[Federal Register Volume 86, Number 138 (Thursday, July 22, 2021)]
[Rules and Regulations]
[Pages 38542-38553]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-15313]


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FEDERAL TRADE COMMISSION

16 CFR Parts 0 and 1


Revisions to Rules of Practice

AGENCY: Federal Trade Commission.

ACTION: Final rule.

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[[Page 38543]]

SUMMARY: The Commission is amending its rules of practice. The revised 
rules modernize procedures for rulemakings to define unfair or 
deceptive acts or practices under the FTC Act to provide for more 
efficient conduct of rulemaking proceedings. The Commission is also 
revising these rules to better reflect the agency's organizational 
structure and authority.

DATES: This rule is effective July 22, 2021.

FOR FURTHER INFORMATION CONTACT: Josephine Liu, Assistant General 
Counsel for Legal Counsel, (202) 326-2170, or Kenny Wright, Attorney, 
(202) 326-2907, Office of the General Counsel, Federal Trade 
Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION: The Federal Trade Commission is revising the 
rules in part 0 and subpart B of part 1 its rules of practice, 16 CFR 
parts 0 and 1.
    The Commission is amending part 0 to more accurately reflect the 
agency's current enforcement authority and organizational structure.
    The amendments to part 1, subpart B will govern rulemaking 
proceedings under Section 18(a)(1)(B) of the Federal Trade Commission 
Act (15 U.S.C. 57(a)(1)(B)) to define unfair or deceptive acts or 
practices. These amendments modernize the procedures for rulemaking 
proceedings under Section 18 and ensure conformance with the statutory 
structure for such proceedings.
    The Commission is also making conforming edits to make the rule 
language more gender-neutral; use active voice instead of passive 
voice; replace ambiguous uses of ``shall'' with ``may'', ``will'', or 
``must'' as appropriate; make nonsubstantive grammatical changes; and 
add and standardize citations to the U.S. Code where appropriate.

I. Revisions to Part 0--Organization

    The Commission is revising certain provisions in part 0 of its 
rules to better reflect the agency's current enforcement authority and 
organizational structure.

Sec.  0.3: Hours

    In Sec.  0.3, the Commission is correcting outdated nomenclature: 
The agency's offices outside of Washington, DC are regional offices, 
not field offices. The Commission is also clarifying that FTC offices 
are generally open from 8:30 a.m. to 5 p.m., except on Saturdays, 
Sundays, and legal holidays.

Sec.  0.4: Laws Administered

    In Sec.  0.4, the Commission is revising the listing of the various 
laws under which the Commission exercises enforcement and 
administrative authority. The Commission now enforces or administers 
more than 80 laws, which are listed at https://www.ftc.gov/enforcement/statutes. The web page, which is updated regularly, contains summaries 
of the laws and links to the relevant statutory texts. Given that the 
web page is more comprehensive and more useful than a static list of 
laws, the Commission is amending Sec.  0.4 by deleting most items on 
the list and adding a cross reference to the web page.

Sec.  0.8: The Chair

    The Commission is amending Sec.  0.8 to designate the Chair to 
serve as the Chief Presiding Officer or to designate an alternative 
Chief Presiding Officer for rulemaking proceedings under Section 
18(a)(1)(B) of the FTC Act. As Chief Presiding Officer, the Chair will 
also retain authority to designate another Commissioner or another 
person who is not responsible to any other official or employee of the 
Commission as Chief Presiding Officer. In addition, Section 0.8 is also 
being revised to include information about three units that report to 
the Office of the Chair: The Office of the Chief Privacy Officer, the 
Office of Equal Employment Opportunity and Workplace Inclusion, and the 
Office of Policy Planning.

Sec.  0.9: Organization Structure

    The Commission is deleting the regional offices from the list of 
principal units included in Sec.  0.9. The regional offices operate 
under the supervision of the Bureaus of Consumer Protection and 
Competition, so listing the regional offices as principal units is not 
an accurate description of the agency's organizational structure.

Sec.  0.11: Office of the General Counsel

    Section 0.11 is being revised to provide a more detailed 
description of the situations when the Office of the General Counsel 
(OGC) represents the Commission in court or before administrative 
agencies, and also to add that OGC represents the agency in employment 
and labor disputes.

Sec.  0.12: Office of the Secretary

    The Commission is revising Sec.  0.12 to specify that an Acting 
Secretary can sign Commission orders and official correspondence in the 
Secretary's absence.

Sec.  0.14: Office of Administrative Law Judges

    In Sec.  0.14, to match the changes to Sec.  0.8, the Commission is 
deleting the reference to the Chief Administrative Law Judge serving as 
the Chief Presiding Officer. The Commission is also deleting a sentence 
about ALJs being appointed under the authority of the Office of 
Personnel Management. This sentence is no longer legally accurate after 
Lucia v. SEC, 585 U.S. __, 138 S. Ct. 2044 (2018) and Executive Order 
13843, 83 FR 32755 (2018).

Sec. Sec.  0.16 and 0.17: Bureaus of Competition and Consumer 
Protection

    The Commission is revising Sec. Sec.  0.16 and 0.17 to harmonize 
the description of the work performed by the Bureaus of Competition and 
Consumer Protection. Both Bureaus have similar investigative and 
enforcement responsibilities. The Commission is also clarifying in 
Sec.  0.17 that the Bureau of Consumer Protection (BCP) may initiate 
civil penalty proceedings for rule violations and deleting an outdated 
discussion about BCP maintaining the agency's public reference 
facilities.

Sec.  0.19: The Regional Offices

    The Commission is updating Sec.  0.19 to reflect the regional 
offices' current responsibilities and organizational structure. The new 
language makes clearer that the regional offices are responsible for 
enforcement as well as investigations. In addition, the regional 
offices are no longer under the general supervision of the Office of 
the Executive Director. Instead, they are under the general supervision 
of the Bureaus of Competition and Consumer Protection and clear their 
activities through the appropriate Bureau. Section 0.19(b) is being 
revised to reflect the various offices' current geographic areas of 
responsibility; to delete the regional offices' address information, 
which can quickly become outdated; and to reflect the fact that the 
Western Region has split into two separate regions: Western Region Los 
Angeles and Western Region San Francisco.

