[Federal Register Volume 61, Number 188 (Thursday, September 26, 1996)]
[Rules and Regulations]
[Pages 50640-50651]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-24316]


      

[[Page 50639]]


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Part VI





Federal Trade Commission





_______________________________________________________________________



16 CFR Part 2, et al.



Rules of Practice Amendments; Final Rule

  Federal Register / Vol. 61, No. 188 / Thursday, September 26, 1996 / 
Rules and Regulations  

[[Page 50640]]



FEDERAL TRADE COMMISSION

16 CFR Parts 2, 3, and 4


Rules of Practice Amendments

AGENCY: Federal Trade Commission (FTC).

ACTION: Interim rules with request for comments.

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SUMMARY: The FTC is amending its Rules of Practice for adjudicatory 
proceedings. The amendments are expected to reduce the cost, 
complexity, and length of FTC adjudicatory proceedings by clarifying 
and streamlining the agency procedures governing such proceedings.

DATES: These rule amendments are effective on September 26, 1996. 
Comments must be received on or before November 25, 1996. Dates of 
Applicability: These amendments will govern all Commission adjudicatory 
proceedings that are commenced on or after January 1, 1997. They will 
also govern all Commission adjudicatory proceedings that are currently 
pending and all proceedings that are commenced before January 1, 1997, 
except to the extent that, in the opinion of the Administrative Law 
Judge (ALJ) or the Commission, the application of one or more amended 
rules in a particular proceeding would not be feasible or would work 
injustice.

ADDRESSES: Written comments must be submitted in 20 copies to the 
Office of the Secretary, Room 159, Federal Trade Commission, 6th Street 
& Pennsylvania Avenue, N.W., Washington, D.C. 20580. Individuals filing 
comments need not submit multiple copies.

FOR FURTHER INFORMATION CONTACT: Cynthia Hogue Levy, (202) 326-2158, 
Jonathan Luna, (202) 326-2444, or Alex Tang, (202) 326-2447, Attorneys, 
Office of General Counsel, FTC, Sixth Street & Pennsylvania Avenue, 
N.W., Washington, D.C. 20580.

SUPPLEMENTARY INFORMATION: On May 30, 1995, FTC Chairman Robert 
Pitofsky announced the formation of a special Task Force on 
Administrative Adjudication (``Task Force'') to review FTC rules and 
policies governing the conduct of administrative litigation at the 
Commission (``Part 3 Rules''). The Task Force developed recommendations 
for clarifying and streamlining current procedures for adjudication 
before the Commission.
    As the Commission has previously recognized, unnecessary delay in 
adjudications can have a negative impact on the Commission's 
adjudicatory program and law enforcement mission. The agency's 
longstanding policy has been that, to the extent practicable and 
consistent with requirements of law, adjudicative proceedings shall be 
conducted expeditiously and that both the Administrative Law Judge and 
litigants shall make every effort to avoid delay at each stage of a 
proceeding. 16 CFR 3.1. Unnecessarily long proceedings waste Commission 
and private resources. Delay can extend legal uncertainty for 
respondents and third parties, and may reduce the efficacy of any 
remedies resulting from such proceedings. Delay may also lessen the 
quality of agency decisions when evidence becomes stale. The risk of 
lengthy proceedings may also undermine administrative adjudication as a 
valid alternative when parties are deciding whether to settle a matter. 
While some respondents may benefit, others may feel unduly pressured to 
settle if they believe that Part 3 litigation will entail a substantial 
commitment of time and resources. Similarly, the expectation of 
unnecessarily lengthy administrative litigation may lead Commission 
staff to recommend Commission acceptance of an unduly limited 
settlement. The length of time taken in FTC proceedings may also be a 
factor that some courts consider in deciding whether to grant a 
preliminary injunction pending the outcome of the Commission's 
administrative proceeding. FTC v. Freeman Hosp., 1995-1, Trade Cas. 
(CCH) para. 71,037 at 74,893 n.8 (D. Mo. 1995), aff'd, 69 F. 3d 260 
(8th Cir. 1995).
    In light of such concerns, the Commission has made several efforts 
over the years to identify ways to make Part 3 proceedings more 
efficient without sacrificing the quality of decisionmaking or 
compromising the procedural rights of parties in such proceedings. In 
1985, for example, the Commission adopted various rule changes 
specifically designed to improve prehearing case management and 
expedite Part 3 proceedings, including the existing requirement 
regarding the timely initiation of evidentiary hearings. 50 FR 41485 
(Oct. 11, 1985).
    More recently, the Commission has made further strides to reduce 
the time taken to render decisions in adjudicative proceedings.\1\ In 
April 1994, the Commission set internal deadlines for the preparation 
and issuance of final orders and opinions in appeals from an initial 
decision. This schedule established deadlines for each of the principal 
stages of preparation of adjudicative opinions, including separate 
statements. Under the new schedule it is expected that the drafting 
process is the usual adjudicative proceeding should generally span 
approximately eight (8) months (following oral argument before the 
Commission). To ensure that its adjudicative decisionmaking remains on 
schedule, the Commission meets quarterly, or more often when necessary, 
to review the progress of each pending adjudicative matter on appeal 
before the Commission.
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    \1\ In announcing institutional improvements at the agency, 
then-Chairman Steiger explained that the Commission had determined 
to take action to address criticisms of delay that were contained in 
a Task Force Report of the American Bar Association. See Prepared 
Remarks of Chairman Janet D. Steiger Before Section of Antitrust 
Law, American Bar Association (Apr. 8, 1994) (referring to Report of 
the American Bar Association Section of Antitrust Law Special 
Committee to Study the Role of the Federal Trade Commission, 58 
ANTITRUST L.J. 43 (1989)).
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    Since implementing a deadline schedule governing its own conduct in 
the preparation of final orders and opinions in adjudicative 
proceedings, the Commission has disposed of a backlog of cases pending 
when the schedule was adopted. Currently, there is one adjudicative 
proceeding pending before the Commission on appeal.
    Building upon these past actions, the Commission has determined to 
adopt further procedural rule changes as set forth below. The 
Commission believes that these changes will advance its goal of 
assuring the public that administrative law enforcement proceedings 
will be resolved fairly and within a reasonable time.
    The Commission also encourages the ALJs to consider implementing 
other techniques, besides the rule amendments announced in this notice, 
to expedite action in each adjudicatory proceeding. Efficient 
adjudication required affirmative case management, and ALJs have broad 
powers under Rule 3.42(c) that should be used fully to balance the 
interests in expedition and fairness.
    Two techniques for expediting evidentiary hearings particularly 
merit attention by the ALJs. First, the Commission encourages the ALJs 
generally to conduct the evidentiary hearing by using consecutive, full 
trial days. Historical data for the past ten years indicate that while 
the average evidentiary trial spans over three (3) months, only thirty 
of those days are actual trial days. Normally conducting proceedings on 
consecutive days, in most cases, would enable the ALJ and the litigants 
to use the period designated for trial to its fullest advantage.

[[Page 50641]]

