commission grants a dispositive motion, that decision will constitute the agency’s final decision in the case, and this 45 day period for deciding dispositive motions is therefore the same amount of time as the Commission has allocated for issuing its final decision following oral argument in cases where the Commission has sought relief under Section 13(b).

Proposed paragraph (c) also imposed word count limits on motion papers. Briefs in support of, and in opposition to, dispositive motions were to be limited to 10,000 words (approximately 40 double-spaced pages), and briefs in support of, and in opposition to, non-dispositive motions were limited to 2,500 words (approximately 10 double-spaced pages). The Commission received no comments on these word count limitations and they have been adopted as proposed.

Proposed paragraph (d) provided an automatic right of reply in support of dispositive motions, stated that reply and surreply briefs in support of non-dispositive motions “shall be permitted only in circumstances where the parties wish to draw the ALJ’s or the Commission’s attention to recent important developments or controlling authority that could not have been raised earlier in the party’s principal brief,” and imposed a five day filing deadline for any authorized reply to a motion. No comments were received on these provisions and they are adopted as proposed.

The other proposed changes to Rule 3.22, such as eliminating previous paragraph (e) and redesignating previous paragraph (f) as paragraph (g), generated no comments and are adopted.

Section 3.23: Interlocutory appeals.

The Commission proposed amendments to Rule 3.23 that would expedite consideration by the ALJ and the Commission of certain applications by a party that seek discretionary review of an interlocutory ruling by the ALJ. As noted in the NPRM, the proposal left unchanged in paragraph (a) the types of rulings that the parties can ask the Commission to review without a determination by the ALJ that interlocutory review is appropriate.

In paragraph (b), the proposal continued to allow applications for interlocutory review of other rulings only on a determination that the ruling “involves a controlling question of law or policy as to which there is substantial ground for difference of opinion and that an immediate appeal from the ruling may materially advance the ultimate termination of the litigation or subsequent review will be an inadequate remedy.” In order to reduce delay, the Commission proposed requiring the ALJ to make his or her determination whether the application for review involves such a controlling question within three days after the filing by a party of a request for such a determination. The revision eliminated the requirement that the ALJ provide a

written justification for his or her determination. It also allowed the party to file its application for review with the Commission if the ALJ does not make a timely ruling on its request for a determination on the appropriateness of review. The Commission adopts these revisions as proposed.

Because the pendency of an application for review may leave a cloud over the proceeding before the ALJ, paragraph (d) of the proposed Rule would have treated the failure of the Commission to act within three days as a denial of the application. As suggested by the Section’s comment, the Commission has eliminated this default provision and the Rule now requires instead that the Commission decide whether to entertain an appeal within three days after the filing of the answer to the application. The Commission has also adopted the Section’s suggestion that the Rule make explicit that the denial of an application does not constitute a ruling on the merits of the appeal.

Also, to avoid unnecessary delay, the proposed Rule set shorter deadlines than the previous Rule for the filing of applications and answers and, to reduce burdens, imposed tighter limits than the previous Rule on the length of these filings. No comments were received on these provisions and the Commission has adopted them.

Section 3.24: Summary decisions.

Proposed paragraph (a), in conjunction with proposed Rule 3.22, was revised to permit the Commission in the first instance to resolve dispositive motions unless referred by the Commission to the ALJ. This proposal was criticized by many of the commenters as improperly infringing on the independence of the ALJ. These commenters asserted that, after the Commission issues a complaint, it should not intervene in the Part 3 proceedings until after the ALJ has conducted the Part 3 hearing and issued an initial decision. As noted in the analysis of Rule 3.22, the Commission may properly make initial rulings on dispositive motions presenting legal or public interest issues and doing so does not infringe on the ALJ’s ability to preside over the evidentiary hearing and issue an initial decision.

Proposed paragraph (a) also required that summary decision motions be filed no later than 30 days before the evidentiary hearing instead of 20 days as in the unamended Rule. The proposed Rule also extended the deadline for filing affidavits in opposition to a summary decision motion from 10 to 14 days in order to provide the nonmoving party more time to oppose the motion where the moving party may have had months in which to prepare its summary decision brief and supporting papers. No comments were received on these proposals and they are therefore being adopted.

Proposed paragraph (a) also eliminated the previous 30 day deadline for ruling on a motion for summary decision but allowed the Commission to set a deadline for a decision when referring such a motion to the ALJ. As discussed above, several commenters complained that the lack of a Commission deadline to rule on dispositive motions while the Part 3 case is proceeding may unfairly prejudice litigants who do not know if or how the issues will be narrowed before the beginning of the evidentiary hearing. In response, in Rule 3.22 the Commission has imposed on itself a 45 day deadline to resolve dispositive motions. As noted earlier, this 45 day period for deciding dispositive motions is the same amount of time as the Commission has allocated for issuing its final decision following oral argument in cases where the Commission has sought relief under Section 13(b).

Finally, commenter Nagin suggested that, where an affidavit in support of or in opposition to a motion for summary decision is filed in bad faith, the list of possible disciplinary actions under Rule 3.24(b) be expanded, from “reprimand, suspension or disbarment” to include “notice to all professional licensing, registration and certification entities to which a lawyer is subject to discipline.” The Commission has the authority to refer unethical conduct to state bar associations and does not believe that a special provision for this is needed in the Rule on summary decisions.

Section 3.26: Motions following denial of preliminary injunctive relief.

Rule 3.26 was first adopted in connection with a 1995 Policy Statement, which explained that the Commission takes a case-by-case approach in deciding whether to pursue administrative litigation of a merger case following the denial of a preliminary injunction in federal court.

Many commenters objected to the Commission’s proposal to eliminate provisions in the Rule for automatic withdrawals from adjudication or stays when a party moves for withdrawal or to dismiss after the Commission loses a motion for preliminary injunction in a merger case. Several commenters argued that the Commission should not pursue administrative litigation in merger cases if it loses its application for a preliminary injunction. Of course, if the Commission were to adopt a policy uniformly disclaiming any intent to pursue the Part 3 adjudication on the merits after losing a preliminary injunction, there would be no need for Rule 3.26 at all. The Commission does not choose to take that approach and instead adheres to the case-by-case approach of the 1995 Policy Statement.

60 FR 39741 (1995).

Several comments argued that, by stating in the NPRM that continuation of the Part 3 adjudication after loss of a preliminary injunction should be the “norm,” the Commission’s proposed amendment amounted to a reversal of its 1995 Policy Statement. According to that Statement,

[I]t would not be in the public interest to forego an administrative trial solely because a preliminary injunction has been denied. Nor would it be in the public interest to require an administrative trial in every case in which a preliminary injunction has been denied. Thus, a case-by-case determination is appropriate. This approach gives the Commission the opportunity to assess such matters as (i) the factual findings and legal conclusions of the district court or any appellate court, (ii) any new evidence developed during the course of the preliminary injunction proceeding, (iii) whether the transaction raises important issues of fact, law, or merger policy that need resolution in administrative litigation, (iv) an overall assessment of the costs and benefits of further proceedings, and (v) any other matter that bears on whether it would be in the public interest to proceed with the merger challenge.

Id.

at 39743.

The 1995 Statement, however, offered no view on whether the typical outcome of a case-by-case analysis would be to continue or to abandon Part 3 litigation. The Pitofsky-Sohn comment states that “articulating such a ‘norm’ leaves the impression that the Commission will take little or no notice of what preliminary injunction courts have to say” and points out that the NPRM was “silent with respect to whether any or all of the factors [listed in the 1995 Statement and quoted above] will continue to be considered.”

The Commission continues to consider the five factors as highly relevant to any determination whether to proceed with Part 3 and anticipates that the parties will address them in their motion papers and, if a motion for withdrawal is granted, in their presentations during the time the case is

withdrawn. The Commission, of course, will also continue to consider carefully the rulings by the district court and any appellate court rulings in deciding whether to proceed with Part 3. In this connection, the Commission urges parties to address anything in the judicial rulings that they believe is relevant to the public interest in further proceedings. Besides the factors listed in the 1995 Policy Statement, this would include, for example, a discussion of whether any judicial ruling on the merits of the challenge to the merger was based on a determination that the Commission had not even raised “questions going to the merits so serious, substantial, difficult and doubtful as to make them fair ground for thorough investigation, study, deliberation and determination by the FTC in the first instance and ultimately by the Court of Appeals,” the test articulated in such decisions as

FTC v. H.J. Heinz Co.

and

FTC v. Whole Foods Market, Inc

for whether the Commission had made a sufficient showing of likelihood of success on the merits to warrant preliminary injunctive relief. Such a determination would itself raise serious questions about whether the Part 3 case should continue.

246 F.3d 708, 714-15 (D.C. Cir. 2001).

No. 07-5276, 2008 U.S. App. LEXIS 24092, at *10 (D.C. Cir. Nov. 21, 2008) (Brown, J.);

id.

at *30 (Tatel, J., concurring).

Although the Commission will maintain the case-by-case approach outlined in the 1995 Statement, this approach does not warrant the delays that result from automatic withdrawals or stays. The Commission, however, is committed to a prompt and careful consideration of the public interest and has accordingly added a requirement that it rule on motions to dismiss or for withdrawal from adjudication not later than 30 days after the filing of motion papers.

The Commission is making another change to the proposed amendment to ensure prompt consideration of the public interest in proceeding with the Part 3 litigation. Proposed paragraph (b) would have made explicit a requirement in the original Rule

that a motion to dismiss or for withdrawal be filed only after the exhaustion of appeals from the district court’s denial of the preliminary injunction. This restriction could prevent the filing of motions to dismiss or for withdrawal from adjudication under this Rule until many months after the district court decision. In order to allow much more prompt consideration of the public interest in determining whether to proceed with the Part 3 case, the Commission has revised paragraph (b) to authorize the filing of a motion to dismiss or for withdrawal at any time within 14 days after, but not earlier than, a court of appeals has denied a Commission request for an injunction or stay pending appeal. For cases in which the Commission has not sought relief from the court of appeals within seven days following the denial of a preliminary injunction, the Rule revision authorizes the filing of a motion to dismiss or for withdrawal at any time within 14 days after the district court denies a Commission request for preliminary relief.

See

60 FR 39640, 39641;

In re Equitable Resources, Inc.

, No. 9322, 2007 F.T.C. LEXIS 49 (May 30, 2007).

Subpart D—Discovery; Compulsory Process

Section 3.31: General discovery provisions.