Sec.  0.20: Office of International Affairs

    The Commission is revising Sec.  0.20 to clarify the role of the 
Office of International Affairs (OIA). OIA's responsibilities include 
handling the FTC's international antitrust and consumer protection 
missions in coordination and consultation with the appropriate Bureaus; 
cooperating with foreign authorities on investigations and enforcement; 
participating in the United States government interagency process to 
promote agency views on

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international issues within the FTC's mandate; coordinating staff 
exchanges and internships at the FTC for staff of non-U.S. competition, 
consumer protection, and privacy agencies; and building capacity at 
other agencies around the world.

II. Revisions to Part 1, Subpart B--Rules and Rulemaking Under Section 
18(a)(1)(B) of the FTC Act

    The Commission is revising part 1, subpart B of its rules to 
modernize the procedures governing rulemaking under Section 18(a)(1)(B) 
of the FTC Act, provide for efficient conduct of rulemaking 
proceedings, and to better reflect the requirements of the FTC Act.

Sec.  1.11: Commencement of a Rulemaking Proceeding

    The Commission is revising procedures under Sec.  1.11 for the 
initiation of rulemaking proceedings under Section 18(a)(1)(B) of the 
FTC Act. Pursuant to these amendments, rulemaking proceedings will 
commence with the issuance of a notice of proposed rulemaking that will 
include the text of the proposed rule, a preliminary regulatory 
analysis and explanation of the Commission's proposal, and an 
invitation for interested persons to comment. Pursuant to the 
requirements of the FTC Act, the Commission will afford interested 
persons an opportunity to request an informal hearing in response to 
this notice and will identify disputed issues of material fact, if any, 
necessary to be resolved in the rulemaking proceeding.
    Interested persons who request to present their position orally in 
an informal hearing must file a request with the Commission after 
issuance of a notice of proposed rulemaking. This request must include 
a statement identifying the person's interests in the proceeding and 
may propose additional disputed issues for resolution at the informal 
hearing.

Sec.  1.12: Notices of Informal Hearings and Designations

    Section 18(c)(2) of the FTC Act also provides an opportunity for 
interested persons to submit their views on a proposed rule orally at 
an informal hearing. 15 U.S.C. 57a(c)(2). In Sec.  1.12, the Commission 
is amending the provisions governing the conduct of such proceedings. 
When an informal hearing is requested or the Commission determines in 
its discretion to hold one, the informal hearing will be initiated by a 
notice of informal hearing.
    Pursuant to the amendments, the Commission will issue an initial 
notice of informal hearing to announce necessary details for an 
informal hearing, including the designation of a presiding officer, the 
time and place of the informal hearing, a final list of disputed issues 
of material fact to be resolved, and a list of persons who will make 
oral presentations. The initial notice of informal hearing will also 
invite interested persons to submit requests for cross-examination or 
to present rebuttal submissions.
    Based upon submissions in response to the initial notice of 
informal hearing, the Commission will issue a final notice of informal 
hearing providing a list of interested persons who will conduct cross-
examination regarding disputed issues of material fact, any groups with 
the same or similar interests who will be required to select a 
representative to conduct cross-examination on behalf of the group, and 
any interested persons who will be permitted to make rebuttal 
submissions.
    To provide for the efficient conduct of informal hearings, the 
amendments retain provisions authorizing the Commission to group 
persons with similar interests and require the selection of a group 
representative to conduct cross-examination. The amended rules preserve 
the authority of the presiding officer to designate group 
representatives if a group of interested persons is unable to agree 
upon a representative and to entertain requests for an individual to 
conduct cross-examination on select issues that affect that person's 
particular interest if a designated group representative would not 
adequately represent their interests.

Sec.  1.13: Conduct of Informal Hearing by the Presiding Officer

    The Commission is amending Sec.  1.13 to focus on the presiding 
officer's powers and responsibilities for the orderly conduct of an 
informal hearing. The amendments provide the presiding officer with the 
powers necessary to conduct effective and orderly informal hearings in 
rulemaking proceedings.
    The amendments provide that the Commission will establish the time 
and location of informal hearings, select participants who shall 
provide oral presentations, and designate disputed issues of material 
fact, if any, that are to be resolved in the rulemaking proceedings. 
The presiding officer designated by the Commission will have the 
necessary powers to conduct hearings in an efficient manner, including 
the power to impose time limits on oral presentations and to select or 
modify representatives designated to conduct cross-examination. The 
amendments also provide that informal hearings will be limited to a 
total of 5 days over the course of a thirty-day period, unless 
Commission extends the time for conduct of a hearing upon a showing of 
good cause.
    The amendments remove references to direct examination in informal 
hearings. Providing interested persons with the opportunity to present 
their positions orally does not require the formality of direct 
examination. Consistent with Section 18 of the FTC Act, the amended 
rules continue to allow an interested person to cross-examine those 
making oral presentations if appropriate and required to address 
disputed issues of material fact.
    The amendments also remove procedures to allow the presiding 
officer to compel the attendance of persons, require the production of 
documents, or require responses to written questions. The Commission 
believes that these procedures are unnecessary for the conduct of 
effective informal hearings in rulemaking proceedings and are 
inconsistent with the informal nature of such proceedings.
    The revisions also eliminate the requirement that Commission staff 
publish a staff report containing an analysis of the rulemaking record 
and recommendations as to the form of the final rule for public 
comment. Such reports are not statutorily required in rulemaking 
proceedings under Section 18(a)(1)(B), and the Commission believes that 
eliminating this requirement will provide for more efficient 
proceedings without undermining the Commission's ability to formulate 
effective rules. The amendments also eliminate provisions providing for 
an additional comment period on the presiding officer's report on the 
rulemaking proceeding.
    The proposed amendments eliminate procedures allowing interested 
persons to petition the Commission or to appeal rulings of the 
presiding officer during an informal hearing. These provisions add 
procedural complexity to informal hearings that are inconsistent with 
the informal nature of the rulemaking process. In addition, they are 
unnecessary given the enhanced role the Commission will play in 
establishing the agenda of the informal hearing and designating 
disputed issues, if any, for resolution at the informal hearing. 
Instead, the amended rules provide a separate post-hearing process for 
petitions seeking Commission review of any rulings by the presiding 
officer denying or limiting the petitioner's ability to conduct cross-
examination or make rebuttal submissions.

