[Federal Register Volume 76, Number 162 (Monday, August 22, 2011)]
[Rules and Regulations]
[Pages 52249-52253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-21019]


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FEDERAL TRADE COMMISSION

16 CFR Parts 3 and 4


Rules of Practice

AGENCY: Federal Trade Commission (``Commission'' or ``FTC'').

ACTION: Final rule amendments.

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SUMMARY: The FTC is amending its Rules of Practice for its adjudicative 
process, including those regarding the initiation of discovery, 
limitations on discovery, the Standard Protective Order, the admission 
of certain hearsay evidence, the video recording of proceedings, the 
designation of confidentiality on documents, the timing for oral 
argument on appeal, and

[[Page 52250]]

a reference to the Equal Access to Justice Act.

DATES: These amendments are effective on August 22, 2011, and will 
govern all Commission adjudicatory proceedings that are commenced after 
that date. They will also govern all Commission adjudicatory 
proceedings that are pending on August 22, 2011, except to the extent 
that, in the opinion of the Commission, their application to a 
particular proceeding would not be feasible or would work an injustice.

FOR FURTHER INFORMATION CONTACT: Robert B. Mahini, Attorney, (202) 326-
2642, Office of the General Counsel, Federal Trade Commission, 600 
Pennsylvania Avenue, NW., Washington DC 20580.

SUPPLEMENTARY INFORMATION: On May 1, 2009, the Commission implemented 
changes to Parts 3 and 4 of the agency's Rules of Practice.\1\ After 
further review of these changes and other aspects of Parts 3 and 4, the 
Commission is making new changes to the Rules of Practice, which are 
discussed below. The immediate implementation of this rule without 
prior notice and the opportunity for public comment is appropriate 
because this rule is one of agency procedure and practice and therefore 
is exempt from notice and comment rulemaking requirements and from the 
30-day publication requirement under the Administrative Procedure Act, 
5 U.S.C. 553(b)(A)-(B) & (d).\2\
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    \1\ 74 FR 20205 (2009).
    \2\ The final rule amendments are not subject to the 
requirements of the Regulatory Flexibility Act, 5 U.S.C. 601(2), 
604(a). The rule revisions to part 3 are also not subject to the 
requirements of the Paperwork Reduction Act, which contains an 
exemption for information collected during the conduct of 
administrative proceedings or investigations. 44 U.S.C. 
3518(c)(1)(B)(ii); 5 CFR 1320.4. To the extent that Rule 4.2 applies 
to filings that do not fall within this exception, the Office of 
Management and Budget has approved the collection of information, 
along with other applications and notices to the Commission, and has 
assigned control number 3084-0047. The revisions to Rule 4.2 do not 
substantially or materially modify this collection of information.
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Section 3.31: General Discovery Provisions.

    The Commission is amending Section 3.31(a) to clarify that 
discovery demands cannot commence before the procedure set forth in 
Section 3.21(c). Under Section 3.21(c), the Administrative Law Judge,

    [n]ot later than 2 days after the scheduling conference, [must] 
enter an order that sets forth the results of the conference and 
establishes a schedule of proceedings that will permit the 
evidentiary hearing to commence on the date set by the Commission, 
including a plan of discovery that addresses the deposition of fact 
witnesses, timing of expert discovery, and the production of 
documents and electronically stored information, 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.

To make clear that discovery shall not commence before the issuance of 
the prehearing scheduling order's plan of discovery absent an express 
agreement of the parties, the Commission is adding language to Section 
3.31(a) stating that, not including the mandatory initial disclosures 
required under paragraph (b) of the same Section, discovery demands 
shall not commence before the issuance of the prehearing scheduling 
order, unless the parties expressly agree otherwise.
    In addition, the Commission is amending Section 3.31(c) to make 
clear that the section's rules regarding the scope of discovery apply 
to all discovery under Part 3 of the Rules of Practice. The Commission 
also is amending language in this paragraph to make clear that the 
section's overall limitations on discovery in paragraph (c)(2) and the 
restriction on discovery of electronically stored information in 
paragraph (c)(3) apply to discovery aimed at third parties, in addition 
to the parties to the proceeding.

Section 3.31 App. A: Standard Protective Order.