    Second, in appropriate cases the ALJs should encourage the parties 
to submit the direct examination of expert witnesses in writing, in 
lieu of live direct examination, reserving live testimony for the 
cross-examination. This practice would reduce the time necessary for 
the presentation of direct testimony but still allow the ALJ to assess 
the demeanor and credibility of expert witnesses. Submission of direct 
expert testimony in writing may result in more focused cross-
examination and would afford both the parties and the ALJ an 
opportunity to identify in advance any questions raised by the expert's 
direct testimony.
    The Commission also invites the ALJs to exercise their discretion 
in regulating the course of adjudicative proceedings in a manner that 
expedites proceedings, consistent with due process considerations. For 
instance, ALJs may wish to consider requiring that, in appropriate 
circumstances, proposed findings of fact and conclusions of law be 
submitted by the parties before, rather than after, trial. In certain 
proceedings, this practice could instill more rigor in the litigants' 
presentation of evidence at trial, while also aiding the ALJ in 
monitoring the introduction of evidence and in preparing findings of 
fact and conclusions of law after the evidentiary hearing. ALJs may 
wish to utilize an alternative procedure, either in conjunction with, 
or in lieu of, pretrial findings of fact and conclusions of law. For 
example, an ALJ may require the parties to submit proposed stipulations 
and contentions to further narrow the legal and factual issues to be 
presented during the evidentiary hearing. See e.g., United States v. 
American Telephone & Telegraph Co., 552 F. Supp. 131, 140 (D.D.C. 
1982).
    As a further step in expediting administrative adjudication, the 
Commission has determined to establish an alternative ``fast track'' 
schedule that respondents may elect in appropriate administrative 
proceedings.\2\ The option is available when a federal district court 
has granted a preliminary injunction in a collateral federal court 
proceeding, brought by the Commission to challenge some or all of the 
same conduct at issue in the administrative proceeding.\3\ Under the 
fast track schedule, the Commission would issue a final order and 
opinion within thirteen (13) months after the latest of the following 
events (``triggering event''): (1) Issuance of an administrative 
complaint; (2) entry of a preliminary injunction by a federal district 
court; or (3) the date on which respondent elects the fast track. This 
deadline may be amended by the Commission only in the following two 
circumstances: (1) If the Commission's final order or opinion contains 
material or information designated for in camera treatment, thus 
obliging the agency to provide advance notification of the Commission's 
intent to disclose that information to submitters of such in camera 
material or information; or (2) if the Commission determines that 
adherence to the thirteen-month deadline would result in a miscarriage 
of justice due to circumstances unforeseen at the time of respondent's 
election of the fast track proceeding.
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    \2\ The new procedure could apply to any administrative 
adjudication specifically designated by the Commission in which the 
agency also seeks a preliminary injunction to enjoin the same 
conduct challenged in the administrative complaint. The Commission 
expects that most such cases will involve challenges to mergers and 
acquisitions.
    \3\ If the preliminary injunction is later vacated, the 
Commission, in its discretion, may take such action as it deems 
appropriate in the administrative adjudication.
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    When the Commission determines to authorize its staff to seek a 
preliminary injunction in federal court, the agency may also determine 
to advise the respondent that the respondent may elect the fast track 
schedule if the federal district court preliminarily enjoins the 
challenged conduct. Such notice will be provided to the prospective 
respondent at the time it is notified of the Commission's action 
authorizing the preliminary injunction motion. The Commission expects 
that the fast track procedure will be available to respondents in the 
typical merger challenge; however, certain cases may appear too complex 
at the outset to be designated as appropriate for the fast track 
schedule. In such instances, the Commission would not notify the 
respondent respecting an option to elect the fast track.
    The new rule specifies the period of time within which a potential 
respondent must elect the fast track schedule. In administrative 
proceedings involving multiple respondents, the fast track schedule 
will be available only if all respondents elect it.
    The Commission expects that the expedited deadlines imposed under 
the fast track procedures will require active management by the ALJ. 
Although the new fast track rule specifies certain interim deadlines, 
the time frames for other interim stages are left to the ALJ's 
discretion. Thus, the length of time to be allotted for discovery, the 
evidentiary hearing, and post-trial written submissions are to be set 
by the ALJ, in keeping with the fast track requirement that the ALJ 
must file the initial decision within one hundred ninety-five (195) 
days after the triggering event specified in new Sec. 3.11A. The 
Commission anticipates that in a typical proceeding governed by the 
fast track schedule, discovery will be completed within three (3) 
months, the evidentiary hearing will span no longer than six weeks, and 
post-trial submissions will be submitted within four weeks following 
the conclusion of the evidentiary hearing.
    The ALJ may in his discretion treat discovery from the preliminary 
injunction hearing and transcripts of testimony in the preliminary 
injunction proceeding as if the material had been discovered and 
presented in the administrative proceeding. The ALJ may limit the 
number of depositions, witnesses, or document production under his 
plenary authority. See 16 CFR 3.42(c)(6).
    The fast track appellate procedure before the Commission differs 
from that governing the standard administrative adjudication. In 
addition to the shorter time frame required for issuance of the 
Commission's final order and opinion, the fast track procedure requires 
the simultaneous filing of the parties' initial appeal briefs (rather 
than the staggered cross-appeal procedure permitted under Rule 
3.52(c)). The Commission's final order and opinion in the proceeding 
will be ready for issuance within one hundred ninety-five (195) days 
after the filing of the ALJ's initial decision.\4\
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    \4\ The Commission's final order and opinion will be ready for 
issuance within the specified time period, except that, if the 
Commission's order or opinion contains material or information that 
has been designated for in camera treatment, its issuance may be 
delayed to the extent necessary to provide the submitters of such 
material or information with advance notice of the Commission's 
intent to release such information in the final order or opinion in 
the proceeding.
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    The thirteen (13) month deadline contemplated under the new 
procedural rule compares favorably with the schedules followed by 
federal district courts in a number of permanent injunction hearings 
involving mergers. Since 1986, the Department of Justice Antitrust 
Division has litigated eight merger enforcement actions on the merits 
in permanent injunction proceedings in federal court.\5\ On average, 
these cases spanned approximately ten (10) months from filing of the 
complaint to issuance of the district court opinion.See generally 
United States v. Mercy Health Services, 902 F. Supp. 968 (N.D. Iowa 
1995)--complaint to opinion: 141 days (including ten-day trial); United 
States v. Nat. L.C., and D.R. Partners D/B/A Donrey Media Group, 892 F. 
Supp 1146 (W.D. Ark. 1995)--complaint to

[[Page 50642]]

opinion: ninety-four days (including eight-day trial); United States v. 
United Tote, Inc., 768 F. Supp. 1064 (D. Del. 1991)--complaint to 
opinion: 422 days [1.2 years] (including six-day trial); United States 
v. Baker Hughes, Inc., 731 F. Supp. 3 (D.D.C. 1990)--complaint to 
opinion: seventy days (including one-day trial); United States v. The 
Rank Organisation plc, 1990-2 Trade Cas. (CCH) para.69,257 (C.D. Cal. 
1990)--complaint to opinion: 141 days (including eight-day trial); 
United States v. Rockford Memorial Corp., 717 F. Supp. 1251 (N.D. Ill. 
1989)--complaint to opinion: 267 days (including nineteen-day trial); 
United States v. Syufy Enterprises, 712 F. Supp. 1386 (N.D. Cal 1989)--
complaint to opinion: 973 days (2.6 years) (including eight-day trial); 
and United States v. Carilion Health System, 707 F. Supp. 840 (W.D. Va. 
1989)--complaint to opinion: 262 days (including twenty-six day trial). 
The Commission's new procedures entail a slightly longer period of time 
than the instances cited, because they contemplate both a trial and an 
administrative appellate process. Because an initial decision by an ALJ 
is followed by de novo review of the initial decision by the 
Commission, the longer time frame is necessary. The Commission believes 
this expedited time frame is both realistic and a reasonable period 
within which such adjudications should be resolved.
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    \5\ Some of these cases involved a consolidation of both the 
preliminary and permanent injunction proceedings.
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    In addition to the rule amendments announced today, the Commission 
has determined to implement the following two institutional 
improvements that are intended to make information more readily 
available to the public regarding both the agency's case management of 
its adjudicative docket and interlocutory rulings issued by ALJs in 
adjudicative proceedings. Neither procedure requires amendment to the 
agency's Rules of Practice. First, the Commission has directed that a 
quarterly status report reflecting the progress of pending 
adjudications before ALJs be made publicly available. Such reports 
would include, inter alia, the dates on which milestone events in a 
particular proceeding occurred (e.g., filing of the administrative 
complaint, respondent's answer, scheduling conference before the ALJ, 
issuance of the ALJ's scheduling order, close of discovery, final 
pretrial conference, commencement and conclusion of the evidentiary 
hearing, and filing of the ALJ's initial decision). The Commission has 
concluded that disclosure of information about the agency's 
adjudication program caseload would increase awareness of the 
importance of the program and promote public confidence in its 
efficiency and fairness. Similar status reports are prepared to 
describe the status of cases pending in federal district courts, in 
keeping with the provisions of the Civil Justice Reform Act of 1990. 28 
U.S.C. 476 (requiring semiannual reporting of, inter alia, bench trials 
and motions that have been submitted for more than six (6) months and 
the number of cases that have not been terminated within three years 
after filing).
    Second, the Commission has determined to make ALJ interlocutory 
orders in adjudicative proceedings more readily available to the 
public. Currently, some, but not all, ALJ interlocutory orders are 
widely available to the public through legal research resources. Recent 
technological advances will soon enable the agency to make significant 
ALJ interlocutory orders available to the public through electronic 
means via the Internet. Accordingly, the Commission has committed 
itself to making such interlocutory orders available to the public 
through such means during the next fiscal year.
    The specific rule amendments that the Commission is adopting at 
this time are as follows:

A. Imposing Tighter Deadlines

    1. Rule 3.12(a) is being amended to shorten the dead-line for the 
filing of an answer after service of the administrative complaint. The 
rule currently allows thirty (30) days for the filing of the answer. 
The revised rule shortens this period to twenty (20) days, in 
conformity with the Federal Rules of Civil Procedure (``Federal 
Rules''). See Fed. R. Civ. P. 12(a)(1)(A). The Commission believes 
twenty (20) days should be adequate, since the Commission sees no 
reason why an FTC complaint should take any longer to answer than does 
a federal court complaint.
    2. Rule 3.21 is being amended to require that the scheduling 
conference be held within seven (7) calendar days after filing of the 
answer, and that the scheduling order be issued by the ALJ within two 
(2) days thereafter. Since respondents in agency adjudications have 
already been on notice of the Commission's investigation, a week should 
be sufficient time for the parties to prepare for the preliminary 
matters to be discussed at the scheduling conference (e.g., general 
discovery plan, timetable for the proceeding). Similarly, no more than 
two (2) days, rather than the two (2) weeks currently allowed by the 
current rule, should be necessary for an ALJ to prepare and issue a 
scheduling order once the scheduling conference has concluded.
    3. Rule 3.51(a) is being amended to require explicitly that the ALJ 
file an initial decision within one (1) year of service of the 
administrative complaint. The ALJ is being permitted, however, in 
extraordinary circumstances to extend this deadline by up to a two-
month period, which may be extended upon expiration of that period by 
additional, consecutive periods of up to two (2) months, provided that 
for each such extension the ALJ finds that extraordinary circumstances 
continue to be present. The rule continues to require, however, that 
the ALJ issue an initial decision within ninety (90) days after the 
hearing record closes, or thirty (30) days after a default or the 
granting of a motion for summary decision or waiver by the parties of 
the filing of proposed findings of fact, conclusions of law, and order. 
Experience suggests that interim deadlines have not been completely 
successful in promoting the expeditious resolution of Part III cases. 
In the Commission's view, a one-year deadline for the initial decision 
is a realistic time frame for most adjudicative proceedings and would 
encourage ALJs to exercise more active control in managing cases from 
start to finish. The pendency of any collateral federal court 
proceeding that relates to the administrative adjudication will toll 
the one-year deadline for filing the initial decision. The 
administrative proceeding may be stayed until resolution of the 
collateral federal court proceeding.
    4. Rules 3.21 and 3.22(d) are being amended to (a) clarify the 
standard for obtaining extensions of deadlines established in the 
scheduling order, and (b) prohibit the ALJ from ruling on ex parte 
motions to extend such deadlines. Currently, such modifications are 
permitted only under a ``good cause'' standard. The rule is being 
amended to provide further guidance on this standard. Specifically, all 
motions to extend any deadline or time specified in the scheduling 
order are required to set forth the total period of extensions 
previously obtained by the moving party. In making a determination on 
such motions, ALJs will consider any extensions already granted, the 
length of the proceedings to date, and the need to conclude the 
evidentiary hearing and render an initial decision in a timely manner. 
Currently, Rule 3.22(d) permits the ALJ to rule on ex parte motions for 
extensions of time. Such rulings would no longer be permitted on the 
basis of ex parte motions under the amendments to Rules 3.21 and 
3.22(d), as set forth below.

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B. Minimizing Discovery Delays

    1. Rule 3.21 is being revised to promote greater use of prehearing 
and status conferences where such conferences are not otherwise 
explicitly required by the Commission's rules. The Commission believes 
that such conferences facilitate the overall adjudicatory process by 
focusing the parties on the issues that are material to the case, 
promoting the exchange of relevant information, forestalling 
unnecessary and time-consuming motions, and providing a forum for 
resolving discovery disputes and exploring settlement options.
    2. Rule 3.21 is being amended to require that the counsel for the 
parties conduct a meeting (preferably, in person) with one another 
before the scheduling conference and also before their final prehearing 
conference with the ALJ. (The final prehearing conference is also a new 
requirement, as discussed infra.) The meeting before the scheduling 
conference is intended to provide the parties with an opportunity to 
discuss the possibility of settlement and to decide, if possible, on a 
proposed discovery schedule, the handling of pretrial motions, a 
preliminary estimate of the time required for the hearing, and a 
hearing date. This requirement is modeled upon Fed. R. Civ. P. 26(f), 
which requires that the parties meet before the scheduling conference 
and order. The meeting before the final prehearing conference is 
intended for the parties to discuss potential stipulations of law and 
fact, the admissibility of or objections to evidence, and the 
organization and exchange of exhibits, witness lists, and designated 
deposition testimony. This meeting should narrow the issues to be 
addressed at the final prehearing conference and help the ALJ plan an 
efficient evidentiary hearing.
    3. Current Rule 3.21(a) is being deleted to abolish the requirement 
that the parties each file a nonbinding statement before the scheduling 
conference, stating the anticipated issues, theories, and proof of the 
case. The requirement that parties provide a preliminary assessment of 
their case theories has not, in practice, demonstrably fulfilled its 
originally intended purpose in helping the ALJ manage cases and control 
discovery. 50 FR 41485, 41487 (Oct. 11, 1985). Although nonbinding 
statements are no longer being required by rule, ALJs will continue to 
retain their discretion, under the plenary power set forth in Rule 
3.42(c), to order that the parties file such statements if they would 
be useful in a particular case.
    4. Rule 3.31 is being revised, after redesignating certain 
paragraphs, to add a new paragraph (b) requiring that the parties make 
certain initial disclosures within five (5) days after the answer, 
without waiting for a formal discovery request. These disclosures would 
be similar to the initial disclosures required by Fed. R. Civ. P. 
26(a)(1) in federal court litigation. In particular, parties will be 
required to exchange the names, addresses, and telephone numbers of 
individuals likely to have discoverable information. The parties will 
also be required to exchange a copy, or a description by category and 
location, of all documents, data, and other tangible things in 
possession of the party that are relevant to disputed facts alleged in 
the pleadings. These initial disclosures are intended to expedite 
discovery by reducing the need for parties to request basic documents 
and other information.
    5. Rules 3.31, 3.33, 3.34, 3.35, 3.36, 3.37, and other Part III 
provisions are being revised to eliminate in substantial part the 
requirement that ALJs pre-authorize requests and subpoenas for 
depositions, interrogatories, documents, and access for inspection and 
other purposes before a party may serve such a request or subpoena. The 
elimination of ALJ pre-authorization includes discovery requests for 
access to documents in the possession, custody, or control of the 
Federal Trade Commission or its employees or for subpoenas requesting 
the appearance of an official or employee of the Commission. Since Rule 
3.31 already provides that parties may seek a protective order from a 
discovery or access request, and Rule 3.34 provides for motions to 
quash a subpoena, pre-authorization of discovery requests and subpoenas 
appears to be unnecessary to prevent abuse. See also 16 CFR 3.38A 
(withholding requested material). This revision is not intended to 
diminish the ALJ's authority to enlarge or limit the scope of 
discovery. See, e.g., Maremont Corp., 76 F.T.C. 1061, 1062, (1969) 
(discovery is primarily the responsibility of the ALJ and the 
Commission ``ordinarily will not dispute his rulings thereon''). The 
Commission notes that the Federal Rules of Civil Procedure do not 
require parties to obtain such authorization before they may make a 
discovery request. See, e.g., Fed. R. Civ. P. 30(a)(1) (taking 
testimony by deposition without leave of court). The Commission's rules 
will continue to require, however, that parties submit a written motion 
to the ALJ for subpoenas seeking the discovery of documents of other 
government agencies, or the appearance of employees of such 
agencies.\6\ See 16 CFR 3.36. Likewise, parties must continue to seek 
the prior approval of the ALJ to compel the attendance of a person to 
testify at an adjudicative hearing. See 16 CFR 3.34(a).
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    \6\ The amended Rule 3.36 will continue to require that motions 
for discovery from other government agencies make a specific showing 
that the information or material sought cannot reasonably be 
obtained by other means. By eliminating ALJ pre-approval of 
discovery from the Commission, the amended rule eliminates the 
requirement that this showing be made for subpoenas for records of 
the Commission or for the appearance of Commission employees.
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    6. Rule 3.31(b)(1) is being amended and redesignated as 3.31(c)(1) 
to strengthen the ALJs' authority to prevent abusive discovery tactics 
by limiting the frequency or extent of discovery under certain 
conditions (e.g., when it would be cumulative or duplicative). This 
amendment tracks in relevant part the language of Fed. R. Civ. P. 
26(b)(2), which sets forth similar limitations on discovery.
    7. Rule 3.31(a) is being amended to encourage simultaneous 
discovery by requiring its use whenever practicable. While the current 
rule does not preclude simultaneous discovery, it is practiced only 
sporadically in adjudicative proceedings. The Commission believes that 
simultaneous discovery prevents an unprepared party from hindering the 
overall progress of the case, while it allows a prepared party to move 
forward expeditiously.
    8. Rule 3.31 is also being amended to redesignate existing 
paragraphs to allow for the addition of a new paragraph (e), explicitly 
requiring that a party supplement its response to a discovery request 
when circumstances render the party's previous response incomplete or 
incorrect. This requirement, which is modeled, in part, on similar 
requirements in Fed. R. Civ. P. 26(e), is intended to promote greater 
candor and cooperation among parties by placing an affirmative burden 
on each party to ensure that its original response remains accurate and 
complete. Failure to observe this requirement may result in sanctions 
or an order to comply issued by the ALJ under Rule 3.38.
    9. The definition of the term ``documents'' in Rule 3.34(b) is 
being amended to incorporate technological advances in electronic 
communications and digital information storage.
    10. Rule 3.35(a)(1) is being amended to limit each party to twenty-
five (25) interrogatories, consistent with federal court practice. See 
Fed. R. Civ. P. 33. Limiting the number of interrogatories is intended 
to improve the efficiency of interrogatory practice and prevent the

[[Page 50644]]

overuse of interrogatories as a means of harassing another party or 
delaying discovery.
    11. Rule 3.35(a)(2) is being amended to establish a uniform thirty-
day period for parties to respond to interrogatories. Under the current 
rule, a respondent may take up to forty-five (45) days to respond from 
the date that the administrative complaint is served on that 
respondent, while other parties must respond within thirty (30) days 
from the date that the interrogatory is served. The amendment would 
eliminate the 45-day rule for respondents, which appears to have caused 
some confusion among practitioners. The amendment would also bring the 
Commission's rules in line with federal court practice, which requires 
that all parties, including the defendant, in a civil action respond 
within thirty (30) days of being served with an interrogatory. See Fed. 
R. Civ. P. 33(b)(3).