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Sec.  1.18: Rulemaking Record

    Consistent with Section 18 of the FTC Act, the amended rules 
continue to provide that communications about the merits of a 
rulemaking to a Commissioner or Commissioner's advisor will be placed 
on the rulemaking record. The Commission is revising Sec.  1.18 to 
remove unnecessary language distinguishing between oral communications 
received during the comment period and those received following the 
close of the comment period on a proposed rule. The amendments require 
that a Commissioner's advisor will ensure that any oral communications 
to a Commissioner or Commissioner's advisor during a rulemaking 
proceeding will be placed on the rulemaking record through either a 
transcript of the communication or a memorandum that summarizes the 
meeting, including a list of all persons attending and a summary of all 
data and arguments presented. In addition, the amendments clarify the 
treatment of written communications to a Commissioner or their staff 
during the rulemaking proceeding. The amended rules provide that 
written communications received during a time period designated for 
acceptance of written comments or submissions will be placed on the 
rulemaking record, while written communications received outside these 
designated periods will be placed on the public record unless the 
Commission votes to place them on the rulemaking record. The amendments 
also provide that communications from Members of Congress will be 
placed on the rulemaking record if received during the time period for 
comments and on the public record if received following the time period 
for public comment.

III. Global Revisions

    The Commission is also making various changes throughout parts 0 
and 1 to:
     Reflect that Commission rulemaking notices in proceedings 
under Section 18(a)(1)(B) of the FTC Act must be submitted to the 
Committee on Energy and Commerce of the House of Representatives;
     Make the rule language more gender-neutral; \1\
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    \1\ In particular, the Commission is revising the rules to 
eliminate the use of he, him, or his as default pronouns. This 
change conforms with the recommendations of numerous style manuals. 
See, e.g., Lauren Easton, Making a Case for a Singular ``They,'' The 
Definitive Source (Mar. 24, 2017), https://blog.ap.org/products-and-services/making-a-case-for-a-singular-they (discussing the following 
addition to the AP Stylebook: ``They/them/their is acceptable in 
limited cases as a singular and-or gender-neutral pronoun, when 
alternative wording is overly awkward or clumsy.''); Chicago Style 
for the Singular They (Apr. 3, 2017), http://cmosshoptalk.com/2017/04/03/chicago-style-for-the-singular-they/ (noting that the 
seventeenth edition of the Chicago Manual of Style does not prohibit 
the use of singular they as a substitute for the generic he in 
formal writing, but recommends avoiding it and offers various other 
ways to achieve bias-free language); Bill Walsh, The Post Drops the 
``Mike''--and the Hyphen in ``Email'', Wash. Post (Dec. 4, 2015), 
https://www.washingtonpost.com/opinions/the-post-drops-the-mike-and-the-hyphen-in-email/2015/12/04/ccd6e33a-98fa-11e5-8917-653b65c809eb_story.html (noting that the Washington Post stylebook 
advises trying to write around the problem, perhaps by changing 
singulars to plurals, before using the singular they as a last 
resort).
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     Use active voice instead of passive voice;
     Replace ambiguous uses of ``shall'' with ``may'', 
``will'', or ``must'' as appropriate;
     Make nonsubstantive grammatical changes; and
     Add and standardize citations to the U.S. Code where 
appropriate.

IV. Procedural Requirements

    The Commission has determined that this rule is exempt from the 
notice and comment requirements of the Administrative Procedure Act, 5 
U.S.C. 553(b), as a rule of agency organization, practice, and 
procedure. In addition, only substantive rules require publication 30 
days prior to their effective date. 5 U.S.C. 553(d). Therefore, this 
final rule is effective upon publication in the Federal Register. The 
requirements of the Regulatory Flexibility Act also do not apply.\2\ 
Further, this rule does not contain any information collection 
requirements as defined by the Paperwork Reduction Act of 1995 as 
amended. 44 U.S.C. 3501 et seq.
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    \2\ A regulatory flexibility analysis under the RFA is required 
only when an agency must publish a notice of proposed rulemaking for 
comment. See 5 U.S.C. 603.
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    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this rule 
as not a ``major rule,'' as defined by 5 U.S.C. 804(2).

List of Subjects in 16 CFR Part 1

    Administrative practice and procedure.

    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 0--ORGANIZATION

0
1. The authority for Part 0 continues to read as follows:

    Authority: 5 U.S.C. 552(a)(1); 15 U.S.C. 46(g).


Sec.  0.1  [Amended]

0
2. In Sec.  0.1, remove the word ``which'' wherever it appears and add, 
in its place, the word ``that''.

0
3. Amend Sec.  0.2 by revising the first sentence to read as follows:


Sec.  0.2  Official address.

    The principal office of the Commission is in Washington, DC. * * *

0
4. Revise Sec.  0.3 to read as follows:


Sec.  0.3  Hours.

    Principal and regional offices are open from 8:30 a.m. to 5 p.m., 
except on Saturdays, Sundays, and legal holidays.

0
5. Revise Sec.  0.4 to read as follows:


Sec.  0.4  Laws administered.

    The Commission exercises enforcement and administrative authority 
under the Federal Trade Commission Act (15 U.S.C. 41-58), Clayton Act 
(15 U.S.C. 12-27), and more than 70 other Federal statutes, which are 
listed at https://www.ftc.gov/enforcement/statutes.

0
6. Revise Sec.  0.5 to read as follows:


Sec.  0.5  Laws authorizing monetary claims.

