Association of Nat. Advertisers, Inc. v. F. T. C., Nos. 79-1030

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtBefore WRIGHT, Chief Judge, and MacKINNON and WILKEY; MacKINNON; The district court; J. SKELLY WRIGHT
Citation617 F.2d 611,199 U.S.App.D.C. 29
Parties, 1979-2 Trade Cases 62,950 ASSOCIATION OF NATIONAL ADVERTISERS, INC., Appellant, v. FEDERAL TRADE COMMISSION et al. KELLOGG COMPANY, a corporation, Appellant, v. FEDERAL TRADE COMMISSION et al. CHOCOLATE MANUFACTURERS ASSOCIATION OF the UNITED STATES OF AMERICA, INC., Appellant, v. FEDERAL TRADE COMMISSION. TOY MANUFACTURERS OF AMERICA, INC., Appellant, v. FEDERAL TRADE COMMISSION et al. to 79-1033.
Decision Date02 October 1979
Docket NumberNos. 79-1030

Page 611

617 F.2d 611
199 U.S.App.D.C. 29, 1979-2 Trade Cases 62,950
ASSOCIATION OF NATIONAL ADVERTISERS, INC., Appellant,
v.
FEDERAL TRADE COMMISSION et al.
KELLOGG COMPANY, a corporation, Appellant,
v.
FEDERAL TRADE COMMISSION et al.
CHOCOLATE MANUFACTURERS ASSOCIATION OF the UNITED STATES OF
AMERICA, INC., Appellant,
v.
FEDERAL TRADE COMMISSION.
TOY MANUFACTURERS OF AMERICA, INC., Appellant,
v.
FEDERAL TRADE COMMISSION et al.
Nos. 79-1030 to 79-1033.
United States Court of Appeals,
District of Columbia Circuit.
Argued March 5, 1979.
Decided Oct. 2, 1979.

Page 613

Appeals from the United States District Court for the District of Columbia. (D.C. Civil Action Nos. 78-1413, 78-1759, 78-1372 and 78-1932).

Gilbert H. Weil, New York City, with whom Stephen A. Weitzman, Washington, D. C., was on brief, for appellants in No. 79-1030.

James H. Wallace, Jr., Washington, D. C., for appellant in No. 79-1032.

Frederick P. Furth, San Francisco, Cal., a member of the bar of the Supreme Court, pro hac vice, by special leave of court, with whom Samuel H. Seymour and Earl C. Dudley, Jr., Washington, D. C., were on brief, for appellant in No. 79-1031.

Richard Gimer, Washington, D. C., was on brief, for appellant in No. 79-1033.

Gerald P. Norton, Deputy Gen. Counsel, F. T. C., Washington, D. C., with whom Michael N. Sohn, Gen. Counsel, David M. Fitzgerald, Atty., F. T. C., Barbara Allen Babcock, Asst. Atty. Gen., Dept. of Justice, Earl J. Silbert, U. S. Atty., Robert E. Kopp and Neil H. Koslowe, Attys., Dept. of Justice, Washington, D. C., were on brief, for appellees.

Before WRIGHT, Chief Judge, and MacKINNON and WILKEY, Circuit Judges.

Opinion for the Court filed by Circuit Judge MacKINNON.

Concurring opinion filed by Chief Judge J. SKELLY WRIGHT.

MacKINNON, Circuit Judge:

Acting on what might be mildly described as a provocative staff report, the Federal Trade Commission decided in April 1978 to initiate hearings on a proposed rule to circumscribe the content of television advertising that is seen by or directed at children. The Commission published in the Federal

Page 614

Register a Notice of Proposed Rulemaking that announced both this undertaking and a special set of rules to govern the rulemaking. These special rules were drafted to apply only to the children's advertising proceeding and significantly differ from the rules the Commission uses in other trade regulation rulemakings.

In September, a group of advertisers and trade associations filed suit in federal district court seeking interlocutory review of the special rules. They alleged that the Commission had not complied with the notice and comment provisions of the Administrative Procedure Act in the promulgation of the special rules, and that one of the new rules, which requires participating parties to produce studies and surveys in their custody pertaining to the issue of children's advertising, lacks statutory authority and otherwise offends statutory and constitutional guarantees. In addition, the advertisers and trade associations complained that a preexisting Commission rule, one prohibiting communications between Commissioners and outside parties while sanctioning sub silentio similar communications between Commissioners and members of the Commission's general staff, violates the rights assured them by statute and the due process clause.

In November, the district court granted the Commission's motion for summary judgment. The district court held that the assaults on the Commission's rules were premature. Despite some misgivings, we affirm.