The Commission proposed to revise Rule 3.31(b) to specify that the documents to be disclosed as part of the parties’ mandatory initial disclosures include declarations or affidavits, as well as transcripts of investigational hearings and depositions, and that initial disclosures also include ESI. The reference to ESI would update the term “data compilations” and would parallel the 2006 amendment to Fed. R. Civ. P. 26(a)(1)(B). The proposed limitations on disclosure of ESI in Rule 3.31(c)(3) follow Fed. R. Civ. P. 26(b)(2)(B). In particular, the proposed provision in Rule 3.31(c)(3) that a party need not provide discovery of ESI from sources that the party identifies as not reasonably accessible because of undue burden or cost is anticipated to reduce delays and costs to the parties. There were no comments on these revisions and the Commission adopts them as proposed. As discussed below, the Commission also proposed to treat expert discovery in a new Rule 3.31A, thereby eliminating the provisions in paragraphs (b) and (c) governing expert discovery.

The proposed revisions to Rule 3.31(c)(2) would limit the scope of discovery for complaint counsel, respondents, and third parties who receive a discovery request. Complaint counsel would only need to search for materials that were collected or reviewed in the course of the investigation of the matter or prosecution of the case and that are in the possession, custody, or control of the Bureaus or Offices of the Commission that investigated the matter, including the Bureau of Economics. The ALJ could authorize for good cause additional discovery of materials in the possession, custody, or control of those Bureaus or Offices, or authorize other discovery pursuant to Rule 3.36. Neither complaint counsel, respondent, nor a third party receiving a discovery request under the rules would be required to search for materials generated and transmitted between an entity’s counsel (including counsel’s legal staff or in-house counsel) and not shared with anyone else, or between complaint counsel and non-testifying Commission employees, unless the ALJ determines there is good cause to provide such materials.

The Section argued that requiring respondents to satisfy the “heightened requirements” of good cause for agency materials that fall outside these limits could create a disparity in substantive outcomes in Part 3 proceedings and those in federal court. In fact, however, the proposed rule is similar to the restrictions on discovery in the Federal Rules of Civil Procedure. The Section admitted that “the FRCP generally limit the discovery of evidence that is duplicative, privileged, or work product.” As the Commission stated in the NPRM, the materials excluded by the proposed rule are frequently duplicative and almost always protected by the deliberative process or attorney-client privileges or as work product. In the rare event that material excluded by the proposed rule is not duplicative, privileged or work product, it should not be difficult for respondent to satisfy a good cause standard or the requirements of Rule 3.36. Moreover, any alleged disadvantage for respondents is offset by the corresponding limitations on discovery of materials held by respondents and third parties. The Commission is adopting the revisions to Rule 3.31(c)(2) as proposed.

Proposed Rule 3.31(d) would require the ALJ to issue the standard protective order set forth in an appendix to the Rule. The Section argued that the parties should be able to negotiate orders suited to the needs of the particular case. These negotiations, however, can substantially delay discovery, prevent the Commission from protecting confidential material in a uniform manner in all Part 3 cases, and reduce the confidence of third party submitters that their confidential submissions will be protected.

The Section specifically objected to a provision that would prohibit disclosure of confidential discovery materials to a respondent’s in-house counsel. It asserted that, in many cases, this restriction would inhibit a respondent’s ability to defend itself. The Commission’s statutory obligation to maintain the confidentiality of

commercially sensitive information,

however, raises serious questions about the wisdom of allowing disclosure of information in its custody to in-house counsel, who might intentionally or unintentionally use it for purposes other than assisting in respondent’s representation, for example, by making or giving advice about the company’s business decisions.

The Commission believes it is not sound policy to allow third party competitively sensitive information to be delivered to people who are in a position to misuse such information, even if inadvertently.

E.g.

, FTC Act 6(f), 15 U.S.C. 46(f).

Although protective orders could limit in-house counsel’s access only to less sensitive third party information, third party submitters during a Part 2 investigation could only guess what degree of protection would eventually be afforded their confidential information in a subsequent Part 3 proceeding.

The proposed standard protective order covered “sensitive personal information,” which includes, but is not limited to, an individual’s Social Security number, taxpayer identification number, financial account number, credit card or debit card number, driver’s license number, state-issued identification number, passport number, date of birth (other than year), and any sensitive health information identified

by individual, such as an individual’s medical records. The Commission is retaining this provision, and as discussed below, is making further conforming amendments to Rule 3.45, which will accord

in camera

treatment if such material is to be introduced as evidence or otherwise used in the proceeding. Likewise, the Commission is amending Rule 4.2, as explained further below, to govern the use of sensitive personal information in filings to the Commission.

The final version of the standard protective order substitutes “identifiable” for “identified.”

The Nagin comment suggested several modifications to the standard protective order, including barring disclosure of confidential material to anyone affiliated with or employed “directly or indirectly” by a respondent, requiring notice if a party receives a discovery request from another government agency without regard to whether the request is part of an agency “proceeding,” and adding specific requirements for the disposition of electronically stored discovery materials at the end of the proceeding. It also recommended that parties maintain logs of all recipients of confidential discovery materials.

Although the term “proceeding” is broad enough to encompass government investigations, the Commission is revising paragraph 11 of the standard order to apply to discovery requests “received in any investigation or in any other proceeding or matter.” The Commission, however, is not convinced that the comment’s other recommended modifications are needed to protect confidential discovery material.

The Commission has also eliminated paragraph (g) from the previous Rule. This paragraph applied to applications for the issuance of subpoenas to compel testimony at an adjudicative hearing pursuant to Rule 3.34. Because the Commission has amended Rule 3.34 to eliminate such applications, this paragraph is unnecessary.

Rule 3.31(g) (proposed Rule 3.31(h)), as revised, addresses the resources used to avoid the risk of privilege and work product waiver, which add to the costs and delay of discovery. The risk of waiver, and the time and effort needed to avoid it, are aggravated when the party is producing ESI. The proposed amendment would limit the risk of waivers resulting from inadvertent disclosures as long as parties take reasonable measures to protect privileged materials. The proposal did not address obligations imposed by state bar rules on attorneys who receive materials that appear to be subject to a privilege claim.

The FTC Act requires the Commission to protect “privileged or confidential” information.

By providing that the Commission will not treat genuinely inadvertent disclosures as waivers of privilege claims, the proposed amendment, together with the relevant provisions of the FTC Act, was intended to assure respondents and third parties alike that if otherwise privileged materials are held by the FTC, those materials will not readily find their way into the public record. In this regard, the protective order expressly includes privileged information in the order’s definition of “confidential materials” subject to the protective order. No comments were received on the provision regarding inadvertent disclosure, and the Commission adopts it as proposed.

FTC Act, 6(f), 21(d)(1)(B), 15 U.S.C. 46(f), 57b-2(d)(1)(B).

Rule 3.31(h) (proposed Rule 3.31(i)), as revised, prohibits the filing of discovery materials with the Office of the Secretary, the ALJ, or otherwise providing such materials to the Commission, except when used to support or oppose a motion or to offer as evidence. This change is similar to Fed. R. Civ. P. 5(d), which generally prohibits the filing of discovery material unless ordered by the court or used in the proceeding. No comments were received on this provision and the Commission adopts it as proposed.

Section 3.31A: Expert discovery.

Proposed Rule 3.31A mandated a schedule for the disclosure of potential expert witnesses, the production of expert reports, and the start and completion of expert depositions. The proposed Rule also incorporated and revised certain provisions contained in previous Rule 3.31(b) and (c). As discussed below, the Commission is revising the Rule to expressly address respondent’s ability, in limited circumstances, to call surrebuttal witnesses and to file surrebuttal reports. The Commission is adopting the remaining provisions of Rule 3.31A as proposed.

The scheduling provisions in the Rule will provide for expert discovery in a more orderly and expeditious manner than what has occurred in past proceedings by not permitting expert discovery to begin until fact discovery is essentially completed. The Commission believes that discovery of experts, including the production of expert reports, will be less than thorough if facts potentially relevant to their opinions have yet to be discovered. The Rule requires the parties to serve each other with a list of experts that they intend to call at the hearing no later than one day after the close of fact discovery. Commenter Nagin asserted that requiring respondents to disclose their expert witnesses at the close of fact discovery invades the work product of respondents. The disclosure of expert witnesses is necessary, however, to allow the parties to prepare for depositions and to engage in other discovery relevant to that witness.

The Rule also limits the number of expert witnesses to five per side. The Section claimed that the revision should allow each party to call five experts, instead of limiting the number of experts to five per “side.” It has been the Commission’s experience, however, that five expert witnesses per side is sufficient for each party to present its case in the vast majority of cases. The Rule also has a safety valve that allows a party to seek leave to call additional expert witnesses in extraordinary circumstances.

The Rule requires that each expert who will testify at the evidentiary hearing produce a written report, thereby eliminating the ALJ’s authority to dispense with them. Preparation of a written expert report is a common requirement in federal courts and, given the Commission’s goal of expedited proceedings, will be required during the

discovery period to allow the parties more effective and targeted discovery. Paragraph (c) of the Rule specifies additional requirements for expert reports, including “a listing of any other cases in which the witness has testified as an expert at trial or by deposition within the preceding 4 years.” The Nagin comment argued that every expert should be required to maintain a database with substantial information about his or her testimony in other proceedings. This suggestion overlooks the fact that individuals may serve as experts in proceedings in other forums before being asked to be an expert in a Commission Part 3 matter. An FTC rule could not require individuals to “maintain” such information when they are not involved in Commission proceedings, and to require an individual to create such a database once they are selected as an expert for a Part 3 matter would be unduly burdensome. The comment suggested further that the FTC maintain a database of all expert reports and expert testimony submitted in all Part 3 proceedings. The Commission already makes all of the trial testimony and exhibits available to the public—except for confidential material—and has begun posting trial testimony at

www.ftc.gov

The Commission declines the invitation to assume the additional burden suggested by the commenter.

For example, the trial transcript for the

In re Rambus, Inc.

matter is available at (

http://www.ftc.gov/os/adjpro/d9302/exhibits/index.shtm

The Rule provides that complaint counsel submit their initial expert reports first, followed by respondents’ expert reports. Respondents’ reports, of course, can rebut material in complaint counsel’s initial expert reports. The Rule also explicitly authorizes complaint counsel to call rebuttal experts and, if complaint counsel intends to exercise this option, requires the experts to prepare rebuttal expert reports. Thus, the Rule allows complaint counsel’s experts an opportunity to respond to respondents’ expert reports. The Section asserted that respondents should also have the express right to call surrebuttal experts in all situations, not just when material outside the scope of a fair rebuttal is presented. While the Commission continues to believe that respondents should only be able to call surrebuttal experts in order to respond to new arguments raised by complaint counsel’s rebuttal experts, it is clarifying the Rule so that the “appropriate relief” sought by respondents in this circumstance explicitly includes the right to seek leave to call surrebuttal experts and to file a surrebuttal report, and includes a deadline for respondents to file such a motion.