C. Minimizing Delay at Trial

    1. Rule 3.21 is being amended to require that the ALJ hold a final 
prehearing conference as close to the commencement of trail as 
reasonably practicable. See Fed. R. Civ. P. 16(d). At this conference, 
counsel will be required to submit any proposed stipulations of law, 
fact, or admissibility of evidence, exchange exhibit and witness lists, 
and designate testimony to be presented by deposition. The ALJ will 
also be required to resolve any outstanding evidentiary matters or 
pending motions (except motions for summary decision), and to establish 
a final schedule for the evidentiary hearing. In requiring that 
``counsel'' personally attend this conference, the Commission intends 
that at least one attorney for each party (preferably the attorney 
responsible for trying the case) appear; if not represented by an 
attorney, the party shall attend on the party's own behalf. 
Furthermore, as discussed earlier, counsel for the parties will be 
expected to consult with one another on these matters in a meeting 
(preferably, in person) prior to the final conference.
    2. Rule 3.43(b) is being amended to incorporate relevant language 
in Rules 403 and 611 of the Federal Rules of Evidence regarding the 
exclusion of cumulative evidence. The amended rule is intended to make 
clearer to litigants that the ALJ is empowered to exclude unduly 
repetitious, cumulative, and marginally relevant materials that merely 
burden the record and delay the trial. This clarification is intended 
to enhance the ALJ's ability to assemble a concise and manageable 
record.
    3. Rule 3.21 is being amended to require that the ALJ's scheduling 
orders include specific instructions on how the parties shall mark 
their exhibits. Such guidance is currently contained only in the FTC 
Operating Manual, which is primarily used for staff guidance. Requiring 
that such specific instructions be included in the scheduling order is 
intended to make them more directly available to the parties.

D. Filing of Documents and Motions

    1. Rule 3.22(a) is being amended to specify that copies of motions 
filed with the Secretary must also be provided promptly and directly to 
the ALJ. This amendment is intended to codify a practice that is well-
established in many federal courts and that many FTC practitioners 
already appear to follow.
    2. Rule 3.22(b) is being amended to require that all motions in 
adjudicative proceedings include the name, address, and telephone 
number of counsel, and attach a draft order containing the proposed 
relief. A conforming change is also being made to Rule 4.2, regarding 
filing requirements. The requirement that motions provide contact 
information and a draft order is intended to facilitate the 
administrative processing and disposition of motions, and is consistent 
with federal court practice. See, e.g., Fed. R. Civ. P. 7(b)(1) & 
11(a).
    3. Rule 3.25(b), governing motions to settle and withdraw a matter 
from adjudication, is being amended to underscore the requirement that 
such motions, like all motions in adjudicatory proceedings, be filed 
with the Office of the Secretary, pursuant to Commission Rule 4.2(a). 
One ALJ has observed that counsel sometimes submit their Rule 3.25(b) 
motions directly to him without filing them with the Secretary as 
required. The amendment complements existing Rule 3.25(c), under which 
the withdrawal of a matter from adjudication is not triggered until the 
Secretary receives the appropriate motion.
    4. Rule 3.24(a)(1) is being amended to require that a party moving 
for summary decision include a statement of the material facts as to 
which the party contends there is no genuine issue. The Commission 
notes that several local rules of federal courts require such 
statements. See, e.g., D.D.C. Local Rule 108(h); S.D.N.Y. Local Rule 
8(d); C.D. Cal. Local Rule 7.14; S.D. Fla. Local Rule 7.5. Changes are 
also being made in paragraphs (a)(2) and (a)(3) to make more explicit 
the existing requirement in paragraph (a)(3) that the opposing party 
provide a statement setting forth specific facts showing that there 
remains a genuine issue to be tried. See Fed. R. Civ. P. 56(e). 
Requiring that the moving and opposing parties provide statements is 
designed to expedite ALJ review of and rulings on summary decision 
motions.
    5. Rule 3.24(a)(1) is also being amended to permit complaint 
counsel to move for summary decision in twenty (20), rather than thirty 
(30), days after the complaint is issued, as specified under the 
current rule. The change mirrors the proposed amendment to Rule 
3.12(a), reducing the time to file an answer to the complaint from 
thirty (30) to twenty (20) days, as discussed earlier.
    6. Rule 3.22(d) is being revised to remove the ALJ's discretion to 
rule on ex parte requests for extensions of time. This change is also 
reflected in revised Rule 3.21, regarding modification of scheduling 
orders.

E. Miscellaneous

    1. Rule 3.11A is being added to establish an alternative ``fast 
track'' schedule that respondents in certain administrative proceedings 
may elect if a federal district court has granted a preliminary 
injunction in a collateral federal court proceeding brought by the 
Commission. Under the fast track schedule, the Commission shall, with 
limited exception, be prepared to issue a final order and opinion in 
such expedited proceedings within thirteen (13) months after the 
triggering event.
    2. Rule 3.44 is being amended to add new paragraph (c), requiring 
that ALJs formally close the hearing record immediately upon the close 
of the evidentiary hearing. A conforming change is also being made to 
Rules 3.46(a) 3.51(a). The Commission believes that little, if any, 
useful purpose is served by allowing the record to remain open after 
completion of the trial, and believes that it may contribute to 
adjudicatory delay. In requiring that ALJs close the record promptly at 
the end of the trial, the Commission does not intend, however, to alter 
or interfere with the procedures under paragraph (b) of the existing 
rule for post-trial corrections to the record as may be necessary, even 
after it has closed.
    3. Rules 2.8, 2.9, and 2.15 are being revised to terminate the 
currently prescribed use of ``presiding officials'' in investigational 
hearings. This practice is neither required by law nor necessary for 
the protection of witness' rights. By eliminating the use of presiding 
officials, the Commission seeks to avoid the erroneous perception that 
investigational hearings are conducted by persons with the same degree 
of authority and independence

[[Page 50645]]

that ALJs have in adjudicative proceedings.
    4. Rule 3.55 is being amended to shorten the time period for filing 
a petition for reconsideration. The current rule allows a party to file 
such a petition within twenty (20) days after service of the 
Commission's decision. By comparison, Federal Rule of Appellate 
Procedure 40 allows only fourteen (14) days, and the Commission 
believes that this time period should also be adequate for parties to 
file for reconsideration in a Commission adjudication.
    5. Rules 3.22(a) and 3.51 are being amended to delete language 
describing the procedure for filing documents containing in camera 
material and to substitute cross-references to Rule 3.45, which is also 
being amended to set forth the relevant in camera procedures and 
obligations in their entirety. These revisions are expected to reduce 
the confusion that may arise from duplicative instructions and to 
improve the litigants' understanding and observance of in camera 
procedures.
    These rule revisions relate solely to agency practice and, thus, 
are not subject to the notice and comment requirements of the 
Administrative Procedure Act, 5 U.S.C. 553(a)(2), nor to the 
requirements of the Regulatory Flexibility Act, 5 U.S.C. 601(2). The 
Paperwork Reduction Act does not apply to these requirements. 44 U.S.C. 
3518(c)(ii). Although the rule revisions are effective as stated in the 
previous section, the Commission welcomes comment on them and will 
consider further revision, as appropriate.

List of Subjects

16 CFR Part 2

    Administrative practice and procedure, Investigations, Reporting 
and recordkeeping requirements.

16 CFR Part 3

    Administrative practice and procedure, Claims, Equal access to 
justice, Lawyers.

16 CFR Part 4

    Administrative practice and procedure, Freedom of Information Act, 
Privacy Act, Sunshine Act.
    For the reasons set forth in the preamble, the Federal Trade 
Commission amends Title 16, Chapter I, Subchapter A of the Code of 
Federal Regulations, as follows:

PART 2--NONADJUDICATIVE PROCEDURES

    1. The authority for part 2 continues to read as follows:

    Authority: Sec. 6, 38 Stat. 721; 15 U.S.C. 46.

    2. Section 2.8 is amended by revising the first sentence of 
paragraph (b) to read as follows:


Sec. 2.8  Investigational hearings.

* * * * *
    (b) Investigational hearings shall be conducted by any Commission 
member, examiner, attorney, investigator, or other person duly 
designated under the FTC Act, for the purpose of hearing the testimony 
of witnesses and receiving documents and other data relating to any 
subject under investigation. * * *
* * * * *
    3. Section 2.9 is amended by revising the last sentence of 
paragraph (b)(4), all of paragraph (b)(5), and the first and second 
sentences of paragraph (b)(6) to read as follows:


Sec. 2.9  Rights of witnesses in investigations.