I. BACKGROUND

A. The Magnuson-Moss Act

In January 1975 Congress amended the Federal Trade Commission Act to add a new section 18. The Magnuson-Moss Warranty Federal Trade Commission Improvement Act, Pub.L. No. 93-637, § 202, 88 Stat. 2193 (1975) (codified at 15 U.S.C. § 57a (1976)). Section 18 empowers the Commission to issue trade regulation rules specifically defining acts and practices that are unfair or deceptive within the meaning of section 5 of the Commission's organic statute. 1 15 U.S.C. § 57a(a)(1)(B) (1976). However, under the Act, the Commission cannot exercise this power through conventional rulemaking processes, for interwoven with the statutory delegation of quasi-legislative power are quasi-adjudicative procedures the Commission must follow in developing standards to govern the behavior of private parties. These procedural provisions grant unusually broad rights of public participation in agency rulemaking, and they substantially restrict the Commission's power to fashion its policy concerns into legally binding rules.

The statute directs that in undertaking to decide whether to promulgate a trade regulation rule the Commission must first publish a notice of proposed rulemaking stating with particularity the reasons for the proposed rule and inviting interested persons to submit written data, views, and arguments. Id. § 57a(b). The Commission must then conduct an informal hearing at which any interested person can present his position orally or by documentary submission or both, subject to such Commission rules as may tend to avoid unnecessary costs and delay. Id. § 57a(c). If the Commission determines that it must resolve disputed issues of material fact necessary to fair decisionmaking on the record as a whole,

Page 615

section 18 entitles interested persons to offer such rebuttal submissions or to conduct (or to have the Commission conduct) such cross-examination of witnesses as the Commission deems appropriate and necessary for a full and true disclosure of facts pertinent to the disputed issues. Id. If the Commission thereafter elects to promulgate a trade regulation rule, interested persons can seek judicial review of the rule immediately upon its issuance.

On such review, section 18 authorizes a court of appeals to set aside a trade regulation rule if the rule is not supported by substantial evidence found in the rulemaking record taken as a whole, 2 or if a Commission rule or ruling limiting an interested person's right to cross-examine or to submit rebuttal statements has precluded disclosure of disputed facts necessary to a fair determination in the rulemaking. Id. § 57a(e). In this as in other respects, section 18 supplements rather than displaces the Administrative Procedure Act. For instance, an appellate court can also set aside a trade regulation rule if the Commission promulgates it without observance of the procedure required by law. Id.; see 5 U.S.C. § 706(2)(D) (1976).

Section 18 is an uncommon statute because it both delegates a rulemaking power and carefully and in unusual detail prescribes the manner in which that power is to be exercised. Section 18 also differs from most provisions authorizing rulemaking in being a codification of the hybrid approach between adjudication and rulemaking in the development of legally binding rules. As the term is normally used, an adjudication refers to the application of a pre-existing legal standard to a well-defined set of controverted facts to determine whether a particular person or group of persons should receive a benefit or penalty. An adjudication, with its attendant procedures, only serves its purpose if the facts are fully aired and accurately resolved. Rulemaking, by contrast, normally refers to the prospective allocation of benefits and penalties according to a specific standard that reflects the policy choice of the rulemaker. The rulemaking serves its purpose if the rulemaker arrives at a reasonable policy choice that adequately guides future conduct. Under section 18's hybrid scheme, the Commission must apply a pre-existing legal standard to the set of controverted facts necessary to a determination whether the prospective allocation of benefits and penalties is an appropriate policy choice. A section 18 proceeding only serves its purpose if the material facts are fully aired and accurately resolved and the Commission arrives at a reasonable policy choice that adequately guides future conduct. The sufficiency of the record in a proceeding of this kind and the validity of the rule it purports to support are directly and substantively correlated to the procedural devices the Commission employs. And while the Commission is authorized to adopt additional procedural devices to avoid unnecessary costs and delay, it is not entitled to transform Congress' careful mixture in section 18 into the more restrictive procedures used by other federal agencies.

Immediately after enactment of section 18 in 1975, the Commission published a Notice of Proposed Rulemaking in the Federal Register inviting comments on proposed rules for the conduct of section 18 proceedings. 40 Fed.Reg. 15237 (1975). This Notice explained that the proposals were designed to implement section 18's rights and obligations. Following the comment period, the Commission formally promulgated the rules, somewhat altering its proposals on the basis of the comments it had received. 3

Page 616

The Commission adhered to these 1975 rules, together with amendments it subsequently issued, 4 until the outset of the children's advertising proceeding.

B. The Special Rules for the Children's Advertising Proceeding

Presaging the children's advertising proceeding was the publication in February 1978 of a Commission staff report that advocated, among other things, a complete ban on certain television advertising seen by or directed at children. 5 Two months later, the Commission published the Notice of Proposed Rulemaking that inaugurated its inquiry into children's advertising and promulgated without opportunity for comment the special set of rules to govern the inquiry. 43 Fed.Reg. 17967 (1978). Describing the special rules as an "experiment," id. at 17968, the Commission explained that they would only apply to the children's advertising proceeding, not to any other trade regulation rulemaking the Commission might later instigate.