    (a) The Commission is authorized to entertain monetary claims 
against it under three statutes.
    (1) The Federal Tort Claims Act (28 U.S.C. 2671-2680) provides that 
the United States will be liable for injury or loss of property or 
personal injury or death caused by the negligent or wrongful acts or 
omissions of its employees acting within the scope of their employment 
or office.
    (2) The Military Personnel and Civilian Employees Claims Act of 
1964 (31 U.S.C. 3701, 3721) authorizes the Commission to compensate 
employees' claims for damage to or loss of personal property incident 
to their service.
    (3) The Equal Access to Justice Act (5 U.S.C. 504 and 28 U.S.C. 
2412) provides that an eligible prevailing party other than the United 
States will be awarded fees and expenses incurred in connection with 
any adversary adjudicative and court proceeding, unless the 
adjudicative officer finds that the agency was substantially justified 
or that special circumstances make an award unjust.
    (b) In addition, eligible parties, including certain small 
businesses, will be awarded fees and expenses incurred in defending 
against an agency demand that is substantially in excess of the final 
decision of the adjudicative officer and is unreasonable when compared 
with such decision under the facts and circumstances of the case, 
unless the

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adjudicative officer finds that the party has committed a willful 
violation of law or otherwise acted in bad faith, or special 
circumstances make an award unjust. Questions may be addressed to the 
Office of the General Counsel.


Sec.  0.7  [Amended]

0
7. Amend Sec.  0.7 by:
0
a. In paragraph (a), adding the words ``(15 U.S.C. 41 note)'' after the 
term ``1961''; and
0
b. In paragraph (b), removing the word ``shall'' and adding, in its 
place, the word ``will''.

0
8. Revise Sec.  0.8 to read as follows:


Sec.  0.8  The Chair.

    The Chair of the Commission is designated by the President, and, 
subject to the general policies of the Commission, is the executive and 
administrative head of the agency. The Chair presides at meetings of 
and hearings before the Commission and participates with other 
Commissioners in all Commission decisions. In rulemaking proceedings 
under section 18(a)(1)(B) of the Federal Trade Commission Act (15 
U.S.C. 57a(a)(1)(B)), the Chair serves as or may designate another 
Commissioner to serve as the Chief Presiding Officer or may appoint 
another person to serve as Chief Presiding Officer who is not 
responsible to any other official or employee of the Commission. 
Attached to the Office of the Chair, and reporting directly to the 
Chair, and through the Chair to the Commission, are the following staff 
units:
    (a) The Office of the Chief Privacy Officer, which ensures that the 
agency's practices and policies comply with applicable federal 
information privacy and security requirements and standards;
    (b) The Office of Congressional Relations, which coordinates all 
liaison activities with Congress;
    (c) The Office of Equal Employment Opportunity and Workplace 
Inclusion, which advises and assists the Chair and the organizational 
units in EEO policy and diversity management issues;
    (d) The Office of Policy Planning, which assists the Commission to 
develop and implement long-range competition and consumer protection 
policy initiatives; and
    (e) The Office of Public Affairs, which furnishes information 
concerning Commission activities to news media and the public.

0
9. Revise Sec.  0.9 to read as follows:


Sec.  0.9  Organization structure.

    The Federal Trade Commission includes the following principal 
units: Office of the Executive Director; Office of the General Counsel; 
Office of the Secretary; Office of the Inspector General; Office of 
Administrative Law Judges; Bureau of Competition; Bureau of Consumer 
Protection; Bureau of Economics; and Office of International Affairs.


Sec.  0.10  [Amended]

0
10. In Sec.  0.10, in the first sentence, add a comma after the word 
``programs''.

0
11. Revise Sec.  0.11 to read as follows:


Sec.  0.11  Office of the General Counsel.

    The General Counsel is the Commission's chief law officer and 
adviser, who renders necessary legal services to the Commission; 
represents the Commission in the Federal and State courts, and before 
administrative agencies in coordination with the Bureaus, in appellate 
litigation, investigative compulsory process enforcement, and defensive 
litigation; advises the Commission and other agency officials and staff 
with respect to questions of law and policy, including advice with 
respect to legislative matters and ethics; represents the agency in 
employment and labor disputes; and responds to requests and appeals 
filed under the Freedom of Information and Privacy Acts and to intra- 
and intergovernmental information access requests.

0
12. Revise Sec.  0.12 to read as follows:


Sec.  0.12  Office of the Secretary.

    The Secretary is the legal custodian of the Commission's seal, 
property, papers, and records, including legal and public records, and 
is responsible for the minutes of Commission meetings. The Secretary, 
or in the Secretary's absence an Acting Secretary, signs Commission 
orders and official correspondence. In addition, the Secretary is 
responsible for the publication of all Commission actions that appear 
in the Federal Register and for the publication of Federal Trade 
Commission decisions.


Sec.  0.13  [Amended]

0
13. In Sec.  0.13, in the second sentence, add a comma after the word 
``efficiency''.

0
14. Revise Sec.  0.14 to read as follows:


Sec.  0.14  Office of Administrative Law Judges.

    Administrative law judges are officials to whom the Commission, in 
accordance with law, delegates the initial performance of statutory 
fact-finding functions and initial rulings on conclusions of law, to be 
exercised in conformity with Commission decisions and policy directives 
and with its Rules of Practice.

0
15. Revise Sec.  0.16 to read as follows:


Sec.  0.16  Bureau of Competition.

    The Bureau is responsible for enforcing Federal antitrust and trade 
regulation laws under section 5 of the Federal Trade Commission Act (15 
U.S.C. 45), the Clayton Act (15 U.S.C. 12-27), and a number of other 
special statutes that the Commission is charged with enforcing. The 
Bureau carries out its responsibilities by investigating alleged law 
violations, recommending to the Commission such further steps as may be 
appropriate, and prosecuting enforcement actions authorized by the 
Commission. Such further steps may include seeking injunctive and other 
relief as permitted by statute in Federal district court; litigating 
before the agency's administrative law judges; negotiating settlement 
of complaints; and initiating rules or reports. The Bureau also 
conducts compliance investigations and, in compliance with Section 
16(a)(1) of the FTC Act (15 U.S.C. 56(a)(1)), initiates proceedings for 
civil penalties to assure compliance with final Commission orders 
dealing with competition and trade restraint matters. The Bureau's 
activities also include business and consumer education and staff 
advice on competition laws and compliance, and liaison functions with 
respect to foreign antitrust and competition law enforcement agencies 
and organizations, including requests for international enforcement 
assistance.