The Rule also excludes from expert discovery anyone who has been retained or specially employed by another party in anticipation of litigation or preparation for hearing unless he or she is expected to be called as a witness at the hearing, so as to prevent the discovery of the unpublished work product of non-testifying experts, particularly where such materials are proprietary and highly confidential. The discovery of such marginally relevant materials can be a major distraction from the central case and can have an adverse effect on the willingness of non-testifying experts to consult in the future.

Section 3.33: Depositions.

The Commission has added to paragraph (a) a reference to Rule 3.36, which provides that certain subpoenas requiring the appearance of certain persons may issue only upon a motion approved by the ALJ.

The proposed Rule added paragraph (b) to Rule 3.33, which allows the ALJ, upon a party’s motion, to prevent the taking of a deposition if it would not meet the scope of discovery standard under Rule 3.31(c) or if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or if the evidence would be misleading, or based on considerations of undue delay, waste of time, or needless presentation of cumulative evidence (as set forth under Rule 3.43(b)). Proposed paragraph (b) also clarified that the fact that a witness testifies in an investigative hearing does not preclude the deposition of that witness.

The Section contended that the proposed revision is inconsistent with the Federal Rules of Civil Procedure, because Fed. R. Civ. P. 30(a)(2) sets out only limited circumstances when permission from a federal judge is required to take a deposition. In addition, the Section asserted that the revision imposes a burden on a party seeking to take the deposition to show that the evidence will be admissible. However, the Commission is adopting the revision as proposed. Under general principles of motions practice, the party filing a motion has the burden of persuasion. In this situation, the party moving to prevent the taking of the deposition would have the burden of showing that the evidence should be excluded for the reasons stated in the proposed Rule; there would not be a burden on the party seeking to take the deposition to show that the evidence will be admissible. The revision is therefore not a significant departure from the federal rules.

The Commission proposed revising paragraph (c) to stop the practice of filing notices of deposition with the Office of the Secretary, the ALJ, or otherwise providing such notices to the Commission, except as provided in proposed Rule 3.31(h). Such notices serve no purpose for the ALJ or the agency, and receipt of these notices causes unnecessary processing costs for the Commission. No comments were received on this proposal and the Commission adopts it as proposed.

Consistent with Rule 3.43, the Commission has proposed eliminating previous Rule 3.33(g)(1) because it contains hearsay-based limitations for the use of depositions. Revised Rule 3.43 reflects existing case law by providing for the admission of hearsay evidence in the evidentiary hearing if the evidence is “relevant, material, and bears satisfactory indicia of reliability so that its use is fair.” If meeting this standard, depositions, investigational hearings, and other prior testimony may be admitted. As discussed further below, the Commission is adopting Rule 3.43 as proposed, and accordingly is eliminating previous Rule 3.33(g)(1).

Section 3.34: Subpoenas.

The Commission proposed amending paragraphs (a) and (b) to authorize counsel for a party to sign and issue a subpoena on a form provided by the Secretary. These revisions are intended to expedite the commencement of hearings by speeding the issuance of discovery and hearing subpoenas. The definition of “documents” would also be revised to parallel Fed. R. Civ. P. 45(c)(1). No comments were received on these rule changes and the Commission adopts them as proposed.

The Commission also proposed revising paragraph (c) to reflect revised Rule 3.36, discussed below, which requires a special showing of need for subpoenas directed to the offices of the Commissioners, the General Counsel, Bureaus and Offices not involved in the matter, the ALJs, or the Secretary. No comments were received on the proposed revisions to Rule 3.36 and the Commission is adopting them as well as the corresponding changes in Rule 3.34(c).

The Commission is also adding a reference to the discovery limitations in Rule 3.31(c)(2).

See infra

note 44.

Section 3.35: Interrogatories to parties.

The Commission proposed to add Rule 3.35(a)(3) to provide that interrogatories should not be filed with the Office of the Secretary, the ALJ, or otherwise provided to the Commission except as provided in proposed Rule 3.31(i) because ordinarily there is no reason to file discovery pleadings. No comments were received on this proposal and the Commission is adopting Rule 3.35(a)(3) as proposed.

Proposed Rule 3.35(b)(2) would allow parties to delay answering a contention interrogatory until the close of discovery, the pretrial conference, or “other later time.” Although the Section recognized that contention interrogatories usually are not answered in federal court cases until the end of fact discovery, it nonetheless asserted that the proposed Rule unfairly shifts the burden of seeking a response to a contention interrogatory to the party who propounds it. The Section also commented that the phrase “other later time” is ambiguous and may allow the recipient of such an interrogatory to evade an answer altogether. The purpose of the proposed Rule is to conform Commission practice with federal court practice and consistently allow a party to delay answering a contention interrogatory until fact discovery is almost complete. However, the proposed Rule also allowed a party posing a contention interrogatory to secure an earlier answer, if one was necessary, by filing a motion seeking an earlier answer. The Rule is not intended to allow an answering party to evade an answer, but to postpone answering until it has all the information it needs to supply a full answer. Accordingly, the Rule now clarifies that contention interrogatories must be answered by the time designated discovery has been completed, but in no case later than three days before the final pretrial conference.

Section 3.36: Applications for subpoenas for records of or appearances by certain officials or employees of the Commission or officials or employees of governmental agencies other than the Commission, and subpoenas to be served in a foreign country.

The Commission proposed to revise Rule 3.36 to require a special showing of need for subpoenas directed to the offices of the Commissioners, the General Counsel, Bureaus and Offices not involved in the matter, the ALJs, and the Secretary because these offices are unlikely to possess relevant, discoverable information that is not available from other sources. The Commission believed that the lack of useful additional information likely to be available from these offices suggested that the burden (and delay) of searches for responsive records and the creation of privilege logs should not be imposed without strong justification. The Commission’s proposed revision to paragraph (b)(3) would require a showing of “compelling need” as the corresponding standard for witness testimony. No comments were received on these proposed amendments to Rule 3.36 and they are adopted as proposed.

The Section did object to a related provision in proposed Rule 3.31(c)(2) to limit the scope of complaint counsel’s obligation to search. As discussed earlier, the Commission is not persuaded by that objection.

Section 3.37: Production of documents, electronically stored information, and any tangible thing; access for inspection and other purposes.

The Commission proposed to amend Rule 3.37 to include provisions from Fed. R. Civ. P. 34 on electronic discovery. The proposed amendment also provided that requests under this Rule not be filed with the Office of the Secretary, the ALJ or otherwise provided to the Commission, except as provided in proposed Rule 3.31(i). No comments were received on this proposal and it is adopted as proposed.

Section 3.38: Motion for order compelling disclosure or discovery; sanctions.

The Commission proposed amending Rule 3.38 to impose short deadlines for responses to and rulings on motions to compel and a 2,500 word limit for motions and answers. The Commission also proposed to amend the Rule to consolidate the sanctions for failure to comply with discovery and disclosure requirements and to add as a sanction the inability to call a witness who was not disclosed under Rule 3.31(b) or an expert not disclosed under proposed Rule 3.31A. No comments were received on the proposed amendments to Rule 3.38 and they are adopted as proposed.

Section 3.38A: Withholding requested material.

The Commission proposed to amend Rule 3.38A to modify the requirement that a privilege/work product log always contain specific information for each item being withheld. The Commission proposed to substitute the more flexible requirement in Fed. R. Civ. P. 26(b)(5)(A) that the schedule of withheld items “describe the nature of the documents, communications, or tangible things not produced or disclosed — and do so in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the claim.” This proposed requirement would permit parties to describe withheld items by categories, but only if the description “will enable other parties to assess the claim.” Unless such descriptions are sufficient, item-by-item descriptions would be required.

The proposed Rule also clarified that the log need not describe any material outside the scope of the duty to search set forth in revised Rule 3.31(c)(2) except to the extent that the ALJ has authorized additional discovery as provided in that Rule.

No comments were received on the proposed amendments to this Rule and they are adopted.

Section 3.39: Orders requiring witnesses to testify or provide other information and granting immunity.

The Commission proposed various technical revisions to this Rule. No comments were received on the proposed amendments and they are adopted.

Subpart E—Hearings

Section 3.41: General hearing rules.

The proposed revisions to Rule 3.41(b) required that the evidentiary hearing commence on the date set in the notice accompanying the complaint, limited the length of the evidentiary hearing to 210 hours (or the equivalent of 30 seven hour trial days) unless extended by the Commission, and established reasonable time allocations. The goal of these proposed revisions was to expedite the proceedings.

The Section commented that the proposed Rule should allow “additional flexibility” for the ALJ to extend the hearing length particularly for nonmerger cases involving multiple parties. Whole Foods complained that the proposed rule unfairly limited the ALJ’s discretion over the length of the hearing and cited to the lack of such a limit in a recent Part 3 scheduling order, and the Chamber similarly asserted that the ALJ should decide if a longer trial is needed. The Commission believes that, in the vast majority of cases, 30 trial days is more than sufficient to complete the evidentiary hearing. Further, the Rule permits the Commission “upon a showing of good cause” to extend the commencement date or the length of the hearing if the case involves, for example, a particularly lengthy record or complex legal issues. For these reasons, the Rule is adopted as proposed.

Commenter Nagin recommended that under paragraph (b)(3), the Commission should clarify that the ALJ can hold a separate segment of the hearing relating to one or more respondents in case any particular claim or issue necessitates such treatment. The current language of this provision, which permits the Commission or ALJ to order separate hearings of any claim, any separate issue, or any number of claims or issues, sufficiently covers the scenario raised by this commenter and, therefore, no change to this provision is necessary.

Finally, the Commission’s proposed amendment included a new paragraph (f), a provision moved (and revised) from previous Rule 3.51(a) concerning the effect of collateral federal court actions on Part 3 proceedings. The new provision states that the pendency of a collateral federal action will stay the Part 3 proceeding only if the Commission (as opposed to the ALJ) so orders “for good cause,” and that deadlines set by the rules will be tolled during the period of the stay. The Commission, and not the ALJ, should be authorized to stay the Part 3 proceeding pending a collateral action in federal court, since the granting of a stay is likely to implicate public interest considerations that the Commission, rather than the ALJ, should resolve.

