National Petroleum Refiners Association v. Federal Trade Commission

United States Court of Appeals for the District of Columbia Circuit · 1973 · Administrative Law

Administrative LawFTCFederal Trade Commission ActSection 6(g)Section 5substantive rulemakingtrade regulation rulesAPA

Facts

The FTC promulgated a 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. The Commission intended such trade regulation rules to give specificity to the broad statutory standards in Section 5 and then use those rules in later adjudicatory cease-and-desist proceedings. The challengers argued that the FTC could proceed only through case-by-case adjudication and lacked authority to issue binding substantive rules. The district court agreed on that statutory-authority question alone and did not resolve the other challenges to the rule.

Issue

Whether the Federal Trade Commission, under the Federal Trade Commission Act and specifically 15 U.S.C. § 46(g), has authority to promulgate substantive rules defining the meaning of the Section 5 standards of unfair methods of competition and unfair or deceptive acts or practices for use in later adjudicatory enforcement proceedings.

Rule

Section 6(g) of the Federal Trade Commission Act authorizes the FTC to make substantive rules and regulations for the purpose of carrying out Section 5, including rules that define with greater specificity the statutory standards of illegality, so long as rulemaking supplements rather than displaces the Act's complaint-hearing-cease-and-desist enforcement scheme and is reasonably related to the purposes of the enabling legislation.

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The Federal Trade Commission adopts a notice-and-comment rule stating that online subscription sellers must display the full recurring monthly price on the final checkout screen. Later, in an administrative proceeding in Chicago, the FTC serves a complaint on Lakefront Stream Co. and seeks a cease-and-desist order for violating the rule.

Lakefront Stream argues that the FTC may announce what counts as an unfair or deceptive act only through case-by-case adjudication, because the Act's enforcement section describes complaints, hearings, findings, and cease-and-desist orders. How should a court rule?

Explanation. The majority held that the FTC's general authority to make rules and regulations for carrying out the Act includes substantive rules defining Section 5's broad standards with greater specificity. The key is that rulemaking supplements rather than replaces the statutory enforcement scheme: the FTC still must proceed by complaint, hearing, findings, and cease-and-desist order. The opinion also rejected reliance on expressio unius to make adjudication exclusive.