0
16. Revise Sec.  0.17 to read as follows:


Sec.  0.17  Bureau of Consumer Protection.

    The Bureau is responsible for enforcing the prohibition against 
unfair or deceptive acts or practices in section 5 of the Federal Trade 
Commission Act (15 U.S.C. 45), as well as numerous special statutes 
that the Commission is charged with enforcing. The Bureau carries out 
its responsibilities by investigating alleged law violations, 
recommending to the Commission such further steps as may be 
appropriate, and prosecuting enforcement actions authorized by the 
Commission. Such further steps may include seeking injunctive and other 
relief as permitted by statute in Federal district court; litigating 
before the agency's administrative law judges; negotiating settlement 
of complaints; initiating rules or reports; and initiating civil 
penalty proceedings for rule violations. The Bureau also conducts 
compliance investigations and, in compliance with Section 16(a)(1) of 
the FTC Act (15 U.S.C. 56(a)(1)), initiates proceedings for

[[Page 38547]]

civil penalties to assure compliance with final Commission orders 
dealing with unfair or deceptive practices. The Bureau participates in 
trade regulation rulemaking proceedings under section 18(a)(1)(B) of 
the Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B)) and other 
rulemaking proceedings under statutory authority. In addition, the 
Bureau seeks to educate both consumers and the business community about 
the laws it enforces, and to assist and cooperate with other state, 
local, and international agencies and organizations in consumer 
protection enforcement and regulatory matters.


Sec.  0.18  [Amended]

0
17. Amend Sec.  0.18 by,
0
a. Removing the word ``bureau'' wherever it appears and adding, in its 
place, the word ``Bureau''.
0
b. Removing the word ``bureaus'' and adding, in its place, the word 
``Bureaus''.

0
18. Revise Sec.  0.19 to read as follows:


Sec.  0.19  The Regional Offices.

    (a) These offices are investigatory and enforcement arms of the 
Commission, and have responsibility for investigational, trial, 
compliance, and consumer educational activities as delegated by the 
Commission. They are under the general supervision of the Bureaus of 
Competition and Consumer Protection and clear their activities through 
the appropriate operating Bureau.
    (b) The names and geographic areas of responsibility of the 
respective regional offices are as follows:
    (1) Northeast Region (located in New York City, New York), covering 
Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, 
Rhode Island, Vermont, Puerto Rico, and the U.S. Virgin Islands.
    (2) Southeast Region (located in Atlanta, Georgia), covering 
Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, 
and Tennessee.
    (3) East Central Region (located in Cleveland, Ohio), covering 
Delaware, District of Columbia, Maryland, Michigan, Ohio, Pennsylvania, 
Virginia, and West Virginia.
    (4) Midwest Region (located in Chicago, Illinois), covering 
Illinois, Indiana, Iowa, Kansas, Kentucky, Minnesota, Missouri, 
Nebraska, North Dakota, South Dakota, and Wisconsin.
    (5) Southwest Region (located in Dallas, Texas), covering Arkansas, 
Louisiana, New Mexico, Oklahoma, and Texas.
    (6) Northwest Region (located in Seattle, Washington), covering 
Alaska, Idaho, Montana, Oregon, Washington, and Wyoming.
    (7) Western Region Los Angeles (located in Los Angeles, 
California), covering Arizona, Hawaii, Southern California, Southern 
Nevada, Guam, the Northern Mariana Islands, and American Samoa.
    (8) Western Region San Francisco (located in San Francisco, 
California), covering Colorado, Northern California, Northern Nevada, 
and Utah.
    (c) Each of the regional offices is supervised by a Regional 
Director and an Assistant Regional Director, who are available for 
conferences with attorneys, consumers, and other members of the public 
on matters relating to the Commission's activities.

0
19. Revise Sec.  0.20 to read as follows:


Sec.  0.20  Office of International Affairs.

    The Office of International Affairs (OIA) is responsible for the 
agency's international antitrust and international consumer protection 
missions in coordination and consultation with the appropriate Bureaus, 
including the design and implementation of the Commission's 
international program. OIA provides support to the Bureaus of 
Competition and Consumer Protection with regard to the international 
aspects of investigation and prosecution of unlawful conduct; builds 
cooperative relationships between the Commission and foreign 
authorities; cooperates with foreign authorities on investigations and 
enforcement; works closely with the Bureaus to recommend agency 
policies to the Commission; works, through bilateral relationships, 
multilateral organizations, and trade fora to promote Commission 
priorities and policies; participates in the United States government 
interagency process to promote agency views on international issues 
within the FTC's mandate; and coordinates staff exchanges and 
internships at the FTC for staff of non-U.S. competition, consumer 
protection, and privacy agencies. OIA also assists young agencies 
around the world to build capacity to promote sound competition and 
consumer protection law enforcement.

PART 1--GENERAL PROCEDURES

0
20. Revise the authority for subpart B of Part 1 to read as follows:

    Authority: 15 U.S.C. 46; 15 U.S.C. 57a; 5 U.S.C. 552; 5 U.S.C. 
601 note.


0
21. Revise Sec.  1.7 to read as follows:


Sec.  1.7  Scope of rules in this subpart.

    The rules in this subpart apply to and govern proceedings for the 
promulgation of rules as provided in section 18(a)(1)(B) of the Federal 
Trade Commission Act (15 U.S.C. 57a(a)(1)(B)). Such rules will be known 
as trade regulation rules. All other rulemaking proceedings will be 
governed by the rules in subpart C of this part, except as otherwise 
required by law or as otherwise specified in this chapter.

0
22. Revise Sec.  1.8 to read as follows:


Sec.  1.8  Nature, authority, and use of trade regulation rules.