    The Commission is amending the Standard Protective Order at Section 
3.31 App. A to make the following changes:
    (1) Add the missing word ``information'' to the first sentence of 
the first paragraph;
    (2) more clearly define in the second paragraph the scope of the 
confidentiality afforded to materials submitted by respondents or third 
parties during an investigation or administrative proceeding by 
referring, in addition to confidentiality protections provided by the 
Federal Trade Commission Act, to protections provided by ``any other 
federal statute or regulation'' and ``any federal court or Commission 
precedent interpreting such statute or regulation'' rather than 
referring to ``any regulation, interpretation, or precedent concerning 
documents in the possession of the Commission'';
    (3) more clearly state in the second paragraph that the Order's 
confidentiality protection extends to any information that ``discloses 
the substance of the contents of any confidential materials derived 
from a document subject to this Order'' given that ``confidential 
materials'' is defined in the Order's first paragraph, replacing the 
current description of protection for ``information taken from any 
portion of such document[s]'';
    (4) add to the fifth paragraph a missing reference to ``Paragraph 
1''; and
    (5) clarify and make consistent language in the sixth paragraph 
regarding documents with ``masked or otherwise redacted copies of 
documents [that] may be produced'' by replacing ``deleted'' where used 
with ``masked or redacted.''

Section 3.31A: Expert Discovery

    The Commission is adding a new paragraph (e) to Section 3.31A 
regarding materials that the parties cannot discover. This new 
paragraph includes language from what was the last sentence of 
paragraph (d), which will now state that ``[a] party may not discover 
facts known or opinions held by an expert who has been retained or 
specifically employed by another party in anticipation of litigation or 
preparation for hearing and who is not listed as a witness for the 
evidentiary hearing,'' and new language that is nearly identical to 
language recently added to Federal Rule of Civil Procedure 26(b)(4)(B) 
and (C), which specifically prohibits discovery of expert report drafts 
and, with some exceptions, communications between a party's attorney 
and its experts. Adding to the limitation of what was the last sentence 
of paragraph (d), the new language taken largely from the Federal Rules 
specifically provides that parties may not discover drafts of any 
report required by Section 3.31A, regardless of the form in which the 
draft is recorded. In addition, the new language prohibits parties from 
discovering any communications, regardless of form, between another 
party's attorney and any of its testifying expert witnesses, unless the 
communication: (1) Relates to the expert's compensation for the study 
or testimony; (2) identifies facts or data provided by the party's 
attorney and considered by the expert in forming the opinions to be 
expressed; or (3) identifies assumptions provided by the party's 
attorney and relied on by the expert in forming the opinions to be 
expressed.
    In addition, the Commission is adding a new paragraph (f) to 
Section 3.31A that allows the Administrative Law Judge, upon a finding 
of good cause, to alter the pre-hearing schedule for expert discovery 
set forth in Section 3.31A, but only if such an alteration would not 
affect the date of the evidentiary hearing noticed in the complaint. 
This change

[[Page 52251]]

allows the Administrative Law Judge to extend the expert discovery time 
line if needed, including where the parties mutually seek such an 
alteration, but would not change the overall time line for the 
administrative adjudication itself.

Section 3.43: Evidence

    The Commission is changing Section 3.43(b) to specifically include 
expert reports as admissible hearsay evidence. In addition, the 
Commission is adding a new requirement to this paragraph regarding the 
admission of ``prior testimony (including expert reports) from other 
proceedings where either the Commission or respondent did not 
participate,'' though this requirement would not apply to ``other 
proceedings where the Commission and at least one respondent did 
participate.'' Such prior testimony could often be voluminous, and in 
recent enforcement actions such evidence was admitted that resulted in 
the inclusion of excessive, unhelpful materials in the record that 
burdened the non-admitting party. As a result, for such material, 
unless the parties consent to its admission, the Administrative Law 
Judge must first make a finding upon the motion of the party seeking 
the admission of such evidence that the prior testimony would not be 
duplicative, would not present unnecessary hardship to a party or delay 
to the proceedings, and would aid in the determination of the matter. 
However, this requirement for ``prior testimony * * * from other 
proceedings'' does not include the Commission staff's investigational 
hearings involving respondent, which shall be admitted without being 
subject to this new limitation.\3\
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    \3\ See 16 CFR 2.8.
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Section 3.44: Record