* * * * *
    (b) * * *
    (4) * * * Copies of such petitions may be filed as part of the 
record of the investigation with the person conducting the 
investigational hearing, but no arguments in support thereof will be 
allowed at the hearing.
    (5) Following completion of the examination of a witness, counsel 
for the witness may on the record request the person conducting the 
investigational hearing to permit the witness of clarify any of his or 
her answers. The grant or denial of such request shall be within the 
sole discretion of the person conducting the hearing.
    (6) The person conducting the hearing shall take all necessary 
action to regulate the course of the hearing to avoid delay and to 
prevent or restrain disorderly, dilatory, obstructionist, or 
contumacious conduct, or contemptuous language. Such person shall, for 
reasons stated on the record, immediately report to the Commission any 
instances where an attorney has allegedly refused to comply with his or 
her directions, or has allegedly engaged in disorderly, dilatory, 
obstructionist, or contumacious conduct, or contemptuous language in 
the course of the hearing. * * *
    4. Section 2.15 is amended by revising the last sentence of 
paragraph (b) to read:


Sec. 2.15  Orders requiring witnesses to testify or provide other 
information and granting immunity.

* * * * *
    (b) * * * The appeal shall not operate to suspend the hearing 
unless otherwise determined by the person conducting the hearing or 
ordered by the Commission.

PART 3--RULES OF PRACTICE FOR ADJUDICATIVE PROCEEDINGS

    5. The authority for part 3 continues to read as follows:

    Authority: Sec. 6, 38 Stat. 721 (15 U.S.C. 46), unless otherwise 
noted.

    6. Section 3.11A is added to read as follows:


Sec. 3.11A   Fast Track Proceedings.

    (a) Availability of Fast Track Proceedings. In certain 
administrative proceedings that have been designated by the Commission 
as appropriate for the fast track schedule, respondents may elect to 
have the proceeding adjudicated under the expedited schedule set forth 
in this section. In administrative proceedings involving multiple 
respondents, the fast track schedule shall be available only if all 
respondents elect it. The Commission shall designate whether the fast 
track schedule will be available at the time it authorizes Commission 
staff to seek a preliminary injunction in federal district court and 
shall provide notice of the defendant's option to elect the fast track 
procedures in the event that the Commission should initiate an 
administrative adjudication challenging some or all of the same conduct 
at issue in the federal court injunctive proceeding. Such notice shall 
be provided to the prospective respondent at the time it is notified of 
the Commission's action to authorize the filing of the preliminary 
injunction motion. In fast track proceedings, the Commission shall be 
prepared to issue a final order and opinion within thirteen (13) months 
after the latest of the following events (hereinafter ``triggering 
event''): Issuance of the Commission's administrative complaint; entry 
of a preliminary injunction by a federal court in a collateral 
proceeding against respondent brought by the Commission; or the date on 
which respondent elects the fast track procedure. The date for issuance 
of the Commission's final order and opinion in fast track proceedings 
may be amended by the Commission in the following circumstances: If the 
Commission's final order or opinion contains material or information 
designated for in camera treatment such that the agency is required to 
provide advance notification of such disclosure to submitters of in 
camera material or information; or if the Commission determines that 
adherence to the thirteen-month deadline would result in a miscarriage 
of justice due to circumstances unforeseen at the time of respondent's 
election of the fast track

[[Page 50646]]

proceeding. Only administrative proceedings challenging conduct that 
has been preliminarily enjoined by a federal court in a collateral 
proceeding brought by the Commission shall be subject to the fast track 
schedule. In the event the preliminary injunction in the collateral 
federal court proceeding is vacated, the Commission, in its discretion, 
may take such action as it deems appropriate in the administrative 
adjudication. Except as modified by this section, the rules contained 
in Subparts A through I of Part 3 of this chapter shall govern fast 
track procedures in adjudicative proceedings.
    (b) Election of Fast Track Proceedings. Respondents making an 
election under this section shall make such election by the later of 
either: Three (3) days after service of the administrative complaint 
challenging the merger or acquisition; or three (3) days after a 
federal district court grants the Commission's request for a 
preliminary injunction. Respondents electing fast track proceedings 
shall do so by filing a notice of election of such expedited 
proceedings with the Secretary.
    (c) Interim Deadlines in Fast Track Proceedings. The following 
deadlines shall govern all fast tract proceedings covered by this 
section:
    (1) The scheduling conference required by Sec. 3.21(b) shall be 
held not later than three (3) days after the triggering event.
    (2) Respondent's answer shall be filed within fourteen (14) days 
after the triggering event.
    (3) The ALJ shall file an initial decision within fifty-six (56) 
days following the conclusion of the evidentiary hearing. The initial 
decision shall be filed no later than one hundred ninety-five (195) 
days after the triggering event, pursuant to paragraph (a) of this 
section.
    (4) Any party wishing to appeal an initial decision to the 
Commission shall file a notice of appeal with the Secretary within 
three (3) days after service of the initial decision. The notice shall 
comply with Sec. 3.52(a) in all other respects.
    (5) The appeal shall be in the form of a brief, filed within 
twenty-one (21) days after service of the initial decision, and shall 
comply with Sec. 3.52(b) in all other respects.
    (6) Within fourteen (14) days after service of the appeal brief, 
the appellee may file an answering brief which shall comply with 
Sec. 3.52(c). Cross-appeals, as permitted in Sec. 3.52(c), may not be 
raised in an appellee's answering brief. All issues raised on appeal 
must be presented in the party's appeal brief and must be filed within 
the deadline specified in paragraphs (c)(4) and (c)(5) of this section.
    (7) Within five (5) days after service of the appellee's answering 
brief, the appellant may file a reply brief, in accordance with 
Sec. 3.52(d) in all other respects.
    (d) Discovery. Discovery shall be governed by Subpart D of this 
part. The ALJ may establish limitations on the number of depositions, 
witnesses, or any document production, pursuant to his plenary 
authority under Sec. 3.42(c)(6).
    7. Section 3.12 is amended by revising the introductory text of 
paragraph (a) to read as follows:


Sec. 3.12  Answer to complaint.

    (a) Time for filing. A respondent shall file an answer within 
twenty (20) days after being served with the complaint: Provided, 
however, That the filing of a motion for a more definite statement of 
the charges shall alter this period of time as follows, unless a 
different time is fixed by the Administrative Law Judge: * * *
* * * * *
    8. Section 3.21 is amended by redesignating paragraph (e) as new 
paragraph (g), revising paragraphs (a) through (d), and adding new 
paragraphs (e) and (f), to read as follows:


Sec. 3.21  Prehearing procedures.

    (a) Meeting of the parties before scheduling conference. An early 
as practicable before the prehearing scheduling conference described in 
paragraph (b) of this section, counsel for the parties shall meet to 
discuss the nature and basis of their claims and defenses and the 
possibilities for a prompt settlement or resolution of the case, and to 
agree, if possible, on a proposed discovery schedule, a preliminary 
estimate of the time required for the hearing, and a proposed hearing 
date, and on any other matters to be determined at the scheduling 
conference.
    (b) Scheduling conference. Not later than seven (7) days after the 
answer is filed by the last answering respondent, the Administrative 
Law Judge shall hold a scheduling conference. At the scheduling 
conference, counsel for the parties shall be prepared to address their 
factual and legal theories, a schedule of proceedings, possible 
limitations on discovery, and other possible agreements or steps that 
may aid in the orderly and expeditious disposition of the proceeding.
    (c) Prehearing scheduling order. (1) Not later than two (2) days 
after the scheduling conference, the Administrative Law Judge shall 
enter an order that sets forth the results of the conference and 
establishes a schedule of proceedings, including a plan of discovery, 
dates for the submission and hearing of motions, the specific method by 
which exhibits shall be numbered or otherwise identified and marked for 
the record, and the time and place of a final prehearing conference and 
of the evidentiary hearing.
    (2) The Administrative Law Judge may grant a motion to extend any 
deadline or time specified in this scheduling order only upon a showing 
of good cause. Such motion shall set forth the total period of 
extensions, if any, previously obtained by the moving party. In 
determining whether to grant the motion, the Administrative Law Judge 
shall consider any extensions already granted, the length of the 
proceedings to date, and the need to conclude the evidentiary hearing 
and render an initial decision in a timely manner. The Administrative 
Law Judge shall not rule on ex parte motions to extend the deadlines 
specified in the scheduling order, or modify such deadlines solely upon 
stipulation or agreement of counsel.
    (d) Meeting prior to final prehearing conference. Counsel for the 
parties shall meet before the final prehearing conference described in 
paragraph (e) of this section to discuss the matters set forth therein 
in preparation for the conference.
    (e) Final prehearing conference. As close to the commencement of 
the evidentiary hearing as practicable, the Administrative Law Judge 
shall hold a final prehearing conference, which counsel shall attend in 
person, to submit any proposed stipulations as to law, fact, or 
admissibility of evidence, exchange exhibit and witness lists, and 
designate testimony to be presented by deposition. At this conference, 
the Administrative Law Judge shall also resolve any outstanding 
evidentiary matters or pending motions (except motions for summary 
decision) and establish a final schedule for the evidentiary hearing.
    (f) Additional prehearing conferences and orders. The 
Administrative Law Judge shall hold additional prehearing and status 
conferences or enter additional orders as may be needed to ensure the 
orderly and expeditious disposition of a proceeding. Such conferences 
shall be held in person to the extent practicable.
    (g) Public access and reporting. * * *
    9. Section 3.22 is amended by revising paragraphs (a) and (d), the 
last sentence of paragraph (e), and the first full sentence of 
paragraph (f), to read as follows:

[[Page 50647]]

Sec. 3.22  Motions.