    (a) For the purpose of carrying out the provisions of the Federal 
Trade Commission Act, the Commission is empowered to promulgate trade 
regulation rules, which define with specificity acts or practices that 
are unfair or deceptive acts or practices in or affecting commerce. 
Trade regulation rules may include requirements prescribed for the 
purpose of preventing such acts or practices. A violation of a rule 
constitutes an unfair or deceptive act or practice in violation of 
section 5(a)(1) of that Act (15 U.S.C. 45(a)(1)), unless the Commission 
otherwise expressly provides in its rule. The respondents in an 
adjudicative proceeding may show that the alleged conduct does not 
violate the rule or assert any other defense to which they are legally 
entitled.
    (b) The Commission at any time may conduct such investigations, 
make such studies, and hold such conferences as it may deem necessary. 
All or any part of any such investigation may be conducted under the 
provisions of part 2, subpart A of this chapter.


Sec.  1.9  [Amended]

0
23. In Sec.  1.9, remove the word ``shall'' from wherever it appears in 
the section and add, in its place, the word ``will''.

0
24. Revise Sec.  1.10 to read as follows:


Sec.  1.10  Advance notice of proposed rulemaking.

    (a) Prior to the commencement of any trade regulation rule 
proceeding, the Commission must publish in the Federal Register an 
advance notice of such proposed proceeding.
    (b) The advance notice must:
    (1) Contain a brief description of the area of inquiry under 
consideration, the objectives which the Commission seeks to achieve, 
and possible regulatory alternatives under consideration by the 
Commission; and
    (2) Invite the response of interested persons with respect to such 
proposed rulemaking, including any suggestions or alternative methods 
for achieving such objectives.
    (c) The advance notice must be submitted to the Committee on

[[Page 38548]]

Commerce, Science, and Transportation of the Senate and to the 
Committee on Energy and Commerce of the House of Representatives.
    (d) The Commission may, in addition to publication of the advance 
notice, use such additional mechanisms as it considers useful to obtain 
suggestions regarding the content of the area of inquiry before 
publication of a notice of proposed rulemaking pursuant to Sec.  1.11.

0
25. Revise Sec.  1.11 to read as follows:


Sec.  1.11  Commencement of a rulemaking proceeding.

    (a) Notice of proposed rulemaking. A trade regulation rule 
proceeding will commence with a notice of proposed rulemaking (NPRM). 
An NPRM will be published in the Federal Register not sooner than 30 
days after it has been submitted to the Committee on Commerce, Science, 
and Transportation of the Senate and to the Committee on Energy and 
Commerce of the House of Representatives.
    (b) Contents of NPRM. The NPRM will include:
    (1) A statement containing, with particularity, the text of the 
proposed rule, including any alternatives, which the Commission 
proposes to promulgate;
    (2) Reference to the legal authority under which the rule is 
proposed;
    (3) A statement describing the reason for the proposed rule;
    (4) An invitation to comment on the proposed rule, as provided in 
paragraph (d) of this section;
    (5) A list of disputed issues of material fact designated by the 
Commission as necessary to be resolved, if any;
    (6) An explanation of the opportunity for an informal hearing and 
instructions for submissions relating to such a hearing, as provided in 
paragraph (e) of this section; and
    (7) A statement of the manner in which the public may obtain copies 
of the preliminary regulatory analysis, if that analysis is not in the 
notice.
    (c) Preliminary regulatory analysis. Except as otherwise provided 
by statute, the Commission must, when commencing a rulemaking 
proceeding, issue a preliminary regulatory analysis, which must 
contain:
    (1) A concise statement of the need for, and the objectives of, the 
proposed rule;
    (2) A description of any reasonable alternatives to the proposed 
rule which may accomplish the stated objective of the rule in a manner 
consistent with applicable law;
    (3) For the proposed rule, and for each of the alternatives 
described in the analysis, a preliminary analysis of the projected 
benefits and any adverse economic effects and any other effects, and of 
the effectiveness of the proposed rule and each alternative in meeting 
the stated objectives of the proposed rule; and
    (4) The information required by the Regulatory Flexibility Act, 5 
U.S.C. 601-612, and the Paperwork Reduction Act, 44 U.S.C. 3501-3520, 
if applicable.
    (d) Written comments. The Commission will accept written 
submissions of data, views, and arguments on all issues of fact, law, 
and policy. The Commission may in its discretion provide for a separate 
rebuttal period following the comment period. The subject matter of any 
rebuttal comments must be confined to subjects and issues identified by 
the Commission in its notice or by other interested persons in comments 
and must not introduce new issues into the record. The NPRM will 
establish deadlines for filing written comments and for filing rebuttal 
comments on the proposed rule.
    (e) Opportunity for hearing. The Commission will provide an 
opportunity for an informal hearing if an interested person requests to 
present their position orally or if the Commission in its discretion 
elects to hold an informal hearing. Any such request regarding an 
informal hearing must be submitted to the Commission no later than the 
close of the written comment period, including a rebuttal period, if 
any, and must include:
    (1) A request to make an oral submission, if desired;
    (2) A statement identifying the interested person's interests in 
the proceeding; and
    (3) Any proposals to add disputed issues of material fact beyond 
those identified in the notice.

0
26. Revise Sec.  1.12 to read as follows:


Sec.  1.12  Notice of Informal Hearing and Designations.