The Commission's special...

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31 practice notes
  • Z St., Inc. v. Koskinen, Civil Action No. 12–cv–0401 KBJ
    • United States
    • United States District Courts. United States District Court (Columbia)
    • May 27, 2014
    ...v. Sullivan, 576 F.3d 522, 525 (D.C.Cir.2009) (internal quotation marks and citation omitted); see also Ass'n of Nat'l Advertisers v. FTC, 617 F.2d 611, 619 (D.C.Cir.1979) ( “General federal question jurisdiction ... gives the district courts the power to review agency action”). Nevertheles......
  • CONSORTIUM OF COM. BASED ORGANIZATIONS v. Donovan, Civ. No. S-81-135 LKK.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • January 11, 1982
    ...circumstances the procedure provided by Congress fails to supply an adequate remedy. See Association of National Advertisers v. F.T.C., 617 F.2d 611, 621 (D.C.Cir.1979); Independent Cosmetic Mfgs. & Distributors, Inc. v. United States Dept. of Health, Education & Welfare, 574 F.2d 553, 554 ......
  • Associated Gas Distributors v. F.E.R.C., No. 85-1811
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • June 23, 1987
    ..."the framework of the generalized challenge made here." Id. at 164, 87 S.Ct. at 1524. See also Association of National Advertisers v. FTC, 617 F.2d 611, 620 (D.C.Cir.1979) (finding a challenge to certain Federal Trade Commission procedures unfit for review as it would entangle the court "in......
  • Batterton v. Marshall, No. 78-1414
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • August 28, 1980
    ...82 Appellee's Br. at 29. 83 In his separate opinion concurring in the result only in Association of Nat'l Advertisers, Inc. v. FTC, 617 F.2d 611 (D.C.Cir.1979), Chief Judge Skelly Wright noted that the Federal Trade Commission "in its brief questions whether the 'substantial impact' test ca......
  • Request a trial to view additional results
30 cases
  • Z St., Inc. v. Koskinen, Civil Action No. 12–cv–0401 KBJ
    • United States
    • United States District Courts. United States District Court (Columbia)
    • May 27, 2014
    ...v. Sullivan, 576 F.3d 522, 525 (D.C.Cir.2009) (internal quotation marks and citation omitted); see also Ass'n of Nat'l Advertisers v. FTC, 617 F.2d 611, 619 (D.C.Cir.1979) ( “General federal question jurisdiction ... gives the district courts the power to review agency action”). Nevertheles......
  • CONSORTIUM OF COM. BASED ORGANIZATIONS v. Donovan, Civ. No. S-81-135 LKK.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • January 11, 1982
    ...circumstances the procedure provided by Congress fails to supply an adequate remedy. See Association of National Advertisers v. F.T.C., 617 F.2d 611, 621 (D.C.Cir.1979); Independent Cosmetic Mfgs. & Distributors, Inc. v. United States Dept. of Health, Education & Welfare, 574 F.2d 553, 554 ......
  • Associated Gas Distributors v. F.E.R.C., No. 85-1811
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • June 23, 1987
    ..."the framework of the generalized challenge made here." Id. at 164, 87 S.Ct. at 1524. See also Association of National Advertisers v. FTC, 617 F.2d 611, 620 (D.C.Cir.1979) (finding a challenge to certain Federal Trade Commission procedures unfit for review as it would entangle the court "in......
  • Batterton v. Marshall, No. 78-1414
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • August 28, 1980
    ...82 Appellee's Br. at 29. 83 In his separate opinion concurring in the result only in Association of Nat'l Advertisers, Inc. v. FTC, 617 F.2d 611 (D.C.Cir.1979), Chief Judge Skelly Wright noted that the Federal Trade Commission "in its brief questions whether the 'substantial impact' test ca......
  • Request a trial to view additional results
1 books & journal articles
  • The FTC in the 1980's: An Analysis of the FTC Improvements ACT of 1980
    • United States
    • Antitrust Bulletin Nbr. 26-3, September 1981
    • September 1, 1981
    ...aimed at children on a case-by-case basis. 3028 Ass'nofNat'. Advertisers, Inc. v. FTC, No. 78-1421 (DoDoC.,filed Nov. 18, 1978),aff'd,617 F.2d 611 (D.C. Cir. 1979).29 901 ATRR A-II (1979).30 806 ATRR A-22 TheFTC:457With Chairman Pertschuk came a shift in emphasis frompremiums to advertiseme......

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