National Petroleum Refiners Association v. FTC

Citation482 F.2d 672
Decision Date27 June 1973
Docket NumberNo. 72-1446.,72-1446.
PartiesNATIONAL PETROLEUM REFINERS ASSOCIATION et al. v. FEDERAL TRADE COMMISSION et al., Appellants. Environmental Defense Fund, Inc., Consumers Union, and Consumer Federation of America, Intervenors-Appellants.
CourtU.S. Court of Appeals — District of Columbia Circuit

Ronald M. Dietrich, Gen. Counsel, F. T. C., of the bar of the Supreme Court of Illinois, pro hac vice, by special leave of court, with whom Harold H. Titus, Jr., U. S. Atty., Harold D. Rhynedance, Jr., Asst. Gen. Counsel, Miles J. Brown, Atty., F. T. C., and Morton Hollander and William D. Appler, Attys., Dept. of Justice, were on the brief, for appellants.

William Simon, Washington, D. C., with whom J. Wallace Adair, John Bodner, Jr., Francis A. O'Brien and Roger C. Simmons, Washington, D. C., were on the brief, for appellees.

Gladys Kessler, Washington, D. C., for intervenors-appellants.

Before BAZELON, Chief Judge, and WRIGHT and ROBINSON, Circuit Judges.

J. SKELLY WRIGHT, Circuit Judge.

This case presents an important question concerning the powers and procedures of the Federal Trade Commission. We are asked to determine whether the Commission, under its governing statute, the Trade Commission Act, 15 U.S. C. ž 41 et seq. (1970), and specifically 15 U.S.C. ž 46(g), is empowered to promulgate substantive rules of business conduct or, as it terms them, "Trade Regulation Rules." The effect of these rules would be to give greater specificity and clarity to the broad standard of illegality ÔÇö "unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce" ÔÇö which the agency is empowered to prevent. 15 U.S.C. ž 45(a). Once promulgated, the rules would be used by the agency in adjudicatory proceedings aimed at producing cease and desist orders against violations of the statutory standard. The central question in such adjudicatory proceedings would be whether the particular defendant's conduct violated the rule in question. See 16 C.F.R. ž 1.12(c) (1973).

The case is here on appeal from a District Court ruling that the Commission lacks authority under its governing statute to issue rules of this sort. National Petroleum Refiners Assn v. FTC, D.D. C., 340 F.Supp. 1343 (1972). Jurisdiction in the District Court was based on Section 10 of the Administrative Procedure Act. 5 U.S.C. ž 706(2) (1970). Specifically at issue in the District Court was the Commission's rule declaring that failure to post octane rating numbers on gasoline pumps at service stations was an unfair method of competition and an unfair or deceptive act or practice.1 The plaintiffs in the District Court, appellees here, are two trade associations and 34 gasoline refining companies. Plaintiffs attacked the rule on several grounds,2 but the District Court disposed of the case solely on the question of the Commission's statutory authority to issue such rules. That is the only question presented for our consideration on appeal. We reverse and remand to the District Court for further consideration of appellees' challenge to the validity of the procedure before the Commission which resulted in the rule.


Our duty here is not simply to make a policy judgment as to what mode of procedure ÔÇö adjudication alone or a mixed system of rule-making and adjudication, as the Commission proposes ÔÇö best accommodates the need for effective enforcement of the Commission's mandate with maximum solicitude for the interests of parties whose activities might be within the scope of the statutory standard of illegality. The Federal Trade Commission is a creation of Congress, not a creation of judges' contemporary notions of what is wise policy. The extent of its powers can be decided only by considering the powers Congress specifically granted it in the light of the statutory language and background. See Textile and Apparel Group v. FTC, 133 U.S.App.D.C. 353, 356-357, 410 F.2d 1052, 1055-1056, cert. denied, 396 U.S. 910, 90 S.Ct. 223, 24 L.Ed.2d 185 (1969). The question to be answered is "not what the Commission thinks it should do but what Congress has said it can do." CAB v. Delta Air Lines, 367 U.S. 316, 322, 81 S.Ct. 1611, 1617, 6 L. Ed. 869 (1961).