    The Commission is amending the general requirement that ``[t]he 
live oral testimony of each witness * * * be video recorded 
digitally.'' The Commission had added this requirement in its 2009 
amendments to the Part 3 Rules ``to enable the Commission, which is 
tasked with reviewing the record de novo, to independently assess 
witness demeanor when necessary.'' \4\ However, recent experience and 
cost estimates have revealed that this video requirement is expensive, 
and the Commission has determined that the benefits of digital video 
recordings to its assessment of witness testimony do not outweigh these 
considerable costs.
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    \4\ 74 FR 1817.
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    Thus, the amendment allows for video recording of all witness 
testimony only by direction of the Administrative Law Judge upon a 
motion by a party. If the Administrative Law Judge issues an order 
finding good cause to permit video recording of all witness testimony, 
the moving party shall bear the costs for such recording. The rule 
contemplates that the reporter officially designated by the Commission 
to transcribe the proceeding shall also provide the video recording 
services, in order to minimize delay or disruption and ensure 
reliability. Where the moving party is not complaint counsel, the 
moving party shall independently contract with and reimburse the 
reporter directly for such additional recording services. The moving 
party may retain some other person or entity to make the recordings, 
such as when the designated reporter is unwilling or unable to perform 
these additional services, only where the Administrative Law Judge 
issues an order setting forth good cause for such substitution and 
prescribing standards and procedures to ensure that the video recording 
will serve as a complete and accurate record of the oral testimony 
being recorded. The Commission's contract with its reporter sets forth 
rates for obtaining copies of video recordings from the reporter. When 
the moving party is other than complaint counsel, that party must 
ensure that its contract with the reporter for video recording services 
requires that copies of such recordings be made available at no more 
than the maximum rates under the FTC's own contract, unless the 
Administrative Law Judge has authorized a person or entity other than 
the Commission's reporter to make the video recordings. In the case of 
such an authorization by the Administrative Law Judge, the maximum 
rates for copies shall be either the maximum rates that the 
Commission's reporter is authorized to charge for such copies under its 
Commission contract or the actual cost of duplication, whichever is 
higher.

Section 3.45: In Camera Orders and Section 4.2: Requirements as to 
Form, and Filing of Documents Other Than Correspondence

    The Commission is amending the language in Sections 3.45 and 4.2 
that requires parties to identify the confidential or public nature of 
a document filed with the Commission on the document's first page. The 
new language requires parties to provide this designation on every page 
of the document to avoid the inadvertent release of individual pages of 
confidential documents.

Section 3.52: Appeal From Initial Decision

    The Commission is amending language in Sections 3.52(a)(1), (a)(2) 
and (b)(2) that provides a deadline for holding oral argument. In these 
paragraphs, the rule requires the Commission to ``schedule oral 
argument'' within a prescribed amount of days after the deadline for 
reply briefs or objections to the initial decision, depending on which 
paragraph applies. To clarify that these sentences require oral 
arguments to be held, and not merely scheduled for some later date, 
within the prescribed amount of days, the Commission is replacing 
``schedule'' with ``hold'' in these sentences.
    In addition, the Commission is amending the beginning of these 
sentences, which had set aside the deadlines for oral argument where 
``the Commission determines there shall be no oral argument.'' Because 
the paragraph permits the Commission to ``order'' that no oral argument 
be held, the sentence now uses ``orders'' in place of ``determines'' to 
make these sentences more consistent with the previous language.

Section 3.83: Procedures for Considering Applications

    The Commission is correcting the citation to the Equal Access to 
Justice Act in Section 3.83(i). That Section provided that ``[j]udicial 
review of final Commission decisions on awards may be sought as 
provided in 5 U.S.C. 503(c)(2).'' The paragraph now correctly cites to 
5 U.S.C. 504(c)(2).

List of Subjects in 16 CFR Parts 3 and 4

    Administrative practice and procedure.

    For the reasons set forth in the preamble, the Federal Trade 
Commission amends Title 16, Chapter 1, Subchapter A of the Code of 
Federal Regulations, parts 3 and 4, as follows:

PART 3--RULES OF PRACTICE FOR ADJUDICATIVE PROCEEDINGS

0
1. The authority citation for part 3 continues to read as follows:

    Authority: 15 U.S.C. 46, unless otherwise noted.


0
2. Amend Sec.  3.31, by adding a new sentence at the end of paragraph 
(a) and revising the introductory text of paragraph (c) and paragraphs 
(c)(2)(i), (c)(2)(iii), and the first two sentences of paragraph (c)(3) 
to read as follows:


Sec.  3.31  General discovery provisions.