Section 3.42: Presiding officials.

The proposed amendment would make explicit provision for the Commission to retain jurisdiction over a matter during some or all of the prehearing proceedings and to designate one or more Commissioners to preside. The Section objected that by “‘codifying’ the Commission’s right to interject itself into prehearing case management, it may undermine the integrity of the process, compromise the ALJ, and create an appearance of unfairness.” The Pitofsky-Sohn comment argued that “the more the Commission invades what has heretofore been the province of an independent ALJ, the more it lends credence to concerns regarding the fairness of the Part 3 adjudicative process.”

The APA, 5 U.S.C. 556(b), and unamended Rule 3.42(a) allow the Commission or one or more Commissioners to preside over the hearing as ALJ. It therefore remains unclear how authorizing the Commission or a Commissioner to preside over the initial phases of the pretrial proceeding raises a legal issue or, for that matter, creates an appearance of unfairness. The package of rule amendments governing scheduling, discovery, and other aspects of the pretrial proceedings, however, will reduce the need for early Commission or Commissioner involvement in case management. Nor is the proposed Rule needed to authorize the Commission or a Commissioner to preside over the initial phases of the pretrial process; that authority is already implicit in Rule 3.42(a), which authorizes the Commission or one or more Commissioners to preside. The Commission, therefore, views the proposed amendment to Rule 3.42(a) as unnecessary and has not adopted it.

Section 3.43: Evidence.

The proposed revision in paragraph (b) defined hearsay evidence and expressly provided for the admission of such evidence if it “is relevant, material, and bears satisfactory indicia of reliability so that its use is fair.” The Section complained that expressly permitting the admission of hearsay evidence would create unnecessary disparities between Part 3 and federal court procedures that could lead to substantive differences in case outcomes. It also asserted that the unamended Rule, which it interprets as applying a case-by-case approach to hearsay, is preferable to “the new default rule admitting hearsay evidence in every circumstance” that might unfairly disadvantage respondents.

However, it is settled law that the Commission’s Rules of Practice already permit the introduction of hearsay evidence, provided that it meets the standards of materiality, reliability, and relevance.

See, e.g.

In re Schering-Plough Corp

., 136 F.T.C. 956, 1007 (2003),

vacated on other grounds

, 402 F.3d 1056 (11th Cir. 2005). As stated in the NPRM, and as acknowledged by the Section, administrative agencies are not bound by the stricter hearsay rules in the Federal Rules of Evidence, but must independently assess the reliability of the evidence itself.

The ALJ in the first instance, and the Commission in its

de novo

review, must determine the admissibility and probative value, if any, to be given to hearsay evidence by analyzing, for example, the possible bias of an out-of-court declarant, the context in which the hearsay material was created, whether the statement was sworn to, and whether it is corroborated or contradicted by other forms of direct evidence.

See

5 U.S.C. 556(d) (APA provides that “[a]ny oral or documentary evidence may be received, but the agency as a matter of policy shall provide for the exclusion of irrelevant, immaterial or unduly repetitious evidence. A sanction may not be imposed or rule or order issued except on consideration of the whole record or those parts thereof cited by a party and supported by and in accordance with the reliable, probative, and substantial evidence.”);

see also J.A.M. Builders, Inc. v. Herman

, 233 F.3d 1350, 1354 (11th Cir. 2000) (hearsay admissible in administrative proceedings if “reliable and credible”);

FTC v. Cement Inst.

, 333 U.S. 683, 705-06 (1948);

Richardson v. Perales

, 402 U.S. 389, 407-08 (1971);

Calhoun v. Bailar

, 626 F.2d 145, 148 (9th Cir. 1980);

Buchwalter v. FTC

, 235 F.2d 344 (2d Cir. 1956) (hearsay evidence is admissible in FTC administrative cases).

Proposed paragraph (b) also provided concrete examples of this principle by expressly stating that depositions, investigational hearings, and prior testimony in Commission and other proceedings, and any other form of hearsay, would be admissible and would not be excluded solely because they constitute or contain hearsay, if the testimony or other form of hearsay was sufficiently reliable and probative. Proposed paragraph (b) also provided that relevant statements or testimony by a party-opponent would be admitted; such statements do not constitute hearsay.

The proposed Rule was intended to ensure that ALJs do not take an overly narrow approach to admitting hearsay evidence. The proposed Rule did not, however, provide for the admission of hearsay evidence “in every circumstance,” but only where such evidence is sufficiently relevant, reliable and probative “so that its use is fair.” The Commission is adopting the hearsay provision in paragraph (b) as proposed.

The Section also argued that, if the amendment is to be adopted, it should require parties to provide notice every time they intend to introduce hearsay evidence to permit the opposing party to rebut the evidence, relying on the residual hearsay exception rule in Fed. R. Evid. 807 that requires such notice. Rule 807, however, does not govern the most familiar forms of admissible hearsay exceptions and the Commission is not persuaded that a blanket notice rule should apply to the admission of hearsay evidence in Part 3 proceedings. The Commission notes that the Rule contains provisions designed to protect against the unfair use of hearsay evidence by prohibiting the admission of unreliable, immaterial or duplicative hearsay evidence, by excluding relevant hearsay evidence “if its probative value is substantially outweighed by the danger of unfair prejudice,” and by providing the right of parties “to submit rebuttal evidence” to counter the admission of any hearsay evidence.

The Commission also proposed a new paragraph (c) to facilitate the admissibility of third party documents by self-authentication through a written declaration of the third party document custodian. This provision is analogous to Fed. R. Evid. 902(11). The

Commission received no comments on this provision and it is adopted as proposed.

Proposed paragraph (d)(1) expressly incorporated the APA standard in 5 U.S.C. 556(d) to allow a party “to present its case or defense by sworn oral testimony and documentary evidence, to submit rebuttal evidence, and to conduct such cross-examination, as in the discretion of the Administrative Law Judge, may be required for a full and true disclosure of the facts.” While the Section objected that the proposed provision might be interpreted to limit cross-examination in violation of the APA, the new provision expressly incorporates the APA standard for the presentation of evidence. While the APA standard does not impose an absolute or unlimited right of cross examination,

it necessarily allows for all cross-examination in order to ascertain the “full and true disclosure of the facts.” This revision is adopted as proposed.

See, e.g.

Citizens Awareness Network, Inc. v. United States

, 391 F.3d 338, 351 (1st Cir. 2004);

Central Freight Lines, Inc. v. United States

, 669 F.2d 1063 (5th Cir. 1982).

Commenter Nagin recommended that paragraph (e), which allows the disclosure and offering into evidence of any information obtained by the Commission, be amended to require adherence to other Part 3 rules in order to prevent “unfairness or surprise.” There is a large difference, however, between offering such evidence into the record and its admission into the record, and—given the mandatory disclosure requirements and other discovery obligations—there are sufficient protections in these rules against any unfair use of evidence by complaint counsel. The Commission is not persuaded that this change is necessary.

Finally, the Commission proposed in re-designated paragraph (f) a definition of “official notice,” and to provide that a party may controvert an officially noticed fact either by opposing the other party’s request that official notice be taken or after it has been noticed by the ALJ or the Commission. Previous Rule 3.43 did not define official notice or what constitutes such notice. The Commission received no comments on this revision and it is adopted as proposed.

Other paragraphs in the proposed Rule were redesignated to accommodate new paragraphs and will be adopted as proposed.

Section 3.44: Record.

The Commission proposed to revise Rule 3.44 to require that witness testimony be video recorded digitally and made part of the official record along with the witness’s written transcript. As noted in the NPRM, the purpose of the proposed revision is to enable the Commission, which is tasked with reviewing the record

de novo

, to independently assess witness demeanor when necessary. Courts have recognized the “added value of demeanor evidence” from video recording.

Requiring video recording of witness testimony will improve the quality of Commission decisions whenever witness demeanor is an important issue. No comments criticized this provision and it is adopted as proposed.

See FTC v. Tarriff

, 557 F. Supp. 2d 92, 97 (D.D.C. 2008).

The Commission also proposed to revise paragraph (c) by deleting the word “immediately” at the beginning of the first sentence to provide the parties with three business days to review the record to determine if it is complete or needs to be supplemented. This revision generated no comments and is adopted as proposed.

Section 3.45: In camera orders.

The Commission proposed revising paragraph (b) to add a paragraph making clear that parties have no obligation to file or provide

in camera

versions of filings with sensitive materials with anyone other than opposing counsel and the ALJ during the proceedings, as well as with the Commission or federal courts during any appeals. No comments were received on this revision and the Commission adopts it as proposed.

Additional amendments are being made to conform the Commission’s

in camera

procedures to the standard protective order that the Commission has adopted as final as an appendix to Rule 3.31, discussed above. Accordingly, paragraph (b) of Rule 3.45 has been further amended to incorporate the order’s definition of “sensitive personal information” to be accorded

in camera

treatment if such material is to be introduced as evidence or otherwise used in the proceeding. Thus, where a party’s proposed findings, briefs, or other documents, filings, and submissions contain such information, parties will be required to prepare public (redacted) and non-public (

in camera

) versions in order to avoid public disclosure, just as the parties are currently required to do under the Rule for other material granted

in camera

treatment or subject to a protective order.

See

Rule 3.45(d), (e). Likewise, the Commission is amending Rule 4.2, as explained further below, to require that parties minimize or omit sensitive personal information in their filings when such information is not needed for the conduct of the proceeding.

Section 3.46: Proposed findings, conclusions, and order.

The Commission proposed to revise paragraph (a) to provide expressly for the simultaneous filing of proposed findings of fact, conclusions of law, rule or order, and supporting briefs within 21 days of the close of the hearing record, as well as the optional filing of proposed reply findings, conclusions, and briefs within 10 days of the filing of the initial proposed findings. The previous Rule did not impose any deadlines or specify the order of these filings, requiring instead that such submissions be filed “[u]pon the closing of the hearing record, or within a reasonable time thereafter fixed by the Administrative Law Judge.” The proposed change was intended to require the orderly and timely submission of proposed findings and conclusions on which the ALJ may consult and to expedite the post-hearing phase and issuance of the initial decision.

Whole Foods commented that the proposed change “revokes the ALJ’s discretion over the timing of proposed findings of fact, conclusions of law and briefs in favor of rigid, one-size-fits-all time schedules.” The schedule outlined in the proposed Rule, however, should be reasonable in the vast majority of cases. In the unusual situation, a party may move the ALJ under Rule 4.3 for an extension “[f]or good cause shown.” The revision is adopted as proposed.

