Trans Union Corp. v. F.T.C.

• Decision Date: 19 April 1996
• Docket Number: No. 94-1725,94-1725
• Citation: 81 F.3d 228
• Parties: , 64 USLW 2662 TRANS UNION CORPORATION, Petitioner v. FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 228

81 F.3d 228

317 U.S.App.D.C. 133, 64 USLW 2662

TRANS UNION CORPORATION, Petitioner v. FEDERAL TRADE COMMISSION, Respondent.

No. 94-1725.

United States Court of Appeals District of Columbia Circuit.

Argued Oct. 16, 1995.

Decided April 19, 1996.

On Petition for Review of an Order of the Federal Trade Commission.

Roger L. Longtin, Chicago, IL, with whom Stephen L. Agin, Chicago, IL, and Philip L. O'Neill, Washington, DC, were on the brief, argued the cause for petitioner.

Lawrence DeMille-Wagman, Attorney, Federal Trade Commission, with whom Jay C. Shaffer, Deputy General Counsel, and Ernest J. Isenstadt, Assistant General Counsel, were on the brief, Washington, DC, argued the cause for respondent.

Before: WILLIAMS, ROGERS and TATEL, Circuit Judges.

Opinion for the court filed by Circuit Judge WILLIAMS.

STEPHEN F. WILLIAMS, Circuit Judge:

The Federal Trade Commission has held that Trans Union Corporation's sale of certain mailing lists was a communication of "consumer reports" for a purpose that was impermissible under the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. (1994). In reaching the threshold conclusion that the lists were consumer reports, the Commission found that the information embodied in the lists was "used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing" the credit "eligibility" of the persons listed. Id. § 1681a(d). To support its finding, it relied on no evidence other than the undisputed fact that the information had been "included as one section in credit reports that are routinely sent to credit grantors" for the purpose of establishing credit eligibility. Final Order, In the Matter of Trans Union Corporation, Slip Copy, Dkt. No. 9255 (Sept. 28, 1994) ("Commission Decision") at 23.

We reverse and remand the case to the Commission. Even the Commission does not embrace the concept that mere inclusion of a fact in a report prepared for credit eligibility purposes establishes that the fact satisfies the statutory test; the Commission has failed adequately to distinguish its own decisions rejecting that principle; and the statutory language does not support such a principle.

* * *

Trans Union is a consumer reporting agency that collects and resells data about the credit and payment patterns of over a hundred million Americans. Typical buyers of this information are firms considering extending some kind of credit to the consumers about whom they inquire; they use Trans Union's information to evaluate whether the consumers are good credit risks. This core business is clearly subject to the Act because the data sold meet the Act's definition of "consumer reports." 15 U.S.C. § 1681a(d) (1994).

In 1987 Trans Union diversified, launching a "target marketing" division. That division--first TransMark, now Trans Union Lists--uses data from Trans Union's consumer reporting database, CRONUS, to create mailing lists. The lists are sold to companies wishing to send sweepstakes entries, catalogs, circulars, and other solicitations to classes of customers that they believe will be particularly responsive to their pitches.

For each person listed, the CRONUS database contains a variety of information, such as name (and aliases), social security number, addresses, phone numbers, occupation, gender, ethnic background, marital status and education. It also contains information about the listed person's credit history on any credit account, each such account being known as a "tradeline." From this universe Trans Union has created a special "base list" for target marketing purposes, the list's common denominator being that each person listed has at least two tradelines. But a tradeline is a tradeline, regardless of whether the person's performance on the account has been perfect or disastrous; mere existence of the two accounts is all that matters for inclusion in the base list. Trans Union also creates a rich variety of sublists based on additional data in the base list, leading to such titles as "Empty Nesters," "Urban Ethnics," and "Suburban Elite." (Trans Union even offers a "hotline" list of consumers who have responded to a credit card solicitation within the past month or so, and are thus, presumably, especially ready, eager and able to consume.)

The mailing lists are simply collections of names and addresses, but because Trans Union has used special criteria to cull them from its database, a buyer of any list also knows that the persons named satisfy the specified criteria. Thus a buyer of any of Trans Union's target marketing lists knows that every person named has at least two credit accounts. And he would also know, as to any list, that listed persons satisfied its particular subcriteria. The FTC claims that this implicit information--even the mere fact that a listed person has two tradelines--transforms Trans Union's lists from legally innocuous mailing labels to consumer reports covered by the limitations of the Act.