    (a) Presentation and disposition. During the time a proceeding is 
before an Administrative Law Judge, all motions therein, except those 
filed under Sec. 3.26, Sec. 3.42(g), or Sec. 4.17, shall be addressed 
to and ruled upon, if within his or her authority, by the 
Administrative Law Judge. The Administrative Law Judge shall certify to 
the Commission any motion upon which he or she has no authority to 
rule, accompanied by any recommendation that he or she may deem 
appropriate. Such recommendation may contain a proposed disposition of 
the motion or other relevant comments. The Commission may order the ALJ 
to submit a recommendation or an amplification thereof. Rulings or 
recommendations containing information granted in camera status 
pursuant to Sec. 3.45 shall be filed in accordance with Sec. 3.45(f). 
All written motions shall be filed with the Secretary of the 
Commission, and all motions addressed to the Commission shall be in 
writing. The moving party shall also provide a copy of its motion to 
the Administrative Law Judge at the time the motion is filed with the 
Secretary.
* * * * *
    (d) Motions for extensions. The Administrative Law Judge or the 
Commission may waive the requirements of this section as to motions for 
extensions of time; however, the Administrative Law Judge shall have no 
authority to rule on ex parte motions for extensions of time.
    (e) Rules on motions for dismissal. * * * When a motion to dismiss 
is made at the close of the evidence offered in support of the 
complaint based upon an alleged failure to establish a prima facie 
case, the Administrative Law Judge may defer ruling thereon until 
immediately after all evidence has been received and the hearing record 
is closed.
    (f) Statement. Each motion to quash filed pursuant to Sec. 3.34(c), 
each motion to compel or determine sufficiency pursuant to 
Sec. 3.38(a), each motion for sanctions pursuant to Sec. 3.38(b), and 
each motion for enforcement pursuant to Sec. 3.38(c) shall be 
accompanied by a signed statement representing that counsel for the 
moving party has conferred with opposing counsel in an effort in good 
faith to resolve by agreement the issues raised by the motion and has 
been unable to reach such an agreement. * * *
    10. Section 3.24 is amended by revising paragraph (a)(1) and adding 
a sentence between the existing first and second sentences of paragraph 
(a)(2) to read as follows:


Sec. 3.24  Summary decisions.

    (a) Procedure. (1) Any party to an adjudicatory proceeding may 
move, with or without supporting affidavits, for a summary decision in 
the party's favor upon all or any part of the issues being adjudicated. 
The motion shall be accompanied by a separate and concise statement of 
the material facts as to which the moving party contends there is not 
genuine issue. Counsel in support of the complaint may so move at any 
time after twenty (20) days following issuance of the complaint and any 
party respondent may so move at any time after issuance of the 
complaint. Any such motion by any party, however, shall be filed in 
accordance with the scheduling order issued pursuant to Sec. 3.21, but 
in any case at least twenty (20) days before the date fixed for the 
adjudicatory hearing.
    (2) * * * The opposing party shall include a separate and concise 
statement of those material facts as to which the opposing party 
contends there exists a genuine issue for trial, as provided in 
Sec. 3.24(a)(3). * * *
* * * * *
    11. Section 3.25 is amended by adding a new sentence between the 
first and second sentences of paragraph (b) to read:


Sec. 3.25  Consent agreement settlements.

* * * * *
    (b) * * * Such motion shall be filed with the Secretary of the 
Commission, as provided in Sec. 4.2. * * *
* * * * *
    12. Section 3.31 is amended by: adding a new sentence to the end of 
paragraph (a); redesignating paragraphs (b), (c), (d), and (e) as 
paragraphs (c), (d), (f), and (g), respectively; adding new paragraphs 
(b) and (e); revising newly redesignated paragraphs (c)(1), (c)(2), the 
first full sentence of (c)(3), the introductory text of newly 
redesignated paragraph (c)(4)(i), and newly redesignated paragraph 
(c)(4)(iii); revising the paragraph heading and adding a new sentence 
at the end of newly redesignated paragraph (d)(1); and revising newly 
redesignated paragraph (g), to read as follows:


Sec. 3.31  General provisions.

    (a) * * * The parties shall, to the greatest extent practicable, 
conduct discovery simultaneously; the fact that a party is conducting 
discovery shall not operate to delay any other party's discovery.
    (b) Initial disclosures. Complaint counsel and respondent's counsel 
shall, within five (5) days of receipt of a respondent's answer to the 
complaint and without awaiting a discovery request, provide to each 
other:
    (1) The name, and, if known, the address and telephone number of 
each individual likely to have discoverable information relevant to the 
allegations of the Commission's complaint, to the proposed relief, or 
to the defenses of the respondent, as set forth in Sec. 3.31(c)(1);
    (2) A copy of, or a description by category and location of, all 
documents, data compilations, and tangible things in the possession, 
custody, or control of the Commission or respondent(s) that are 
relevant to the allegations of the Commission's complaint, to the 
proposed relief, or to the defenses of the respondent, as set forth in 
Sec. 3.31(c)(1); unless such information or materials are privileged as 
defined in Sec. 3.31(c)(2), pertain to hearing preparation as defined 
in Sec. 3.31(c)(3), pertain to experts as defined in Sec. 3.31(c)(4), 
or are obtainable from some other source that is more convenient, less 
burdensome, or less expensive. A party shall make its disclosures based 
on the information then reasonably available to it and is not excused 
from making its disclosures because it has not fully completed its 
investigation.
    (c) Scope of discovery. * * *
    (1) In general; limitations. Parties may obtain discovery to the 
extent that it may be reasonably expected to yield information relevant 
to the allegations of the complaint, to the proposed relief, or to the 
defenses of any respondent. Such information may include the existence, 
description, nature, custody, condition and location of any books, 
documents, or other tangible things and the identity and location of 
persons having any knowledge of any discoverable matter. Information 
may not be withheld from discovery on grounds that the information will 
be inadmissible at the hearing if the information sought appears 
reasonably calculated to lead to the discovery of admissible evidence. 
The frequency or extent of use of the discovery methods otherwise 
permitted under these rules shall be limited by the Administrative Law 
Judge if he determines that:
    (i) The discover sought is unreasonably cumulative or duplicative, 
or is obtainable from some other source that is more convenient, less 
burdensome, or less expensive;
    (ii) The party seeking discovery has had ample opportunity by 
discovery in the action to obtain the information sought; or
    (iii) The burden and expense of the proposed discovery outweigh its 
likely benefit.

[[Page 50648]]

    (2) Privilege. The Administrative Law Judge may enter a protective 
order denying or limiting discovery to preserve the privilege of a 
witness, person, or governmental agency as governed by the 
Constitution, any applicable act of Congress, or the principles of the 
common law as they may be interpreted by the Commission in the light of 
reason and experience.
    (3) Hearing preparations: Materials. Subject to the provisions of 
paragraph (c)(4) of this section, a party may obtain discovery of 
documents and tangible things otherwise discoverable under paragraph 
(c)(1) of this section and prepared in anticipation of litigation or 
for hearing by or for another party or by or for that other party's 
representative (including the party's attorney, consultant, or agent) 
only upon a showing that the party seeking discovery has substantial 
need of the materials in the preparation of its case and that the party 
is unable without undue hardship to obtain the substantial equivalent 
of the materials by other means. * * *
    (4) Hearing preparation: Experts. (i) Discovery of facts known and 
opinions held by experts, otherwise discoverable under the provisions 
of paragraph (c)(1) of this section and acquired or developed in 
anticipation of litigation or for hearing, may be obtained only as 
follows: * * *
    (ii) * * *
    (iii) The Administrative Law Judge may require as a condition of 
discovery that the party seeking discovery pay the expert a reasonable 
fee, but not more than the maximum specified in 5 U.S.C. 3109 unless 
the parties have stipulated a higher amount, for time spent in 
responding to discovery under paragraphs (c)(4)(i)(B) and (c)(4)(ii) of 
this section.
    (d) Protective orders; order to preserve evidence. (1) * * * Such 
an order may also be issued to preserve evidence upon a showing that 
there is substantial reason to believe that such evidence would not 
otherwise be available for presentation at the hearing.
    (2) * * *
    (e) Supplementation of disclosures and responses. A party who has 
made an initial disclosure under Sec. 3.31(b) or responded to a request 
for discovery with a disclosure or response is under a duty to 
supplement or correct the disclosure or response to include information 
thereafter acquired if ordered by the Administrative Law Judge or in 
the following circumstances:
    (1) A party is under a duty to supplement at appropriate intervals 
its initial disclosures under Sec. 3.31(b) if the party learns that in 
some material respect the information disclosed is incomplete or 
incorrect and if the additional or corrective information has not 
otherwise been made known to the other parties during the discovery 
process or in writing.
    (2) A party is under a duty seasonably to amend a prior response to 
an interrogatory, request for production, or request for admission if 
the party learns that the response is in some material respect 
incomplete or incorrect.
    (f) Stipulations. * * *
    (g) Ex parte rulings on applications for compulsory process. 
Applications for the issuance of subpoenas to compel testimony at an 
adjudicative hearing pursuant to Sec. 3.34 may be made ex parte, and, 
if so made, such applications and rulings thereon shall remain ex parte 
unless otherwise ordered by the Administrative Law Judge or the 
Commission.
    13. Section 3.33 is amended by revising paragraph (a), the first 
and second full sentences of paragraph (c), and the introductory text 
of paragraph (e), and by removing and reserving paragraph (b), to read 
as follows:


Sec. 3.33   Depositions.

    (a) In general. Any party may take a deposition of a named person 
or of a person or persons described with reasonable particularity, 
provided that such deposition is reasonably expected to yield 
information within the scope of discovery under Sec. 3.31(c)(1). Such 
party may, by motion, obtain from the Administrative Law Judge an order 
to preserve relevant evidence upon a showing that there is substantial 
reason to believe that such evidence would not otherwise be available 
for presentation at the hearing. Depositions may be taken before any 
person having power to administer oaths, either under the law of the 
United States or of the state or other place in which the deposition is 
taken, who may be designated by the party seeking the deposition, 
provided that such person shall have no interest in the outcome of the 
proceeding. The party seeking the deposition shall serve upon each 
person whose deposition is sought and upon each party to the proceeding 
reasonable notice in writing of the time and place at which it will be 
taken, and the name and address of each person or persons to be 
examined, if known, and if the name is not known, a description 
sufficient to identify them.
    (b) [Reserved]
    (c) Notice to corporation or other organization. A party may name 
as the deponent a public or private corporation, partnership, 
association, governmental agency other than the Federal Trade 
Commission, or any bureau or regional office to the Federal Trade 
Commission, and describe with reasonable particularity the matters on 
which examination is requested. The organization so names shall 
designate one or more officers, directors, or managing agents, or other 
persons who consent to testify on its behalf, and may set forth, for 
each person designated, the matters on which he will testify. * * *
* * * * *
    (e) Depositions upon written questions. A party desiring to take a 
deposition upon written questions shall serve them upon every other 
party with a notice stating: * * *
* * * * *
    14. Section 3.34 is amended by revising paragraphs (a) and (b), and 
by revising the paragraph heading and adding a new sentence to the end 
of existing paragraph (c), to read as follows:


Sec. 3.34   Subpoenas.

    (a) Subpoenas ad testificandum--(1) Prehearing. The Secretary of 
the Commission shall issue a subpoena, signed but otherwise in blank, 
requiring a person to appear and give testimony at the taking of a 
deposition to a party requesting such subpoena, who shall complete it 
before service.
    (2) Hearing. Application for issuance of a subpoena commanding a 
person to attend and give testimony at an adjudicative hearing shall be 
made in writing to the Administrative Law Judge. Such subpoena may be 
issued upon a showing of the reasonable relevancy of the expected 
testimony.
    (b) Subpoenas duces tecum; subpoenas to permit inspection of 
premises. The Secretary of the Commission, upon request of a party, 
shall issue a subpoena, signed but otherwise in blank, commanding a 
person to produce and permit inspection and copying of designated 
books, documents, or tangible things, or commanding a person to permit 
inspection of premises, at a time and place therein specified. The 
subpoena shall specify with reasonable particularity the material to be 
produced. The person commanded by the subpoena need not appear in 
person at the place of production or inspection unless commanded to 
appear for a deposition or hearing pursuant to paragraph (a) of this 
section. As used herein, the term ``documents'' includes writings, 
drawings, graphs, charts, handwritten notes, film, photographs, audio 
and video recordings and any such representations stored on a computer, 
a computer disk, CD-ROM, magnetic or electronic tape, or any other

[[Page 50649]]

means of electronic storage, and other data compilations from which 
information can be obtained in machine-readable form (translated, if 
necessary, into reasonably usable form by the person subject to the 
subpoena). A subpoena duces tecum may be used by any party for purposes 
of discovery, for obtaining documents for use in evidence, or for both 
purposes, and shall specify with reasonable particularity the materials 
to be produced.
    (c) Motions to quash; limitation on subpoenas to other government 
agencies. * * * Nothing in paragraphs (a) and (b) of this section 
authorizes the issuance of subpoenas requiring the appearance of, or 
the production of documents in the possession, custody, or control of, 
an official or employee of a governmental agency other than the 
Commission, which may be authorized only in accordance with Sec. 3.36.
    15. Section 3.35 is amended by revising the first sentence of 
paragraph (a)(1), the third sentence of paragraph (a)(2), and paragraph 
(b)(1) to read as follows:


Sec. 3.35  Interrogatories to parties.

    (a) Availability; procedures for use. (1) Any party may serve upon 
any other party written interrogatories, not exceeding twenty-five (25) 
in number, including all discrete subparts, to be answered by the party 
served or, if the party served is a public or private corporation, 
partnership, association or governmental agency, by any officer or 
agent, who shall furnish such information as is available to the party. 
* * *
    (2) * * * The party upon whom the interrogatories have been served 
shall serve a copy of the answers, and objections, if any, within 
thirty (30) days after the service of the interrogatories. * * *
    (b) Scope; use at hearing. (1) Interrogatories may relate to any 
matters that can be inquired into under Sec. 3.31(c)(1), and the 
answers may be used to the extent permitted by the rules of evidence.
* * * * *
    16. Section 3.36 is revised to read as follows:


Sec. 3.36  Applications for subpoenas for records, or appearances by 
officials or employees, of governmental agencies other than the 
Commission.

    (a) Form. An application for issuance of a subpoena for the 
production of documents, as defined in Sec. 3.34(b), or for the 
issuance of a subpoena requiring access to documents or other tangible 
things, for the purposes described in Sec. 3.37(a), in the possession, 
custody, or control of a governmental agency other than the Commission 
or the officials or employees of such other agency, or for the issuance 
of a subpoena requiring the appearance of an official or employee of 
another governmental agency, shall be made in the form of a written 
motion filed in accordance with the provisions of Sec. 3.22(a). No 
application for records pursuant to Sec. 4.11 of this chapter or the 
Freedom of Information Act may be filed with the Administrative Law 
Judge.
    (b) Content. The motion shall satisfy the same requirements for a 
subpoena under Sec. 3.34 or a request for production or access under 
Sec. 3.37, together with a specific showing that:
    (1) the material sought is reasonable in scope;
    (2) if for purposes of discovery, the material falls within the 
limits of discovery under Sec. 3.31(b)(1), or, if for an adjudicative 
hearing, the material is reasonably relevant; and
    (3) the information or material sought cannot reasonably be 
obtained by other means.
    17. Section 3.37 is revised to read as follows:


Sec. 3.37  Production of documents and things; access for inspection 
and other purposes.

    (a) Availability; procedures for use. Any party may serve on 
another party a request: to produce and permit the party making the 
request, or someone acting on the party's behalf, to inspect and copy 
any designated documents, as defined in Sec. 3.34(b), or to inspect and 
copy, test, or sample any tangible things which are within the scope of 
Sec. 3.31(c)(1) and in the possession, custody or control of the party 
upon whom the request is served; or to permit entry upon designated 
land or other property in the possession or control of the party upon 
whom the order would be served for the purpose of inspection and 
measuring, surveying, photographing, testing, or sampling the property 
or any designated object or operation thereon, within the scope of 
Sec. 3.31(c)(1). Each such request shall specify with reasonable 
particularity the documents or things to be inspected, or the property 
to be entered. Each such request shall also specify a reasonable time, 
place, and manner of making the inspection and performing the related 
acts. A party shall make documents available as they are kept in the 
usual course of business or shall organize and label them to correspond 
with the categories in the request. A person not a party to the action 
may be compelled to produce documents and things or to submit to an 
inspection as provided in Sec. 3.34.
    (b) Response; objections. The response of the party upon whom the 
request is served shall state, with respect to each item or category, 
that inspection and related activities will be permitted as requested, 
unless the request is objected to, in which event the reasons for the 
objection shall be stated. If objection is made to part of an item or 
category, the part shall be specified and inspection permitted of the 
remaining parts. The party submitting the request may move for an order 
under Sec. 3.38(a) with respect to any objection to or other failure to 
respond to the request or any part thereof, or any failure to permit 
inspection as requested.
    18. Section 3.38 is amended by revising the section heading and 
paragraph (a) to read as follows:


Sec. 3.38  Motion for order compelling disclosure or discovery; 
sanctions.