Subpart F—Decision

Section 3.51: Initial decision.

The Commission proposed to revise paragraph (a) to require the initial decision to be filed within 70 days after the last-filed proposed findings of fact and conclusions of law (or 85 days after the closing of the hearing record if the parties waive filing proposed findings), but allowed the ALJ to extend these deadlines by 30 days “for good cause.” The previous Rule required that the initial decision be filed within 90 days of the close of the hearing record, but the Commission determined that setting the initial decision deadline to the filing of proposed findings and conclusions, on which the ALJ may consult in preparing his or her decision, was more reasonable than basing the deadline on the closing of the hearing record.

The proposed revision also maintained the previous Rule’s over-all one year deadline for the issuance of the

initial decision, but added that only the Commission could extend the one year deadline “upon a finding of extraordinary circumstances and if appropriate in the public interest.” The previous Rule permitted the ALJ to grant consecutive 60 day extensions upon a finding of “extraordinary circumstances,” but the Commission believed that the proposed revision would prevent protracted delays while still providing sufficient time for the ALJ to review the evidence and issue the initial decision.

The Section’s comment was generally favorable, stating that while it “believes that in most cases, expediting the merger review process is a positive step, such timing requirements are not universally applicable. The Section applauds this revision to speed up an ALJ’s decision.” The Section noted, however, that based on other deadlines imposed in these rules, the schedule for cases in which the hearing will typically be set for eight months after the complaint issues will likely result in the initial decision being filed slightly beyond the one year deadline. The Commission has eliminated the overall one year deadline for all cases. The Commission concludes that the filing of the initial decision within 70 days after the filing of the last-filed proposed findings and conclusions (or 30 days beyond that if the ALJ directs the one-time extension for “good cause”) provides a sufficient time limit.

Based on these revisions to this paragraph, the Commission is also slightly modifying a sentence in the proposed Rule to now state that: “The Commission may further extend any of these time periods for good cause.” This modification imposes a standard for extensions and clarifies that the ALJ cannot extend the deadline beyond the 30 days provided in the Rule.

The Commission has also removed language from previous Rule 3.51(a) regarding the effect of a pending collateral federal court proceeding on a Part 3 case, and inserted revised language into Rule 3.41 as the stay and tolling provisions incident to collateral federal actions potentially affect more than the deadline for filing the initial decision.

Commenter Nagin recommended that paragraph (c), regarding the evidence to support an initial decision, be changed from “reliable and probative evidence,” to “competent and reliable, probative evidence” so as to be consistent with certain scientific nomenclature. The Commission does not believe that such a change materially alters the standard of evidence necessary to support an initial decision and therefore does not revise the Rule as suggested.

Finally, proposed paragraph (c)(2) required that the initial decision be filed in a word processing format that is accessible to the Commission on review. This revision generated no comments and is adopted as proposed.

Section 3.52: Appeal from initial decision.

The Commission proposed to revise paragraphs (b) and (c) to shorten the word counts for the principal appellate briefs from 18,750 words to 14,000 words (approximately 55 double-spaced pages), to revise paragraph (d) to shorten the word count limits for reply briefs to half of the principals’ briefs (or 7,000 words), to make explicit that parties cannot raise new arguments or matters in reply briefs that could have been raised earlier, to revise paragraph (c) to reduce the word count limit for cross-appeal briefs to 16,500 words, and to revise paragraph (j) to limit the word count limit on

amicus

briefs to “no more than one-half the maximum length authorized by these rules for a party’s principal brief.” The Commission also proposed to revise paragraph (k) to specify the contents of the brief that would count toward the word count limit. While the Commission is not required to follow the Federal Rules of Appellate Procedure in its Rules of Practice, these new word count limits are consistent with limits for analogous briefs under Fed. R. App. P. 28.1, 29 and 32.

As explained in the NPRM, while lengthier appellate briefs could be justified by the Commission’s obligation to review the record

de novo

, the Commission’s review is also enhanced by its access to the parties’ proposed findings and conclusions filed with the ALJ. Further, the Commission may extend these word count limits if the case involves a particularly large record or complex legal issues. As noted in paragraph (k), however, the Commission will not lightly permit such extensions. The Commission received no comments on these suggested word count revisions and they are adopted as proposed.

The Commission is also imposing deadlines on the issuance of its final decision. The Commission had announced in the NPRM “its intention to make best efforts to expedite its preparation and disposition of final orders and opinions in its review of initial decisions in adjudicatory proceedings.”

The Commission recognized that complaints about the protracted nature of Part 3 proceedings extend both to proceedings before the ALJ and to the Commission’s issuance of the final decision.

73 FR at 58834.

Nonetheless, given the Commission’s stated goal of expediting the Part 3 process, several commenters criticized the absence in the proposed rules of any formal deadlines for the Commission to issue its final decision of an appeal. For example, according to the Pitofsky-Sohn comment:

The proposed changes to Part 3 do not address the absence in the present rules of any limitation on the Commission’s time to render a decision in the event of an appeal from the ALJ’s decision. It has been said that since 2000, it has taken the Commission an average of 18 months to render its own decision, even in those cases where no complicated remedial issues requiring further proceedings were involved. This hole should be plugged with a rule change requiring the Commission to render its decision within six months of the ALJ’s ruling, except in narrow and unusual circumstances.

The Section commented that the rule proposals “fail sufficiently to expedite Part 3 proceedings by not imposing a time within which the Commission should issue a final decision,” which is “the stage of the proceeding that consumes the greatest time.” The Section recommended that, in unconsummated merger cases, the final Commission order be issued within five months from filing of the complaint and that, in general, the Commission issue its final order within 90 days after the initial decision. The Chamber also asserted that the Commission failed to place a deadline on “a decision by the Commissioners, which is very often a source of substantial delay.” Based on these concerns, the Commission is setting strict deadlines for the issuance of its final decisions in all Part 3 cases.

For cases in which the Commission has sought preliminary relief under Section 13(b) of the FTC Act

(typically unconsummated merger cases), the Commission has provided that it will review all initial decisions—without requiring a notice of appeal—and issue a final decision within 45 days of oral argument (

i.e.

, within 100 days of the filing of the initial decision).

Although the Section has urged the Commission to decide all merger cases within five months of the filing of the complaint,

the Commission believes that this is a pace that unduly rushes the parties and virtually precludes any opportunity for the Commission to treat exhaustively any novel issues that may arise in a particular case. This deadline would also be faster than what federal courts frequently manage even for expedited permanent injunction cases on the merits (after which, like Commission decisions, appeals are to be filed in federal appellate courts).

This rule revision institutionalizes an approach for dealing with such cases on a consistent and even-handed basis as opposed to an expedited schedule being issued

ad hoc

on a case-by-case basis.

15 U.S.C. 53(b).

The timing deadlines for the Commission’s decisions on appeal or review, as with other rule deadlines, are subject to the timing requirements in Rule 4.3(a). Thus, these deadlines may be enlarged slightly if, for example, a deadline were to fall on a weekend or holiday.

United States v. Carilion Health Sys.

, 707 F. Supp. 840, 841 (W.D. Va.),

aff’d

, No. 89-2625, 1989 WL 157282 (4th Cir. Nov. 29, 1989) (decision issued approximately nine months after complaint filed);

United States v. Primestar, Inc.

, No. 98-CV-01193 (D.D.C. filed May 12, 1998) (approximately nine months from complaint to trial on the merits).

The Commission is also setting deadlines in all other cases in which preliminary relief was not sought, although on a less rapid schedule. These cases will typically include cases involving allegations of anticompetitive conduct, most cases challenging consummated mergers, and most consumer protection cases. In these matters, the Commission will issue its final decision within 100 days after oral argument (

i.e

., within six months of the issuance of the initial decision).

To accommodate those expedited deadlines, the Commission is reducing the time in which parties may file briefs from the initial decision. For cases in which the Commission has sought preliminary relief under Section 13(b), there will be automatic Commission review of the initial decision (

i.e.

, no notice of appeal will be required). In these cases, a party objecting to any portion of the initial decision (

e.g.

, decision on liability or scope of remedy) must file its opening brief within 20 days of the issuance of the initial decision. Parties would respond to any objections filed by another party by filing answering briefs within 20 days of service of the opening brief, and any reply briefs would be due within five days of service of the answering brief. The Commission will schedule oral argument within 10 days after the deadline for the filing of any reply briefs and will issue its final decision within 45 days after oral argument.

In the event that no objections to the initial decision are filed, the Commission in its discretion may schedule oral argument within 10 days after the deadline for the filing of objections, and will issue its final decision within 45 days after oral argument. If no oral argument is scheduled, the Commission will issue its final decision within 45 days after the deadline for the filing of objections.

For all other cases, review by the Commission will not be automatic, but will normally be initiated by a party filing a notice of appeal (as under the previous Rule).

In these cases, any party objecting to any portion of the initial decision must file a notice of appeal within 10 days of the initial decision, or within five days of the initial notice if a party is filing a cross-appeal. Any party filing a notice of appeal (including a cross-notice of appeal) must then perfect its appeal by filing its opening brief within 30 days of the issuance of the initial decision. Parties may respond to opening briefs by filing answering briefs within 30 days of service of the opening briefs and may file reply briefs within seven days of service of the answering briefs. The Commission will schedule oral argument within 15 days after the deadline for the filing of the reply briefs, and the Commission will issue its final decision within 100 days after oral argument.

The Commission has retained Rule 3.53, which authorizes the Commission to place a case on its docket for review in the absence of an appeal.

If no argument is scheduled, the Commission will issue its final decision within 100 days after the deadline for the filing of any reply briefs.

The new Rule requires simultaneous briefing on review for all cases brought in Part 3. For that reason, the word count limitations in the former Rule for a combined answering and cross-appeal brief, and the additional rounds of briefing provided in the former Rule for cross-appeals, are unnecessary, and these provisions have been eliminated in the new Rule.

Finally, the Commission’s proposal to revise paragraph (h) regarding oral arguments by striking the last two sentences generated no comments and will be adopted.

Section 4.2: Requirements as to form, and filing of documents other than correspondence.

