801 F.2d 417 (D.C. Cir. 1986), 85-1032, Consumers Union of United States, Inc. v. F.T.C.

Docket Nº:85-1032.
Citation:801 F.2d 417
Party Name:1986-2 Trade Cases 67,256 CONSUMERS UNION OF U.S., INC., Petitioner, v. FEDERAL TRADE COMMISSION, Respondent, National Automobile Dealers Association, National Independent Automobile Dealers Association, Intervenors.
Case Date:September 02, 1986
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit

Page 417

801 F.2d 417 (D.C. Cir. 1986)

1986-2 Trade Cases 67,256




National Automobile Dealers Association, National

Independent Automobile Dealers Association, Intervenors.

No. 85-1032.

United States Court of Appeals, District of Columbia Circuit

September 2, 1986

Argued Feb. 18, 1986.

Page 418

Michelle Meier, with whom Linda Lipsen, was on brief, for petitioner.

Lawrence DeMille-Wagman, Atty., F.T.C., with whom John H. Carley, Gen. Counsel and Ernest J. Isenstadt, Asst. Gen. Counsel, F.T.C., Washington, D.C., were on brief for respondent. Melvin H. Orlans, Atty., F.T.C., Washington, D.C., entered an appearance for respondent.

Glenn A. Mitchell, with whom David U. Fierst, Washington, D.C., Frank E. McCarthy and Robert J. Wade, McLean, Va., were on brief, for intervenor Nat. Auto. Dealers Assn.

Richard J. Leighton, Richard F. Mann and Buchanan Ingersoll, Washington, D.C., were on brief for intervenor Nat. Independent Auto. Dealers Assn.

Before WALD, Chief Judge, and SCALIA and STARR, Circuit Judges.

Opinion of the Court filed by Circuit Judge SCALIA.

Concurring opinion filed by Chief Judge WALD.

SCALIA, Circuit Judge:

Petitioner, Consumers Union of U.S., Inc., challenges the Federal Trade Commission's "Used Car Rule," a Trade Regulation Rule governing the sale of used motor vehicles. See 16 C.F.R. Part 455 (1986). Petitioner objects to the Commission's decision to omit from the final rule the so-called "known-defects provision," which would have required used-car dealers to list on the window sticker affixed to any used car offered for sale the presence of certain mechanical defects of which they have knowledge. The principal issues addressed are the legality of the procedures by which the Commission withdrew the known-defects provision following remand of the initial rule by a reviewing court, and the substantive validity of the withdrawal.

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The tumultuous history of the Used Car Rule began in 1975, with the enactment of the Magnuson-Moss Warranty--Federal Trade Commission Improvement Act ("Magnuson-Moss Act"), Pub.L. No. 93-637, 88 Stat. 2183 (1975) (codified at 15 U.S.C. Secs. 2301-2312 (1982) and other scattered sections of 15 U.S.C.), which, in Sec. 109(b), directed the Commission to promulgate a rule regulating "warranties and warranty practices in connection with the sale of used motor vehicles," 15 U.S.C. Sec. 2309(b). In 1981, relying upon Sec. 109(b) and upon Sec. 18(a)(1) of the Federal Trade Commission Act ("FTC Act"), ch. 311, 38 Stat. 717 (1914), as added by the Magnuson-Moss Act, Sec. 202, 88 Stat. 2193 (codified as amended at 15 U.S.C. Sec. 57a(a)(1) (1982)), which grants the Commission rulemaking authority to regulate "unfair or deceptive" trade practices, the Commission promulgated a rule that required used-car 1 dealers to post on a standard window sticker several consumer warnings, the terms of any warranty, and a list of certain specific mechanical defects known to the dealer. 46 Fed.Reg. 41,328 (1981) ("Initial Rule").

Timely petitions for review of the Initial Rule were filed in the United States Court of Appeals for the Second Circuit, pursuant to Sec. 18(e) of the FTC Act, 15 U.S.C. Sec. 57a(e), attacking primarily the known-defects provision. Miller Motor Car Corp. v. FTC, Nos. 81-4144, 81-4172, 81-4216. A lengthy delay interrupted the case, during which Congress vetoed the Initial Rule, see 128 CONG.REC. 10,343-44 (1982); 128 CONG.REC. H2856-58 (daily ed. May 26, 1982), and the Supreme Court, in turn, declared the legislative veto unconstitutional, see United States Senate v. FTC, 463 U.S. 1216, 103 S.Ct. 3556, 77 L.Ed.2d 1402, 1403, 1413 (1983); United States House of Representatives v. FTC, 463 U.S. 1216, 103 S.Ct. 3556, 77 L.Ed.2d 1402, 1403, 1413 (1983). While Miller was pending, the Commission announced its intention to consider modifying the Initial Rule. 48 Fed.Reg. 36,096 (1983). Shortly thereafter, alleging that the Commission had never afforded them the requisite opportunity to comment on the known-defects provision, the Miller petitioners moved the court to remand the case to the Commission pursuant to Sec. 18(e)(2) of the FTC Act, 15 U.S.C. Sec. 57a(e)(2), for additional oral and written presentations on the Initial Rule. By stipulation of the parties, in which the Commission disputed the alleged procedural irregularity, the court remanded the case pursuant to Sec. 18(e)(2), retaining jurisdiction.