    (a) * * * Unless all parties expressly agree otherwise, no 
discovery shall take

[[Page 52252]]

place before the issuance of a prehearing scheduling order under Sec.  
3.21(c), except for the mandatory initial disclosures required by 
paragraph (b) of this section.
* * * * *
    (c) Scope of discovery. Unless otherwise limited by order of the 
Administrative Law Judge or the Commission in accordance with these 
rules, the scope of discovery under all the rules in this part is as 
follows:
* * * * *
    (2) * * *
    (i) The discovery sought from a party or third party is 
unreasonably cumulative or duplicative, or is obtainable from some 
other source that is more convenient, less burdensome, or less 
expensive;
* * * * *
    (iii) The burden and expense of the proposed discovery on a party 
or third party outweigh its likely benefit.
    (3) Electronically stored information. A party or third party need 
not provide discovery of electronically stored information from sources 
that the party or third party identifies as not reasonably accessible 
because of undue burden or cost. On a motion to compel discovery, the 
party or third party from whom discovery is sought must show that the 
information is not reasonably accessible because of undue burden or 
cost. * * *
* * * * *

0
3. In Appendix A to Sec.  3.31 revise the first sentence of paragraph 
1, the first sentence of paragraph 2, paragraph 5, and the last 
sentence of paragraph 6 to read as follows:

Appendix A to Sec.  3.31: Standard Protective Order

* * * * *
    1. As used in this Order, ``confidential material'' shall refer 
to any document or portion thereof that contains privileged 
information, competitively sensitive information, or sensitive 
personal information. * * *
    2. Any document or portion thereof submitted by a respondent or 
a third party during a Federal Trade Commission investigation or 
during the course of this proceeding that is entitled to 
confidentiality under the Federal Trade Commission Act, or any other 
federal statute or regulation, or under any federal court or 
Commission precedent interpreting such statute or regulation, as 
well as any information that discloses the substance of the contents 
of any confidential materials derived from a document subject to 
this Order, shall be treated as confidential material for purposes 
of this Order. * * *
* * * * *
    5. A designation of confidentiality shall constitute a 
representation in good faith and after careful determination that 
the material is not reasonably believed to be already in the public 
domain and that counsel believes the material so designated 
constitutes confidential material as defined in Paragraph 1 of this 
Order.
    6. * * * Masked or otherwise redacted copies of documents may be 
produced where the portions masked or redacted contain privileged 
matter, provided that the copy produced shall indicate at the 
appropriate point that portions have been masked or redacted and the 
reasons therefor.
* * * * *

0
4. Amend Sec.  3.31A, by revising paragraph (d) and adding paragraphs 
(e) and (f) to read as follows:


Sec.  3.31A  Expert discovery.

* * * * *
    (d) A party may depose any person who has been identified as an 
expert whose opinions may be presented at trial. Unless otherwise 
ordered by the Administrative Law Judge, a deposition of any expert 
witness shall be conducted after the disclosure of a report prepared by 
the witness in accordance with paragraph (a) of this section. 
Depositions of expert witnesses shall be completed not later than 65 
days after the close of fact discovery. Upon motion, the Administrative 
Law Judge may order further discovery by other means, subject to such 
restrictions as to scope as the Administrative Law Judge may deem 
appropriate.
    (e) A party may not discover facts known or opinions held by an 
expert who has been retained or specifically employed by another party 
in anticipation of litigation or preparation for hearing and who is not 
listed as a witness for the evidentiary hearing. A party may not 
discover drafts of any report required by this section, regardless of 
the form in which the draft is recorded, or any communications between 
another party's attorney and any of that other party's testifying 
experts, regardless of the form of the communications, except to the 
extent that the communications:
    (1) Relate to compensation for the expert's study or testimony;
    (2) Identify facts or data that the other party's attorney provided 
and that the expert considered in forming the opinions to be expressed; 
or
    (3) Identify assumptions that the other party's attorney provided 
and that the expert relied on in forming the opinions to be expressed.
    (f) The Administrative Law Judge may, upon a finding of good cause, 
alter the pre-hearing schedule set forth in this section; provided, 
however, that no such alteration shall affect the date of the 
evidentiary hearing noticed in the complaint.

0
5. Amend Sec.  3.43 by removing the sixth sentence of paragraph (b) and 
adding, in its place, two sentences, to read as follows:


Sec.  3.43  Evidence.