As always, we must begin with the words of the statute creating the Commission and delineating its powers. Section 53 directs the Commission to "prevent persons, partnerships, or corporations * * * from using unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce."4 Section 5(b) of the Trade Commission Act specifies that the Commission is to accomplish this goal by means of issuance of a complaint, a hearing,5 findings as to the facts, and issuance of a cease and desist order. The Commission's assertion that it is empowered by Section 6(g) to issue substantive rules defining the statutory standard of illegality in advance of specific adjudications does not in any formal sense circumvent this method of enforcement. For after the rules are issued, their mode of enforcement remains what it has always been under Section 5: the sequence of complaint, hearing, findings, and issuance of a cease and desist order. What rule-making does do, functionally, is to narrow the inquiry conducted in proceedings under Section 5(b). It is the legality of this practice which we must judge.

Appellees argue that since Section 5 mentions only adjudication as the means of enforcing the statutory standard, any supplemental means of putting flesh on that standard, such as rule-making, is contrary to the overt legislative design. But Section 5(b) does not use limiting language suggesting that adjudication alone is the only proper means of elaborating the statutory standard. It merely makes clear that a Commission decision, after complaint and hearing, followed by a cease and desist order, is the way to force an offender to halt his illegal activities.6 Nor are we persuaded by appellees' argument that, despite the absence of limiting language in Section 5 regarding the role of adjudication in defining the meaning of the statutory standard, we should apply the maxim of statutory construction expressio unius est exclusio alterius and conclude that adjudication is the only means of defining the statutory standard. This maxim is increasingly considered unreliable, see Potomac Passngers Assn v. Chesapeake & Ohio R. Co., 154 U.S.App.D.C. 214, 220-222, 475 F.2d 325, 331-332 (1973), cert. granted, sub nom. Nat'l. R. R. Passenger Corp. v. Nat'l. Assn. of R. R. Passngers, 411 U. S. 981, 93 S.Ct. 2273, 36 L.Ed.2d 957 (1973), for it stands on the faulty premise that all possible alternative or supplemental provisions were necessarily considered and rejected by the legislative draftsmen. See American Trucking Assns v. United States, 344 U.S. 298, 309-310, 73 S.Ct. 307, 97 L.Ed. 337 (1953); Durnin v. Allentown Federal Savings & Loan Assn, E.D.Pa., 218 F. Supp. 716, 719 (1963). Here we have particularly good reason on the face of the statute to reject such arguments. For the Trade Commission Act includes a provision which specifically provides for rule-making by the Commission to implement its adjudicatory functions under Section 5 of the Act. Section 6(g) of the Act, 15 U.S.C. ž 46(g), states that the Commission may "from time to time * * * classify corporations and * * * make rules and regulations for the purpose of carrying out the provisions of sections 41 to 46 and 47 to 58 of this title."7

According to appellees, however, this rule-making power is limited to specifying the details of the Commission's nonadjudicatory, investigative and informative functions spelled out in the other provisions of Section 68 and should not be read to encompass substantive rulemaking in implementation of Section 5 adjudications. We disagree for the simple reason that Section 6(g) clearly states that the Commission "may" make rules and regulations for the purpose of carrying out the provisions of Section 5 and it has been so applied. For example, the Commission has issued rules specifying in greater detail than the statute the mode of Commission procedure under Section 5 in matters involving service of process, requirements as to the filing of answers, and other litigation details necessarily involved in the Commission's work of prosecuting its complaints under Section 5. Such rule-making by the Commission has been upheld. See Hunt Foods & Industries, Inc. v. FTC, 9 Cir., 286 F.2d 803, 810 (1960); United States v. San Juan Lumber Co., D.Colo., 313 F.Supp. 703, 708 (1969).

Moreover, the Supreme Court has ruled that the powers specified in Section 6 do not stand isolated from the Commission's enforcement and law-applying role laid out in Section 5. In United States v. Morton Salt Co., 338 U.S. 632, 70 S.Ct. 357, 94 L.Ed. 401 (1950), the Court unanimously rejected arguments that the powers in the two sections are to be exercised separately. There the Court upheld the Commission's power to utilize its authority under Section 6(b) to compel the filing of "special reports" to monitor a defendant's compliance with a cease and desist order issued under Section 5. The Commission sought information in such reports to supplement the reports the defendants had been ordered to file by the Court of Appeals which had affirmed the Commission's original cease and desist order. Finding the Commission's request squarely within a commonsense definition of a "special report," the Court reasoned that the power to compel "special reports" meant that the agency could "elicit any information beyond the ordinary data of a routine annual report." Id. at 650, 70 S.Ct. at 368. More importantly, the Court rejected arguments that the legislative history compelled an opposite result, pointing out that while the legislative history did not specifically underwrite this function of "special reports," neither did it explicitly "deny their...

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