    (a) Motion for order to compel. A party may apply by motion to the 
Administrative Law Judge for an order compelling disclosure or 
discovery, including a determination of the sufficiency of the answers 
or objections with respect to the initial disclosures required by 
Sec. 3.31(b), a request for admission under Sec. 3.32, a deposition 
under Sec. 3.33, or an interrogatory under Sec. 3.35.
    (1) Initial disclosures; requests for admission; depositions; 
interrogatories. Unless the objecting party sustains its burden of 
showing that the objection is justified, the Administrative Law Judge 
shall order that an answer be served or disclosure otherwise be made. 
If the Administrative Law Judge determines that an answer or other 
response by the objecting party does not comply with the requirements 
of these rules, he may order either that the matter is admitted or that 
an amended answer or response be served. The Administrative Law Judge 
may, in lieu of these orders, determine that final disposition may be 
made at a prehearing conference or at a designated time prior to trial.
    (2) Requests for production or access. If a party fails to respond 
to or comply as requested with a request for production or access made 
under Sec. 3.37(a), the discovering party may move for an order to 
compel production or access in accordance with the request.
* * * * *
    19. Section 3.38A is amended by revising the first sentence of 
paragraph (a) to read as follows:

[[Page 50650]]

Sec. 3.38A  Withholding requested material.

    (a) Any person withholding material responsive to a subpoena issued 
pursuant to Sec. 3.34, written interrogatories requested pursuant to 
Sec. 3.35, a request for production or access pursuant to Sec. 3.37, or 
any other request for the production of materials under this part, 
shall assert a claim of privilege or any similar claim not later than 
the date set for production of the material. * * *
* * * * *
    20. Section 3.43 is amended by revising paragraph (b) to read as 
follows:


Sec. 3.43  Evidence.

* * * * *
    (b) Admissibility; exclusion of relevant evidence; mode and order 
of interrogation and presentation. Relevant, material, and reliable 
evidence shall be admitted. Irrelevant, immaterial, and unreliable 
evidence shall be excluded. Evidence, even if relevant, may be excluded 
if its probative value is substantially outweighed by the danger of 
unfair prejudice, confusion of the issues, or if the evidence would be 
misleading, or by considerations of undue delay, waste of time, or 
needless presentation of cumulative evidence. The Administrative Law 
Judge shall exercise reasonable control over the mode and order of 
interrogating witnesses and presenting evidence so as to
    (1) make the interrogation and presentation effective for the 
ascertainment of the truth,
    (2) avoid needless consumption of time, and
    (3) protect witnesses from harassment or undue embarrassment.
* * * * *
    21. Section 3.44 is amended by adding a new paragraph (c) to read 
as follows:


Sec. 3.44  Record.

* * * * *
    (c) Closing of the hearing record. Immediately upon completion of 
the evidentiary hearing, the Administrative Law Judge shall issue an 
order closing the hearing record. The Administrative Law Judge shall 
retain the description to permit or order correction of the record as 
provided in Sec. 3.44(b).
    22. Section 3.45 is amended by adding a new paragraph (f) to read 
as follows:


Sec. 3.45  In camera orders.

* * * * *
    (f) When in camera information is included in rulings or 
recommendations of the Administrative Law Judge. If the Administrative 
Law Judge includes in any ruling or recommendation information that has 
been granted in camera status pursuant to Sec. 3.45(b), the 
Administrative Law Judge shall file two versions of the ruling or 
recommendation. A complete version shall be marked ``In Camera'' on the 
first page and shall be serve upon the parties. The complete version 
will be placed in the in camera record of the proceeding. An expurgated 
version, to be filed within five (5) days after the filing of the 
complete version, shall omit the in camera information that appears in 
the complete version, shall be marked ``Public Record'' on the first 
page, shall be served upon the parties, and shall be included in the 
public record of the proceeding.
    23. Section 3.46 is amended by revising the first full sentence of 
paragraph (a) to read as follows:


Sec. 3.46  Proposed findings, conclusions, and order.

    (a) General. Upon the closing of the hearing record, or within a 
reasonable time thereafter fixed by the Administrative Law Judge, any 
party may file with the Secretary of the Commission for consideration 
of the Administrative Law Judge proposed findings of fact, conclusions 
of law, and rule or order, together with reasons therefor and briefs in 
support thereof. * * *
* * * * *
    24. Section 3.51 is amended by revising paragraph (a) and paragraph 
(c)(1) to read as follows:


Sec. 3.51  Initial decision.

    (a) When filed and when effective. The Administrative Law Judge 
shall file an initial decision within ninety (90) days after closing 
the hearing record pursuant to Sec. 3.44(c), or within thirty (30) days 
after a default or the granting of a motion for summary decision or 
waiver by the parties of the filing of proposed findings of fact, 
conclusions of law and order, or within such further time as the 
Commission may by order allow upon written request from the 
Administrative Law Judge. In no event shall the initial decision be 
filed any later than one (1) year after the issuance of the 
administrative compliant, except that the Administrative Law Judge may, 
upon a finding of extraordinary circumstances, extend the one-year 
deadline for a period of up to sixty (60) days. Such extension, upon 
its expiration, may be continued for additional consecutive periods of 
up to sixty (60) days, provided that each additional period is based 
upon a finding by the Administrative Law Judge that extraordinary 
circumstances are still present. The pendency of any collateral federal 
court proceeding that relates to the administrative adjudication shall 
toll the one-year deadline for filing the initial decision. The ALJ may 
stay the administrative proceeding until resolution of the collateral 
federal court proceeding. Once issued, the initial decision shall 
become the decision of the Commission thirty (30) days after service 
thereof upon the parties or thirty (30) days after the filing of a 
timely notice of appeal, whichever shall be later, unless a party 
filing such a notice shall have perfected an appeal by the timely 
filing of an appeal brief or the Commission shall have issued an order 
placing the case on its own docket for review or staying the effective 
date of the decision.
    (b) * * *
    (c) Content. (1) The initial decision shall include a statement of 
findings (with specific page references to principal supporting items 
of evidence in the record) and conclusions, as well as the reasons or 
basis therefor, upon all the material issues of fact, law, or 
discretion presented on the record (or those designated under paragraph 
(c)(2) of this section) and an appropriate rule or order. Rulings 
containing information granted in camera status pursuant to Sec. 3.45 
shall be filed in accordance with Sec. 3.45(f).
* * * * *
    25. Section 3.55 is amended by revising the first sentence to read 
as follows:


Sec. 3.55  Reconsideration.

    Within fourteen (14) days after completion of service of a 
Commission decision, any party may file with the Commission a petition 
for reconsideration of such decision, setting forth the relief desired 
and the grounds in support thereof. * * *

PART 4--MISCELLANEOUS RULES

    26. The authority for Part 4 continues to read as follows:

    Authority: Sec. 6, 38 Stat. 721; 15 U.S.C. 46.

    27. Section 4.2 is amended by adding a new sentence at the end of 
paragraph (c) and a new sentence at the end of paragraph (e)(1) to read 
as follows:


Sec. 4.2  Requirements as to form, and filing of documents other than 
correspondence.

* * * * *
    (c) Copies. * * * With respect to motions under Sec. 3.22, the 
moving party shall provide a copy of its motion to the Administrative 
Law Judge at the time the motion is filed with the Secretary.
* * * * *

[[Page 50651]]

    (e) Signature. (1) * * * In addition, motions filed pursuant to 
Sec. 3.22 shall include the name, address, and telephone number of 
counsel.

    By direction of the Commission.
Donald S. Clark,
Secretary.

Concurring Statement of Commissioner Mary L. Azcuenaga

Amendment of the Commission's Procedural Rules Governing 
Adjudicative Proceedings

    The Commission today amends its procedural rules governing 
administrative adjudications. I welcome the amended rules as a first 
step in reforming the Commission's adjudicative process. Some of the 
amendments seem clearly to be good ideas and the others may be worth 
a try to help expedite the Commission's adjudicative proceedings. 
Whether they will result in net benefits remains to be seen. 
Although rule changes to expedite adjudications are a starting point 
for improving the adjudicative process, reform ultimately should 
focus on improving the quality of the adjudicative record and of 
adjudicative decisions to help ensure that they meet the test of 
appeal.
    I support further examination of the entire process, including 
how to focus discovery and hearings more precisely on the pertinent 
facts, and how best to prepare the record for efficient use in 
formulating reasoned and well supported decisions. I look forward to 
the next installment of this effort.

[FR Doc. 96-24316 Filed 9-25-96; 8:45 am]
BILLING CODE 6750-01-M