The Commission has added a new paragraph (c)(4), and redesignated existing paragraph (c)(4) as (c)(5), to require that filing parties redact or omit “sensitive personal information” from their filings when such information is not needed for the conduct of the proceeding. Sensitive personal information, which is also protected by the standard protective order contained in Appendix A of Rule 3.31, will be accorded

in camera

treatment pursuant to Rule 3.45 if such material is to be introduced as evidence or otherwise used in the proceeding. These procedures, as amended, are intended to safeguard the confidentiality of such information in the event such information must be filed or otherwise used in the proceeding.

Section 4.3: Time.

The proposed revision to Rule 4.3(b) specified that the ALJ may extend a time period set by a Commission order only if the order expressly authorizes the ALJ to do so. It also added time limits regarding motions directed to the Commission to the list of extensions that only the Commission may grant. The revision also clarified that the ALJ may not enlarge any deadline that a rule specifically authorizes only the Commission to extend. No comments were received on these revisions and the Commission adopts them as proposed.

III. Invitation To Comment

The Commission invites interested members of the public to submit written comments addressing any issues raised by the interim rule amendments. Such comments must be filed by February 12, 2009, and must be filed in accordance with the instructions in the

ADDRESSES

section of this document. While the Commission will consider all comments it receives, it is inviting comment in particular on the rules it is adopting which reflect changes from the proposed amendments.

IV. Interim Final Rule Revisions

List of Subjects in 16 CFR Part 3

Administrative practice and procedure.

List of Subjects in 16 CFR Part 4

Administrative practice and procedure.

For the reasons set forth in the preamble, the Federal Trade Commission amends Title 16, Chapter 1, Subchapter A of the Code of Federal Regulations, parts 3 and 4, as follows:

PART 3—RULES OF PRACTICE FOR ADJUDICATIVE PROCEEDINGS

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

Authority:

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

2. Revise § 3.1 to read as follows:

§ 3.1

Scope of the rules in this part.

The rules in this part govern procedure in formal adjudicative proceedings. To the extent practicable and consistent with requirements of law, the Commission’s policy is to conduct such proceedings expeditiously. In the conduct of such proceedings the Administrative Law Judge and counsel for all parties shall make every effort at each stage of a proceeding to avoid delay. The

Commission, at any time, or the Administrative Law Judge at any time prior to the filing of his or her initial decision, may, with the consent of the parties, shorten any time limit prescribed by these Rules of Practice.

3. Revise § 3.2 to read as follows:

§ 3.2

Nature of adjudicative proceedings.

Adjudicative proceedings are those formal proceedings conducted under one or more of the statutes administered by the Commission which are required by statute to be determined on the record after opportunity for an agency hearing. The term includes hearings upon objections to orders relating to the promulgation, amendment, or repeal of rules under sections 4, 5 and 6 of the Fair Packaging and Labeling Act, but does not include rulemaking proceedings up to the time when the Commission determines under § 1.26(g) of this chapter that objections sufficient to warrant the holding of a public hearing have been filed. The term also includes proceedings for the assessment of civil penalties pursuant to § 1.94 of this chapter. The term does not include other proceedings such as negotiations for and Commission consideration of the entry of consent orders; investigational hearings as distinguished from proceedings after the issuance of a complaint; requests for extensions of time to comply with final orders or other proceedings involving compliance with final orders; proceedings for the promulgation of industry guides or trade regulation rules; or the promulgation of substantive rules and regulations.

4. Revise § 3.11 to read as follows:

§ 3.11

Commencement of proceedings.

(a)

Complaint

. Except as provided in § 3.13, an adjudicative proceeding is commenced when an affirmative vote is taken by the Commission to issue a complaint.

(b)

Form of complaint

. The Commission’s complaint shall contain the following:

(1) Recital of the legal authority and jurisdiction for institution of the proceeding, with specific designation of the statutory provisions alleged to have been violated;

(2) A clear and concise factual statement sufficient to inform each respondent with reasonable definiteness of the type of acts or practices alleged to be in violation of the law;

(3) Where practical, a form of order which the Commission has reason to believe should issue if the facts are found to be as alleged in the complaint; and

(4) Notice of the specific date, time and place for the evidentiary hearing. Unless a different date is determined by the Commission, the date of the evidentiary hearing shall be 5 months from the date of the administrative complaint in a proceeding in which the Commission, in an ancillary proceeding, has sought or is seeking relief pursuant to Section 13(b) of the FTC Act, 15 U.S.C. 53(b), and 8 months from the date of issuance of the administrative complaint in all other proceedings

5. Revise § 3.12 to read as follows:

§ 3.12

Answer.

(a)

Time for filing

. A respondent shall file an answer within 14 days after being served with the complaint.

(b)

Content of answer

. An answer shall conform to the following:

(1)

If allegations of complaint are contested

. An answer in which the allegations of a complaint are contested shall contain:

(i) A concise statement of the facts constituting each ground of defense;

(ii) Specific admission, denial, or explanation of each fact alleged in the complaint or, if the respondent is without knowledge thereof, a statement to that effect. Allegations of a complaint not thus answered shall be deemed to have been admitted.

(2)

If allegations of complaint are admitted

. If the respondent elects not to contest the allegations of fact set forth in the complaint, the answer shall consist of a statement that the respondent admits all of the material allegations to be true. Such an answer shall constitute a waiver of hearings as to the facts alleged in the complaint, and together with the complaint will provide a record basis on which the Commission shall issue a final decision containing appropriate findings and conclusions and a final order disposing of the proceeding. In such an answer, the respondent may, however, reserve the right to submit proposed findings of fact and conclusions of law under § 3.46.

(c)

Default

. Failure of the respondent to file an answer within the time provided shall be deemed to constitute a waiver of the respondent’s right to appear and contest the allegations of the complaint and to authorize the Commission, without further notice to the respondent, to find the facts to be as alleged in the complaint and to enter a final decision containing appropriate findings and conclusions and a final order disposing of the proceeding.

6. Revise § 3.21 to read as follows:

§ 3.21

Prehearing procedures.

(a)

Meeting of the parties before scheduling conference

. As early as practicable before the prehearing scheduling conference described in paragraph (b) of this section, but in any event no later than 5 days after the answer is filed by the last answering respondent, counsel for the parties shall meet to discuss the nature and basis of their claims and defenses and the possibilities for a prompt settlement or resolution of the case. The parties shall also agree, if possible, on (1) a proposed discovery plan specifically addressing a schedule for depositions of fact witnesses, the production of documents and electronically stored information, and the timing of expert discovery pursuant to § 3.31A. The parties’ agreement regarding electronically stored information should include the scope of and a specified time period for the exchange of such information that is subject to §§ 3.31(b)(2), 3.31(c), and 3.37(a), and the format for the disclosure of such information, consistent with § 3.31(c)(3) and § 3.37(c); (2) a preliminary estimate of the time required for the evidentiary hearing; and (3) any other matters to be determined at the scheduling conference.

(b)

Scheduling conference

. Not later than 10 days after the answer is filed by the last answering respondent, the Administrative Law Judge shall hold a scheduling conference. At the scheduling conference, counsel for the parties shall be prepared to address: (1) their factual and legal theories; (2) the current status of any pending motions; (3) a schedule of proceedings that is consistent with the date of the evidentiary hearing set by the Commission; (4) steps taken to preserve evidence relevant to the issues raised by the claims and defenses; (5) the scope of anticipated discovery, any limitations on discovery, and a proposed discovery plan, including the disclosure of electronically stored information; (6) issues that can be narrowed by agreement or by motion, suggestions to expedite the presentation of evidence at trial, and any request to bifurcate issues, claims or defenses; and (7) other possible agreements or steps that may aid in the just and expeditious disposition of the proceeding and to avoid unnecessary cost.

(c)

Prehearing scheduling order

. (1) Not later than 2 days after the scheduling conference, the Administrative Law Judge shall enter an order that sets forth the results of the conference and establishes a schedule of proceedings that will permit the evidentiary hearing to commence on the

date set by the Commission, including a plan of discovery that addresses the deposition of fact witnesses, timing of expert discovery, and the production of documents and electronically stored information, dates for the submission and hearing of motions, the specific method by which exhibits shall be numbered or otherwise identified and marked for the record, and the time and place of a final prehearing conference. The Commission may, upon a showing of good cause, order a later date for the evidentiary hearing than the one specified in the complaint. (2) The Administrative Law Judge may, upon a showing of good cause, grant a motion to extend any deadline or time specified in this scheduling order other than the date of the evidentiary hearing. Such motion shall set forth the total period of extensions, if any, previously obtained by the moving party. In determining whether to grant the motion, the Administrative Law Judge shall consider any extensions already granted, the length of the proceedings to date, the complexity of the issues, and the need to conclude the evidentiary hearing and render an initial decision in a timely manner. The Administrative Law Judge shall not rule on

ex parte

motions to extend the deadlines specified in the scheduling order, or modify such deadlines solely upon stipulation or agreement of counsel.

(d)

Meeting prior to final prehearing conference

. Counsel for the parties shall meet before the final prehearing conference described in paragraph (e) of this section to discuss the matters set forth therein in preparation for the conference.

(e)

Final prehearing conference

. As close to the commencement of the evidentiary hearing as practicable, the Administrative Law Judge shall hold a final prehearing conference, which counsel shall attend in person, to submit any proposed stipulations as to law, fact, or admissibility of evidence, exchange exhibit and witness lists, and designate testimony to be presented by deposition. At this conference, the Administrative Law Judge shall also resolve any outstanding evidentiary matters or pending motions (except motions for summary decision) and establish a final schedule for the evidentiary hearing.

(f)

Additional prehearing conferences and orders

. The Administrative Law Judge shall hold additional prehearing and status conferences or enter additional orders as may be needed to ensure the just and expeditious disposition of the proceeding and to avoid unnecessary cost. Such conferences shall be held in person to the extent practicable.

(g)

Public access and reporting

. Prehearing conferences shall be public unless the Administrative Law Judge determines in his or her discretion that the conference (or any part thereof) shall be closed to the public. The Administrative Law Judge shall have discretion to determine whether a prehearing conference shall be stenographically reported.

7. Revise § 3.22 to read as follows:

§ 3.22

Motions.