After soliciting further evidence and comments on the Initial Rule, and particularly comments on the know-defects provision, 48 Fed.Reg. 55,874 (1983), the Commission (in addition to making minor changes not relevant here) revised the Initial Rule to delete the known-defects provision. 49 Fed.Reg. 45,692 (1984) ("Revised Rule").

Petitioner sought review of the Revised Rule in this court, challenging both the Commission's decision to omit the known-defects provision and the procedures it followed in arriving at that decision. The Second Circuit transferred Miller to this court and we designated the National Automobile Dealers Association ("NADA") and the National Independent Automobile Dealers Association, which were petitioners in Miller, as intervenors in this case.


We address first petitioner's contention that the Commission, in promulgating the Revised Rule, neglected to provide statutorily required procedures. The essence of the dispute is this: Section 18(e)(2) of the FTC Act, pursuant to which the Second Circuit remanded the Initial Rule to the Commission, provides that the reviewing court may, at the request of either the petitioner or the Commission, order the Commission to provide opportunity for "additional oral submissions or written presentations" if "there were reasonable grounds for ... failure to make such submissions

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and presentations in the proceeding before the Commission." 15 U.S.C. Sec. 57a(e)(2). It continues:

The Commission may modify or set aside its rule or make a new rule by reason of the additional submissions and presentations and shall file such modified or new rule, and the rule's statement of basis of [sic ] purpose, with the return of such submissions and presentations. The court shall thereafter review such new or modified rule.

Id. By contrast, Sec. 18(d)(2)(B) of the FTC Act, 15 U.S.C. Sec. 57a(d)(2)(B), requires that "[a] substantive amendment to, or repeal of, a rule promulgated under subsection (a)(1)(B) of this section [as was the Initial Rule in the present case] shall be prescribed ... in the same manner as a rule prescribed under such subsection." That manner of prescription includes not merely the opportunity for oral presentation and written submission, 15 U.S.C. Sec. 57a(c)(2)(A), but also opportunity "to present such rebuttal submissions and to conduct (or have conducted ...) such cross-examination of persons as the Commission determines (i) to be appropriate, and (ii) to be required for a full and true disclosure" with respect to disputed issues of material fact, 15 U.S.C. Sec. 57a(c)(2)(B). Rebuttal submissions were permitted in the present case. The Commission did not, however, either permit cross-examination or determine that it was not "appropriate" or not "required for a full and true disclosure" with respect to disputed issues of material fact. It is this failure petitioner complains of--and whether the complaint is justified depends upon (1) whether Sec. 18(e)(2) requires such procedures, and (2) if not, whether Sec. 18(e)(2) or rather Sec. 18(d)(2)(B) governed the proceedings on remand.

The first point is not contested. As odd as it might seem to allow supplementation of the rulemaking record in a fashion different from that by which the original record itself was compiled, that is precisely what Sec. 18(e)(2) prescribes, in the limited circumstances in which it is applicable. And there is some reason for the oddity. The Sec. 18(e)(2) procedure, while not as demanding as that of Sec. 18(d)(2)(B) (or Sec. 18(c)) is fully as demanding as that of normal rulemaking under the Administrative Procedure Act ("APA"). See 5 U.S.C. Sec. 553(b), (c) (1982). In fact, it is somewhat more demanding, since it permits the remanding court to require receipt of not merely written comments but oral presentations. Congress evidently thought that this compromise procedure was a reasonable accommodation to the need for expedition where a lengthy completed Sec. 18(c) proceeding needs to be supplemented.

The issue reduces itself, therefore, to whether Sec. 18(e)(2) governed the remand. Petitioner's principal argument that it does not is based upon the simple (and simply rejected) premise that Sec. 18(d)(2)(B) categorically requires Sec. 18(c) procedures for "substantive amendment to ... a rule promulgated under subsection (a)(1)(B)." It does indeed contain that requirement, but the requirement cannot possibly be categorical, since it must be reconciled with Sec. 18(e)(2), which explicitly authorizes the Commission to "modify or set aside its rule or make a new rule by reason of the additional submissions and presentations." The manner of reconciliation is obvious: the traditional principle of construction that the more specific prevails over the more general. It is Sec. 18(e)(2), and not Sec. 18(d)(2)(B), that governs the narrow category of case in which a reviewing court authorizes reopening of the record under the former section. There is no question that is what occurred here. Though petitioner at one point puzzlingly asserts "the impropriety of treating the proceedings used by the Commission here as if they were made pursuant to a section [18(e)(2) ] remand," Reply Brief for Petitioner at 14 (emphasis added), it is entirely...

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