    (a) Initial notice of informal hearing. If an informal hearing has 
been requested under Sec.  1.11(e), a notice of informal hearing will 
be published in the Federal Register. The initial notice of informal 
hearing will include:
    (1) The designation of a presiding officer, pursuant to Sec.  
1.13(a)(1);
    (2) The time and place of the informal hearing;
    (3) A final list of disputed issues of material fact necessary to 
be resolved during the hearing, if any;
    (4) A list of the interested persons who will make oral 
presentations;
    (5) A list of the groups of interested persons determined by the 
Commission to have the same or similar interests in the proceeding;
    (6) An invitation to interested persons to submit requests to 
conduct or have conducted cross-examination or to present rebuttal 
submissions, pursuant to Sec.  1.13(b)(2), if desired; and
    (7) Any other procedural rules necessary to promote the efficient 
and timely determination of the disputed issues to be resolved during 
the hearing.
    (b) Requests to conduct cross-examination or present rebuttal 
submissions. Cross-examination and rebuttal submissions at an informal 
hearing are available only to address disputed issues of material fact 
necessary to be resolved. Requests for an opportunity to cross-examine 
or to present rebuttal submissions must be accompanied by a specific 
justification therefor. In determining whether to grant such requests, 
the presence of the following circumstances indicate that such requests 
should be granted:
    (1) An issue for cross-examination or the presentation of rebuttal 
submissions, is an issue of specific fact in contrast to legislative 
fact;
    (2) A full and true disclosure with respect to the issue can be 
achieved only through cross-examination rather than through rebuttal 
submissions or the presentation of additional oral submissions; and
    (3) The particular cross-examination or rebuttal submission is 
required for the resolution of a disputed issue.
    (c) Final notice of informal hearing. Based on requests submitted 
in response to the initial notice of public hearing, the Commission 
will publish a final notice of informal hearing in the Federal 
Register. The final notice of public hearing will include:
    (1) A list of the interested persons who will conduct cross-
examination regarding disputed issues of material fact;
    (2) A list of any groups of interested persons with the same or 
similar interests in the proceeding who will be required to choose a 
single representative to conduct cross-examination on behalf of the 
group, as provided in paragraph (d) of this section; and
    (3) A list of the interested persons who will be permitted to make 
rebuttal submissions regarding disputed issues of material fact.
    (d) Designation of group representatives for cross-examination. 
After consideration of any submissions under Sec.  1.11(e), the 
Commission will, if appropriate, identify groups of interested persons 
with the same or similar interests in the proceeding. The Commission 
may require any group of

[[Page 38549]]

interested persons with the same or similar interests in the proceeding 
to select a single representative to conduct cross-examination on 
behalf of the group.

0
27. Revise Sec.  1.13 to read as follows:


Sec.  1.13  Conduct of informal hearing by the presiding officer.

    (a) Presiding officer--(1) Designation. In a trade regulation rule 
proceeding in which the Commission determines an informal hearing will 
be conducted, the initial notice of informal hearing must designate a 
presiding officer, who will be appointed by the Chief Presiding Officer 
specified in Sec.  0.8 of this chapter.
    (2) Powers of the presiding officer. The presiding officer is 
responsible for the orderly conduct of the informal hearing. The 
presiding officer has all powers necessary or useful to that end, 
including the following:
    (i) To issue any public notice that may be necessary for the 
orderly conduct of the informal hearing;
    (ii) To modify the location, format, or time limits prescribed for 
the informal hearing, except that the presiding officer may not 
increase the time allotted for an informal hearing beyond a total of 
five hearing days over the course of a thirty-day period, unless the 
Commission, upon a showing of good cause, extends the number of days 
for the hearing;
    (iii) To prescribe procedures or issue rulings to avoid unnecessary 
costs or delay, including, but not limited to, the imposition of 
reasonable time limits on the number and duration of oral presentations 
from individuals or groups with the same or similar interests in the 
proceeding and requirements that any cross-examination, which a person 
may be entitled to conduct or have conducted, be conducted by the 
presiding officer on behalf of that person in such a manner as the 
presiding officer determines to be appropriate and to be required for a 
full and true disclosure with respect to any issue designated for 
consideration in accordance with Sec.  1.13(b)(1);
    (iv) To issue rulings selecting or modifying the designated 
representatives of groups of interested persons, as provided in 
paragraph (a)(3) of this section;
    (v) To require that oral presentations at the informal hearing be 
under oath;
    (vi) To require that oral presentations at the informal hearing be 
submitted in writing in advance of presentation; and
    (viii) To rule on all requests of interested persons made during 
the course of the informal hearing.
    (3) Selection or modification of group representatives. If a group 
of interested persons designated by the Commission under Sec.  1.12(d) 
to select a group representative is unable to agree upon a 
representative, the presiding officer may select a representative for 
the group. The presiding officer may entertain requests by a member of 
a group of interested persons to conduct or have conducted cross-
examination under paragraph (b)(2) of this section if, after good-faith 
effort, the person is unable to agree upon a single representative with 
other group members and is able to demonstrate that the group 
representative will not adequately represent the person's interests. If 
the presiding officer finds that there are substantial and relevant 
issues or data that will not be adequately presented by the group 
representative, then the presiding officer may allow that person to 
conduct or have conducted any appropriate cross-examination on issues 
affecting the person's particular interests.
    (4) Organization. In the performance of their rulemaking functions, 
presiding officers are responsible to the chief presiding officer who 
must not be responsible to any other officer or employee of the 
Commission.
    (5) Ex parte communications. Except as required for the disposition 
of ex parte matters as authorized by law, no presiding officer may 
consult any person or party with respect to any fact in issue unless 
such officer gives notice and opportunity for all parties to 
participate.
    (b) Additional procedures when there are disputed issues of 
material fact. If requested under Sec.  1.11(d), an informal hearing 
with the opportunity for oral presentations will be conducted by the 
presiding officer. In addition, if the Commission determines that there 
are disputed issues of material fact that are material and necessary to 
resolve, the informal hearing on such issues will be conducted in 
accordance with Sec.  1.13(b)(2).
    (1) Nature of issues for consideration in accordance with Sec.  
1.13(b)(2)--(i) Issues that must be considered in accordance with Sec.  
1.13(b)(2). The only issues that must be designated for consideration 
in accordance with paragraphs (b)(2) of this section are disputed 
issues of fact that are determined by the Commission to be material and 
necessary to resolve.
    (ii) Addition or modification of issues for consideration in 
accordance with Sec.  1.13(b)(2). The presiding officer may at any time 
on the presiding officer's own motion or pursuant to a written petition 
by interested persons, add or modify any issues designated pursuant to 
Sec.  1.12(a). No such petition shall be considered unless good cause 
is shown why any such proposed issue was not proposed pursuant to Sec.  
1.11(e). In the event that new issues are designated, the presiding 
officer may determine whether interested persons may conduct cross-
examination or present rebuttal submissions with respect to each new 
issue, as provided in Sec.  1.12(b), and may select or modify group 
representatives for cross examination with respect to each new issue, 
as provided in paragraph (a)(3) of this section.
    (2) Cross-examination and the presentation of rebuttal submissions 
by interested persons. The presiding officer will conduct or allow to 
be conducted cross-examination of oral presentations and the 
presentation of rebuttal submissions relevant to the disputed issues of 
material fact designated for consideration during the informal hearing. 
For that purpose, the presiding officer may require submission of 
written requests for presentation of questions to any person making 
oral presentations and will determine whether to ask such questions or 
any other questions. All requests for presentation of questions will be 
placed in the rulemaking record. The presiding officer will also allow 
the presentation of rebuttal submissions as appropriate and required 
for a full and true disclosure with respect to the disputed issues of 
material fact designated for consideration during the informal hearing.
    (c) Written transcript. A verbatim transcript will be made of the 
informal hearing and placed in the rulemaking record.
    (d) Recommended decision. The presiding officer will make a 
recommended decision based on their findings and conclusions as to all 
relevant and material evidence. The recommended decision will be made 
by the presiding officer who presided over the informal hearing except 
that such recommended decision may be made by another officer if the 
officer who presided over the hearing is no longer available to the 
Commission. The recommended decision must be rendered within sixty days 
of the completion of the hearing. If a petition for review of a ruling 
by the presiding officer has been filed under paragraph (e) of this 
section, the recommended decision must be rendered within sixty days 
following the resolution of that petition or any rehearing required by 
the Commission. The presiding officer's recommended decision will be 
limited to explaining the presiding officer's proposed resolution of 
disputed issues of material fact.
    (e) Post-hearing review by the Commission of rulings by the 
presiding

