[Federal Register Volume 59, Number 127 (Tuesday, July 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16181]

[[Page Unknown]]

[Federal Register: July 5, 1994]




Policy Statement Concerning Errors and Omissions Clauses in 
Consent Decrees

AGENCY: Federal Trade Commission.

ACTION: Statement of policy.


SUMMARY: The Commission has determined that it is unnecessary and 
inappropriate to include in any of its consent decrees any provision 
establishing as a defense to an action brought to enforce the consent 
decree that the defendant's errors and omissions were inadvertent and 
unintentional and that the causes and consequences of these errors and 
omissions were quickly remedied.

EFFECTIVE DATE: July 5, 1994.

Joel N. Brewer, Division of Enforcement, Bureau of Consumer Protection, 
Federal Trade Commission, Washington, DC 20580, (202) 326-2967.

SUPPLEMENTARY INFORMATION: In each of two previous Consent Decrees, 
Damark International, Inc., Civ. No. 4-91-275 (D. Minn. 1991), and 
Lillian Vernon Co., 92 Civ. 7537 (CLB) (S.D.N.Y. 1992), the Commission 
included a provision that provided a defense against an enforcement 
action if the defendant could establish that (1) any order violations 
arose from inadvertent and unintentional errors that may have occurred 
despite the defendant's good faith maintenance of records and 
procedures to prevent such errors, and (2) the defendant took prompt 
action to remedy any cause of, or injury resulting from, those errors. 
The Commission now has decided that such provisions are unnecessary in 
light of the Commission's inherent prosecutorial discretion.
    The Commission initiates law enforcement actions under Section 5 of 
the FTC Act, 15 U.S.C. 45, only when it has reason to believe both that 
the law has been violated and that an action is in the public interest. 
In deciding whether an action is in the public interest, the Commission 
considers, among other things, the scope of the alleged violation, the 
circumstances in which it occurred and the extent of any resulting 
injury. Accordingly, the Commission believes that the inclusion of the 
language referred to above from the decisions and orders in Damark and 
Lillian Vernon is redundant to its public interest considerations and 
could cause confusion concerning the Commission's exercise of 
prosecutorial discretion within the terms of Section 5. Therefore, the 
Commission's policy will be to refuse to approve proposed consent 
decrees containing provisions designed to circumscribe liability for 
inadvertent and promptly remedied errors, or otherwise to delineate the 
Commission's discretion in initiating law enforcement proceedings.

    Authority: 15 U.S.C. 41-58.

List of Subjects

    Trade practices.

    By direction of the Commission.
Donald S. Clark,

    Dissenting statement of Commissioner Deborah K. Owen, regarding the 
Commission's policy statement concerning errors and omissions clauses 
in consent decrees.
    I have voted against the proposed change in Commission policy, 
which would preclude a defense in consent decrees relating to 
inadvertent and unintentional errors by defendants. In my view, such 
language is harmless with respect to any legitimate Commission 
interest, and may serve to reassure parties as to the judicious 
exercise of our prosecutorial discretion.

[FR Doc. 94-16181 Filed 7-1-94; 8:45 am]