Trans Union's main objection to the decision is that its lists are not "consumer reports" as defined by the Act, primarily because, it argues, it has not collected the implicit information conveyed therein to serve as a factor in determining credit eligibility. The Commission's finding to the contrary is especially vulnerable, in its view, because the Commission reached its decision under "summary decision" procedures, 16 CFR § 3.24 (1993) (modeled on judicial interpretations of Rule 56 of the Federal Rules of Civil Procedure, see Gellhorn & Robinson, Summary Judgment in Administrative Adjudication, 84 Harv.L.Rev. 612, 626 (1971)), without allowing Trans Union a hearing. Trans Union also argues that even if the lists are "consumer reports," selling them to mass mailers is a permissible purpose under the Act, and, finally, that if the Act does allow the FTC's contrary holdings, its cease-and-desist order is a prior restraint of speech in violation of the First Amendment.

The Commission's error on the first issue requires reversal. Trans Union raised an issue of material fact precluding the Commission's summary decision that Trans Union's lists are consumer reports. Accordingly, we grant Trans Union's petition for review and remand the case to the FTC for further factual development. We reject Trans Union's contention that use of genuine consumer reports for target marketing would be a permissible use, but we do not reach its First Amendment claim.

* * *

Standard of review

Both Trans Union and the FTC, noting the Act's "administrative enforcement" provision, 15 U.S.C. § 1681s(a) (1994), agree that the Commission has enforcement but not rulemaking authority under the Act. Trans Union argues from this that the FTC's interpretations of the Act are entitled only to the rather limited type of deference that the Supreme Court has found suitable for the Equal Employment Opportunity Commission in its enforcement of Title VII, in partial reliance on the EEOC's lack of rulemaking authority. See General Electric Co. v. Gilbert, 429 U.S. 125, 140-46, 97 S.Ct. 401, 410-13, 50 L.Ed.2d 343 (1976); EEOC v. Arabian American Oil Co., 499 U.S. 244, 256-57, 111 S.Ct. 1227, 1234-35, 113 L.Ed.2d 274 (1991). That deference is a type most famously expressed in Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944), under which "the level of deference afforded will depend upon the thoroughness evident in [the agency's] consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control." Id. at 140, 65 S.Ct. at 164, quoted in General Electric, 429 U.S. at 142, 97 S.Ct. at 411; Arabian American Oil Co., 499 U.S. at 257, 111 S.Ct. at 1235.

The Commission's apparent lack of rulemaking power under the Act does not seem to us in itself to make a solid case for withholding Chevron deference. See Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). First, we have extended Chevron deference to agency interpretive rules, see Health Ins. Ass'n of Am. v. Shalala, 23 F.3d 412, 424 n. 8 (D.C.Cir.1994) (citing cases); indeed, the rule at issue in Chevron itself appears to have been interpretive. See American Mining Cong. v. Mine Safety & Health Admin., 995 F.2d 1106, 1108-12 (D.C.Cir.1993). And we have expressly held that Chevron deference extends to interpretations reached in adjudications as much as to ones reached in a rulemaking. Midtec Paper Corp. v. United States, 857 F.2d 1487, 1497 (D.C.Cir.1988). Moreover, there is, for the EEOC, a rather strong alternative ground for withholding Chevron deference--the fact that its role is, like the Justice Department's in enforcement of criminal statutes, the role of prosecutor. See Crandon v. United States, 494 U.S. 152, 177, 110 S.Ct. 997, 1011, 108 L.Ed.2d 132 (1990) (interpretation of criminal statutes by Department of Justice and other agencies not given Chevron deference) (Scalia, J., concurring). Finally, the FTC notes that the courts of appeals have often given its interpretations of the Act great deference, see, e.g., Estiverne v. Sak's Fifth Ave., 9 F.3d 1171, 1173 (5th Cir.1993) (citing Chevron, 467 U.S. at 843, 104 S.Ct. at 2782, 81 L.Ed.2d at 703 (1984)); the inferences from that deference are uncertain, however, as the courts have not discussed the Commission's lack of rulemaking power under the Act, or any other Commission characteristics specific to the Act.

It turns out that we can decide this case without resolving the level of deference due. Even under Chevron's lenient standard the FTC's conclusion that all of Trans Union's mailing lists are consumer reports under the Act cannot stand, as there is no permissible construction of the statute under which it could reach its conclusion without further factual exploration. As to Trans Union's other statutory claims, the FTC's holdings survive review even...