(a)

Presentation and disposition

. Motions filed under § 3.26 or § 4.17 shall be directly referred to and ruled on by the Commission. Motions to dismiss filed before the evidentiary hearing, motions to strike, and motions for summary decision shall be directly referred to the Commission and shall be ruled on by the Commission unless the Commission in its discretion refers the motion to the Administrative Law Judge. Motions not referred to the Administrative Law Judge shall be ruled on by the Commission within 45 days of the filing of the last-filed answer or reply to the motion, if any, unless the Commission determines there is good cause to extend the deadline. If the Commission refers the motion to the Administrative Law Judge, it may set a deadline for the ruling by the Administrative Law Judge, and a party may seek review of the ruling of the Administrative Law Judge in accordance with § 3.23. During the time a proceeding is before an Administrative Law Judge, all other motions shall be addressed to and decided by the Administrative Law Judge, if within his or her authority. The Administrative Law Judge shall certify to the Commission a motion to disqualify filed under § 3.42(g) if the Administrative Law Judge does not disqualify himself or herself within 10 days. The Administrative Law Judge shall certify to the Commission forthwith any other motion upon which he or she has no authority to rule. Rulings containing information granted

in camera

status pursuant to § 3.45 shall be filed in accordance with § 3.45(f). When a motion to dismiss is made at the close of the evidence offered in support of the complaint based upon an alleged failure to establish a

prima facie

case, the Administrative Law Judge shall defer ruling thereon until immediately after all evidence has been received and the hearing record is closed. All written motions shall be filed with the Secretary of the Commission, and all motions addressed to the Commission shall be in writing. The moving party shall also provide a copy of its motion to the Administrative Law Judge at the time the motion is filed with the Secretary.

(b)

Proceedings not stayed

. A motion under consideration by the Commission shall not stay proceedings before the Administrative Law Judge unless the Commission so orders.

(c)

Content

. All written motions shall state the particular order, ruling, or action desired and the grounds therefor. Memoranda in support of, or in opposition to, any dispositive motion shall not exceed 10,000 words. Memoranda in support of, or in opposition to, any other motion shall not exceed 2,500 words. Any reply in support of a dispositive motion shall not exceed 5,000 words and any reply in support of any other motion authorized by the Administrative Law Judge or the Commission shall not exceed 1,250 words. These word count limitations include headings, footnotes, and quotations, but do not include the cover, table of contents, table of citations or authorities, glossaries, statements with respect to oral argument, any addendums containing statutes, rules or regulations, any certificates of counsel, proposed form of order, and any attachment required by § 3.45(e). Documents that fail to comply with these provisions shall not be filed with the Secretary. Motions must also include the name, address, telephone number, fax number, and e-mail address (if any) of counsel and attach a draft order containing the proposed relief. If a party includes in a motion information that has been granted

in camera

status pursuant to § 3.45(b) or is subject to confidentiality protections pursuant to a protective order, the party shall file 2 versions of the motion in accordance with the procedures set forth in § 3.45(e). The party shall mark its confidential filings with brackets or similar conspicuous markings to indicate the material for which it is claiming confidential treatment. The time period specified by § 3.22(d) within which an opposing party may file an answer will begin to run upon service on that opposing party of the confidential version of the motion.

(d)

Responses

. Within 10 days after service of any written motion, or within such longer or shorter time as may be designated by the Administrative Law Judge or the Commission, the opposing party shall answer or shall be deemed to have consented to the granting of the relief asked for in the motion. If an opposing party includes in an answer information that has been granted

in camera

status pursuant to § 3.45(b) or is subject to confidentiality protections pursuant to a protective order, the

opposing party shall file 2 versions of the answer in accordance with the procedures set forth in § 3.45(e). The moving party shall have no right to reply, except for dispositive motions or as otherwise permitted by the Administrative Law Judge or the Commission. Reply and surreply briefs to motions other than dispositive motions shall be permitted only in circumstances where the parties wish to draw the Administrative Law Judge’s or the Commission’s attention to recent important developments or controlling authority that could not have been raised earlier in the party’s principal brief. The reply may be conditionally filed with the motion seeking leave to reply. Any reply with respect to a dispositive motion, or any permitted reply to any other motion, shall be filed within 5 days after service of the last answer to that motion.

(e)

Rulings on motions

. Unless otherwise provided by a relevant rule, the Administrative Law Judge shall rule on motions within 14 days after the filing of all motion papers authorized by this section. The Commission, for good cause, may extend the time allowed for a ruling.

(f)

Motions for extensions

. The Administrative Law Judge or the Commission may waive the requirements of this section as to motions for extensions of time; however, the Administrative Law Judge shall have no authority to rule on

ex parte

motions for extensions of time.

(g)

Statement

. Each motion to quash filed pursuant to § 3.34(c), each motion to compel or determine sufficiency pursuant to § 3.38(a), each motion for sanctions pursuant to § 3.38(b), and each motion for enforcement pursuant to § 3.38(c) shall be accompanied by a signed statement representing that counsel for the moving party has conferred with opposing counsel in an effort in good faith to resolve by agreement the issues raised by the motion and has been unable to reach such an agreement. If some of the matters in controversy have been resolved by agreement, the statement shall specify the matters so resolved and the matters remaining unresolved. The statement shall recite the date, time, and place of each such conference between counsel, and the names of all parties participating in each such conference. Unless otherwise ordered by the Administrative Law Judge, the statement required by this rule must be filed only with the first motion concerning compliance with the discovery demand at issue.

8. Revise § 3.23 to read as follows:

§ 3.23

Interlocutory appeals.

(a)

Appeals without a determination by the Administrative Law Judge.

(1) The Commission may, in its discretion, entertain interlocutory appeals where a ruling of the Administrative Law Judge:

(i) Requires the disclosure of records of the Commission or another governmental agency or the appearance of an official or employee of the Commission or another governmental agency pursuant to § 3.36, if such appeal is based solely on a claim of privilege:

Provided

, that the Administrative Law Judge shall stay until further order of the Commission the effectiveness of any ruling, whether or not appeal is sought, that requires the disclosure of nonpublic Commission minutes, Commissioner circulations, or similar documents prepared by the Commission, an individual Commissioner, or the Office of the General Counsel;

(ii) Suspends an attorney from participation in a particular proceeding pursuant to § 3.42(d); or

(iii) Grants or denies an application for intervention pursuant to the provisions of § 3.14.

(2) Appeal from such rulings may be sought by filing with the Commission an application for review within 3 days after notice of the Administrative Law Judge’s ruling. An answer may be filed within 3 days after the application for review is filed. The Commission upon its own motion may enter an order staying compliance with a discovery demand authorized by the Administrative Law Judge pursuant to § 3.36 or placing the matter on the Commission’s docket for review. Any order placing the matter on the Commission’s docket for review will set forth the scope of the review and the issues which will be considered and will make provision for the filing of memoranda of law if deemed appropriate by the Commission.

(b)

Other interlocutory appeals

. A party may request the Administrative Law Judge to determine that a ruling involves a controlling question of law or policy as to which there is substantial ground for difference of opinion and that an immediate appeal from the ruling may materially advance the ultimate termination of the litigation or subsequent review will be an inadequate remedy. An answer may be filed within 3 days after the application for review is filed. The Administrative Law Judge shall issue a ruling on the request for determination within 3 days of the deadline for filing an answer. The party may file an application for review with the Commission within 1 day after notice that the Administrative Law Judge has issued the requested determination or 1 day after the deadline has passed for the Administrative Law Judge to issue a ruling on the request for determination and the Administrative Law Judge has not issued his or her ruling.

(c) The application for review shall attach the ruling from which appeal is being taken and any other portions of the record on which the moving party relies. Neither the application for review nor the answer shall exceed 2,500 words. This word count limitation includes headings, footnotes, and quotations, but does not include the cover, table of contents, table of citations or authorities, glossaries, statements with respect to oral argument, any addendums containing statutes, rules or regulations, any certificates of counsel, proposed form of order, and any attachment required by § 3.45(e). The Commission may order additional briefing on the application.

(d)

Ruling on application for review.

Within 3 days after the deadline for filing an answer, the Commission will determine whether to grant the application for review. The denial of an application shall not constitute a ruling on the merits of the ruling that is the subject of the application.

(e)

Proceedings not stayed.

An application for review and appeal hereunder shall not stay proceedings before the Administrative Law Judge unless the Judge or the Commission shall so order.

9. Revise § 3.24 to read as follows:

§ 3.24

Summary decisions.

(a)

Procedure

. (1) Any party may move, with or without supporting affidavits, for a summary decision in the party’s favor upon all or any part of the issues being adjudicated. The motion shall be accompanied by a separate and concise statement of the material facts as to which the moving party contends there is no genuine issue for trial. Counsel in support of the complaint may so move at any time after 20 days following issuance of the complaint and any respondent may so move at any time after issuance of the complaint. Any such motion by any party, however, shall be filed in accordance with the scheduling order issued pursuant to § 3.21, but in any case at least 30 days before the date fixed for the hearing.

(2) Any other party may, within 14 days after service of the motion, file opposing affidavits. The opposing party shall include a separate and concise statement of those material facts as to which the opposing party contends there exists a genuine issue for trial, as

provided in § 3.24(a)(3). The parties may file memoranda of law in support of, or in opposition to, the motion consistent with § 3.22(c). If a party includes in any such brief or memorandum information that has been granted

in camera

status pursuant to § 3.45(b) or is subject to confidentiality protections pursuant to a protective order, the party shall file 2 versions of the document in accordance with the procedures set forth in § 3.45(e). If the Commission (or, when appropriate, the Administrative Law Judge) determines that there is no genuine issue as to any material fact regarding liability or relief, it shall issue a final decision and order. In the event that the motion has been referred to the Administrative Law Judge, such determination by the Administrative Law Judge shall constitute his or her initial decision and shall conform to the procedures set forth in § 3.51(c). A summary decision, interlocutory in character and in compliance with the procedures set forth in § 3.51(c), may be rendered on the issue of liability alone although there is a genuine issue as to relief.

(3) Affidavits shall set forth such facts as would be admissible in evidence and shall show affirmatively that the affiant is competent to testify to the matters stated therein. The Commission (or, when appropriate, the Administrative Law Judge) may permit affidavits to be supplemented or opposed by depositions, answers to interrogatories, or further affidavits. When a motion for summary decision is made and supported as provided in this rule, a party opposing the motion may not rest upon the mere allegations or denials of his or her pleading; the response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue of material fact for trial. If no such response is filed, summary decision, if appropriate, shall be rendered.

(4) Should it appear from the affidavits of a party opposing the motion that it cannot, for reasons stated, present by affidavit facts essential to justify its opposition, the Commission (or, when appropriate, the Administrative Law Judge) may deny the motion for summary decision or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or make such other order as is appropriate and a determination to that effect shall be made a matter of record.