* * * * *
    (b) * * * If otherwise meeting the standards for admissibility 
described in this paragraph, depositions, investigational hearings, 
prior testimony in Commission or other proceedings, expert reports, and 
any other form of hearsay, shall be admissible and shall not be 
excluded solely on the ground that they are or contain hearsay. 
However, absent the consent of the parties, before admitting prior 
testimony (including expert reports) from other proceedings where 
either the Commission or respondent did not participate, except for 
other proceedings where the Commission and at least one respondent did 
participate, the Administrative Law Judge must make a finding upon the 
motion of a party seeking the admission of such evidence that the prior 
testimony would not be duplicative, would not present unnecessary 
hardship to a party or delay to the proceedings, and would aid in the 
determination of the matter. * * *
* * * * *

0
6. Amend Sec.  3.44, by removing the last two sentences of paragraph 
(a) and adding, in their place, five sentences, to read as follows:


Sec.  3.44  Record.

    (a) * * * Upon a motion by any party, for good cause shown the 
Administrative Law Judge may order that the live oral testimony of all 
witnesses be video recorded digitally, at the expense of the moving 
party, and in such cases the video recording and the written transcript 
of the testimony shall be made part of the record. If a video recording 
is so ordered, the moving party shall not pay or retain any person or 
entity to perform such recording other than the reporter designated by 
the Commission to transcribe the proceeding, except by order of the 
Administrative Law Judge upon a finding of good cause. In any order 
allowing for video recording by a person or entity other than the 
Commission's designated reporter, the Administrative Law Judge shall 
prescribe standards and procedures for the video recording to ensure 
that it is a complete and accurate record of the witnesses' testimony. 
Copies of the written transcript and video recording are available from 
the reporter at rates not to exceed the maximum rates fixed by contract 
between the Commission and the reporter. Copies of a video recording

[[Page 52253]]

made by a person or entity other than the reporter shall be available 
at the same rates, or no more than the actual cost of duplication, 
whichever is higher.
* * * * *

0
7. Amend Sec.  3.45, by revising the second and seventh full sentences 
of paragraph (e) and the second and third full sentences of paragraph 
(f) to read as follows:


Sec.  3.45  In camera orders.

* * * * *
    (e) * * * A complete version shall be marked ``In Camera'' or 
``Subject to Protective Order,'' as appropriate, on every page and 
shall be filed with the Secretary and served by the party on the other 
parties in accordance with the rules in this part. * * * An expurgated 
version of the document, marked ``Public Record'' on every page and 
omitting the in camera and confidential information and attachment that 
appear in the complete version, shall be filed with the Secretary 
within 5 days after the filing of the complete version, unless the 
Administrative Law Judge or the Commission directs otherwise, and shall 
be served by the party on the other parties in accordance with the 
rules in this part. * * *
    (f) * * * A complete version shall be marked ``In Camera'' or 
``Subject to Protective Order,'' as appropriate, on every page and 
shall be served upon the parties. The complete version will be placed 
in the in camera record of the proceeding. An expurgated version, to be 
filed within 5 days after the filing of the complete version, shall 
omit the in camera and confidential information that appears in the 
complete version, shall be marked ``Public Record'' on every page, 
shall be served upon the parties, and shall be included in the public 
record of the proceeding.***
* * * * *

0
8. Amend Sec.  3.52, by revising the fourth sentence of paragraph 
(a)(1), the first sentence of paragraph (a)(2), and the fourth sentence 
of paragraph (b)(2) to read as follows:


Sec.  3.52  Appeal from initial decision.

    (a) * * *
    (1) * * * Unless the Commission orders that there shall be no oral 
argument, it will hold oral argument within 10 days after the deadline 
for the filing of any reply briefs. * * *
    (2) If no objections to the initial decision are filed, the 
Commission may in its discretion hold oral argument within 10 days 
after the deadline for the filing of objection, * * *
    (b) * * *
    (2) * * * Unless the Commission orders that there shall be no oral 
argument, it will hold oral argument within 15 days after the deadline 
for the filing of any reply briefs. * * *
* * * * *

0
9. Amend Sec.  3.83, by revising paragraph (i) to read as follows:


Sec.  3.83  Procedures for considering applicants.

* * * * *
    (i) Judicial review. Judicial review of final Commission decisions 
on awards may be sought as provided in 5 U.S.C. 504(c)(2).
* * * * *

PART 4--MISCELLANEOUS RULES

0
1. The authority for part 4 remains:

    Authority: 15 U.S.C. 46, unless otherwise noted.


0
2. Amend Sec.  4.2(b), by revising the last sentence, to read as 
follows:


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

* * * * *
    (b) * * * Every page of each such document shall be clearly and 
accurately labeled ``Public'', ``In Camera'' or ``Confidential''.
* * * * *

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2011-21019 Filed 8-19-11; 8:45 am]
BILLING CODE 6750-01-P