(5) If on motion under this rule a summary decision is not rendered upon the whole case or for all the relief asked and a trial is necessary, the Commission (or, when appropriate, the Administrative Law Judge) shall issue an order specifying the facts that appear without substantial controversy and directing further proceedings in the action. The facts so specified shall be deemed established.

(b)

Affidavits filed in bad faith

. (1) Should it appear to the satisfaction of the Commission (or, when appropriate, the Administrative Law Judge) at any time that any of the affidavits presented pursuant to this rule are presented in bad faith, or solely for the purpose of delay, or are patently frivolous, the Commission (or, when appropriate, the Administrative Law Judge) shall enter a determination to that effect upon the record.

(2) If upon consideration of all relevant facts attending the submission of any affidavit covered by paragraph (b)(1) of this section, the Commission (or, when appropriate, the Administrative Law Judge) concludes that action to suspend or remove an attorney from the case is warranted, it shall take action as specified in § 3.42(d). If the Administrative Law Judge to whom the Commission has referred a motion for summary decision concludes, upon consideration of all the relevant facts attending the submission of any affidavit covered by paragraph (b)(1) of this section, that the matter should be certified to the Commission for consideration of disciplinary action against an attorney, including reprimand, suspension or disbarment, the Administrative Law Judge shall certify the matter, with his or her findings and recommendations, to the Commission for its consideration of disciplinary action in the manner provided by the Commission’s rules. If the Commission has addressed the motion directly, it may consider such disciplinary action without a certification by the Administrative Law Judge.

10. Revise § 3.26 to read as follows:

§ 3.26

Motions following denial of preliminary injunctive relief.

(a) This section sets forth two procedures by which respondents may obtain consideration of whether continuation of an adjudicative proceeding is in the public interest after a court has denied preliminary injunctive relief in a separate proceeding brought under section 13(b) of the Federal Trade Commission Act, 15 U.S.C. 53(b), in aid of the adjudication.

(b) A motion under this section shall be addressed to the Commission and filed with the Secretary of the Commission. If the Commission has filed a request for a stay, injunction, or other emergency relief pending appeal to a court of appeals, the motion must be filed within 14 days after, but no earlier than, the court of appeals has denied the Commission’s request. In cases in which the Commission has not sought relief from the court of appeals within 7 days following the denial of a preliminary injunction, the motion must be filed within 14 days after the district court has denied preliminary relief.

(c)

Withdrawal from adjudication

. If a court has denied preliminary injunctive relief to the Commission in a section 13(b) proceeding brought in aid of an adjudicative proceeding, respondents may move that the proceeding be withdrawn from adjudication in order to consider whether or not the public interest warrants further litigation. Such a motion shall be filed jointly or separately by each of the respondents in the adjudicative proceeding. Complaint counsel may file a response within 14 days after such motion is filed. The matter will not be withdrawn from adjudication unless the Commission so directs.

(d)

Consideration on the record

. Instead of a motion to withdraw the matter from adjudication, any respondent or respondents may file a motion under this paragraph to dismiss the administrative complaint on the basis that the public interest does not warrant further litigation after a court has denied preliminary injunctive relief to the Commission. Complaint counsel may file a response within 14 days after such motion is filed. The filing of a motion to dismiss shall not stay the proceeding unless the Commission so directs.

(e)

Form

. Memoranda in support of or in opposition to such motions shall not exceed 10,000 words. This word count limitation includes headings, footnotes, and quotations, but does not include the cover, table of contents, table of citations or authorities, glossaries, statements with respect to oral argument, any addendums containing statutes, rules or regulations, any certificates of counsel, proposed form of order, and any attachment required by § 3.45(e).

(f)

In camera materials

. If any filing includes materials that are subject to confidentiality protections pursuant to an order entered in either the proceeding under section 13(b) or in the proceeding under this part, such materials shall be treated as

in camera

materials for purposes of this paragraph and the party shall file 2 versions of the document in accordance with the procedures set forth in § 3.45(e). The time within which complaint counsel may file an answer under this paragraph

will begin to run upon service of the

in camera

version of the motion (including any supporting briefs and memoranda).

(g)

Ruling by Commission.

The Commission shall rule on any motion authorized by this section within 30 days after the filing of the motion and any memoranda in support of or in opposition to the motion.

11. Revise § 3.31 to read as follows:

§ 3.31

General discovery provisions.

(a)

Discovery methods

. Parties may obtain discovery by one or more of the following methods: Depositions upon oral examination or written questions; written interrogatories; production of documents or things for inspection and other purposes; and requests for admission. Except as provided in the rules, or unless the Administrative Law Judge orders otherwise, the frequency or sequence of these methods is not limited. The parties shall, to the greatest extent practicable, conduct discovery simultaneously; the fact that a party is conducting discovery shall not operate to delay any other party’s discovery.

(b)

Mandatory initial disclosures.

Complaint counsel and respondent’s counsel shall, within 5 days of receipt of a respondent’s answer to the complaint and without awaiting a discovery request, provide to each other:

(1) The name, and, if known, the address and telephone number of each individual likely to have discoverable information relevant to the allegations of the Commission’s complaint, to the proposed relief, or to the defenses of the respondent, as set forth in § 3.31(c)(1); and

(2) A copy of, or a description by category and location of, all documents and electronically stored information including declarations, transcripts of investigational hearings and depositions, and tangible things in the possession, custody, or control of the Commission or respondent(s) that are relevant to the allegations of the Commission’s complaint, to the proposed relief, or to the defenses of the respondent, as set forth in § 3.31(c)(1); unless such information or materials are subject to the limitations in § 3.31(c)(2), privileged as defined in § 3.31(c)(4), pertain to hearing preparation as defined in § 3.31(c)(5), pertain to experts as defined in § 3.31A, or are obtainable from some other source that is more convenient, less burdensome, or less expensive. A party shall make its disclosures based on the information then reasonably available to it and is not excused from making its disclosures because it has not fully completed its investigation.

(c)

Scope of discovery

. Unless otherwise limited by order of the Administrative Law Judge or the Commission in accordance with these rules, the scope of discovery is as follows:

(1)

In general

. Parties may obtain discovery to the extent that it may be reasonably expected to yield information relevant to the allegations of the complaint, to the proposed relief, or to the defenses of any respondent. Such information may include the existence, description, nature, custody, condition, and location of any books, documents, other tangible things, electronically stored information, and the identity and location of persons having any knowledge of any discoverable matter. Information may not be withheld from discovery on grounds that the information will be inadmissible at the hearing if the information sought appears reasonably calculated to lead to the discovery of admissible evidence.

(2)

Limitations

. Complaint counsel need only search for materials that were collected or reviewed in the course of the investigation of the matter or prosecution of the case and that are in the possession, custody or control of the Bureaus or Offices of the Commission that investigated the matter, including the Bureau of Economics. The Administrative Law Judge may authorize for good cause additional discovery of materials in the possession, custody, or control of those Bureaus or Offices, or authorize other discovery pursuant to § 3.36. Neither complaint counsel, respondent, nor a third party receiving a discovery request under these rules is required to search for materials generated and transmitted between an entity’s counsel (including counsel’s legal staff or in-house counsel) and not shared with anyone else, or between complaint counsel and non-testifying Commission employees, unless the Administrative Law Judge determines there is good cause to provide such materials. The frequency or extent of use of the discovery methods otherwise permitted under these rules shall be limited by the Administrative Law Judge if he or she determines that:

(i) The discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive;

(ii) The party seeking discovery has had ample opportunity by discovery in the action to obtain the information sought; or

(iii) The burden and expense of the proposed discovery outweigh its likely benefit.

(3)

Electronically stored information

. A party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost. On a motion to compel discovery, the party from whom discovery is sought must show that the information is not reasonably accessible because of undue burden or cost. If that showing is made, the Administrative Law Judge may nonetheless order discovery if the requesting party shows good cause, considering the limitations of paragraph (c)(2). The Administrative Law Judge may specify conditions for the discovery.

(4)

Privilege

. Discovery shall be denied or limited in order to preserve the privilege of a witness, person, or governmental agency as governed by the Constitution, any applicable act of Congress, or the principles of the common law as they may be interpreted by the Commission in the light of reason and experience.

(5)

Hearing preparations: Materials

. Subject to the provisions of § 3.31A, a party may obtain discovery of documents and tangible things otherwise discoverable under paragraph (c)(1) of this section and prepared in anticipation of litigation or for hearing by or for another party or by or for that other party’s representative (including the party’s attorney, consultant, or agent) only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of its case and that the party is unable without undue hardship to obtain the substantial equivalent of the materials by other means. In ordering discovery of such materials when the required showing has been made, the Administrative Law Judge shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party.

(d)

Protective orders; orders to preserve evidence

. In order to protect the parties and third parties against improper use and disclosure of confidential information, the Administrative Law Judge shall issue a protective order as set forth in the appendix to this section. The Administrative Law Judge may also deny discovery or make any other order which justice requires to protect a party or other person from annoyance, embarrassment, oppression, or undue burden or expense, or to prevent undue delay in the proceeding. Such an order may also be issued to preserve evidence

upon a showing that there is substantial reason to believe that such evidence would not otherwise be available for presentation at the hearing.

(e)

Supplementation of disclosures and responses

. A party who has made a mandatory initial disclosure under § 3.31(b) or responded to a request for discovery with a disclosure or response is under a duty to supplement or correct the disclosure or response to include information thereafter acquired if ordered by the Administrative Law Judge or in the following circumstances:

(1) A party is under a duty to supplement at appropriate intervals its mandatory initial disclosures under § 3.31(b) if the party learns that in some material respect the information disclosed is incomplete or incorrect and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing.

(2) A party is under a duty to amend in a timely manner a prior response to an interrogatory, request for production, or request for admission if the party learns that the response is in some material respect incomplete or incorrect.

(f)

Stipulations

. When approved by the Administrative Law Judge, the parties may by written stipulation (1) provide that depositions may be taken before any person, at any time or place, upon any notice, and in any manner and when so taken may be used like other depositions, and (2) modify the procedures provided by these rules for other methods of discovery.

(g)

Inadvertent production

. The inadvertent production of information produced by a party or third party in discovery that is subject to a claim of privilege or immunity for hearing preparation material shall not waive such claims as to that or other information regarding the same subject matter if the Administrative Law Judge determines that the holder of the claim made efforts reasonably designed to protect the privilege or the hearing preparation material, provided, however, this provision shall not apply if the party, or an entity related to that party, who inadvertently produced the privileged information relies upon such information to support a claim or defense.

(h)

Restriction on filings.

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