[[Page 38550]]

officer. (1) Within ten days of the completion of the informal hearing, 
any interested person may petition the Commission for review of a 
ruling by the presiding officer denying or limiting the petitioner's 
ability to conduct cross-examination or make rebuttal submissions upon 
a showing that the ruling precluded disclosure of a disputed material 
fact that was necessary for fair determination by the Commission of the 
rulemaking proceeding as a whole. Such petitions must not exceed eight 
thousand words. This word count limitation includes headings, 
footnotes, and quotations, but does not include the cover, table of 
contents, table of citations or authorities, glossaries, statements 
with respect to oral argument, any addendums containing statutes, rules 
or regulations, any certificates of counsel, or proposed form of order. 
A petition hereunder will not stay the rulemaking proceeding unless the 
Commission so orders. All petitions filed under this paragraph will be 
a part of the rulemaking record.
    (2) The Commission may, in its discretion, hear the appeal. 
Commission review, if granted, will be based on the petition and 
anything on the rulemaking record, without oral argument or further 
briefs, unless otherwise ordered by the Commission. If the Commission 
grants review, it will render a decision within thirty days of the 
announcement of its decision to review unless, upon a showing of good 
cause, the Commission extends the number of days for review.

0
28. Revise Sec.  1.14 to read as follows:


Sec.  1.14  Promulgation.

    (a) The Commission, after review of the rulemaking record, may 
issue, modify, or decline to issue any rule. If the Commission wants 
further information or additional views of interested persons, it may 
withhold final action pending the receipt of such additional 
information or views. If it determines not to issue a rule, it may 
adopt and publish an explanation for not doing so.
    (1) Statement of basis and purpose. If the Commission determines to 
promulgate a rule, it will adopt a statement of basis and purpose to 
accompany the rule, which must include:
    (i) A statement regarding the prevalence of the acts or practices 
treated by the rule;
    (ii) A statement as to the manner and context in which such acts or 
practices are unfair or deceptive; and
    (iii) A statement as to the economic effect of the rule, taking 
into account the effect on small businesses and consumers.
    (2) Final regulatory analysis. Except as otherwise provided by 
statute, if the Commission determines to promulgate a final rule, it 
will issue a final regulatory analysis relating to the final rule. Each 
final regulatory analysis must contain:
    (i) A concise statement of the need for, and the objectives of, the 
final rule;
    (ii) A description of any alternatives to the final rule that were 
considered by the Commission;
    (iii) An analysis of the projected benefits and any adverse 
economic effects and any other effects of the final rule;
    (iv) An explanation of the reasons for the determination of the 
Commission that the final rule will attain its objectives in a manner 
consistent with applicable law and the reasons the particular 
alternative was chosen;
    (v) A summary of any significant issues raised by the comments 
submitted during the public comment period in response to the 
preliminary regulatory analysis, and a summary of the assessment by the 
Commission of such issues; and
    (vi) The information required by the Regulatory Flexibility Act, 5 
U.S.C. 601-612, and the Paperwork Reduction Act, 44 U.S.C. 3501-3520, 
if applicable.
    (3) Small entity compliance guide. For each rule for which the 
Commission must prepare a final regulatory flexibility analysis, the 
Commission will publish one or more guides to assist small entities in 
complying with the rule. Such guides will be designated as ``small 
entity compliance guides.''
    (b) If the Commission determines, upon its review of the rulemaking 
record, to propose a revised rule for further proceedings in accordance 
with this subpart, such proceedings, including the opportunity of 
interested persons to avail themselves of the procedures of Sec.  
1.13(b)(2), will be limited to those portions of the revised rule, the 
subjects and issues of which were not substantially the subject of 
comment in response to a previous notice of proposed rulemaking.
    (c) The final rule will be published in the Federal Register and 
will include the Statement of Basis and Purpose for the rule or provide 
an explanation of the manner in which the public may obtain copies of 
that document.

0
29. Revise Sec.  1.16 to read as follows:


Sec.  1.16  Petition for exemption from trade regulation rule.

    Any person to whom a rule would otherwise apply may petition the 
Commission for an exemption from such rule. The procedures for 
determining such a petition will be those of subpart C of this part.

0
30. Revise Sec.  1.18 to read as follows:


Sec.  1.18  Rulemaking record.

    (a) Definition. For purposes of these rules the term rulemaking 
record includes the final rule, its statement of basis and purpose, the 
verbatim transcripts of the informal hearing, if any, written 
submissions, the recommended decision of the presiding officer, any 
communications placed on the rulemaking record pursuant to Sec.  
1.18(c), and any other information the Commission considers relevant to 
the rule.
    (b) Public availability. The rulemaking record will be publicly 
available except when the Commission, for good cause shown, determines 
that it is in the public interest to allow any submission to be 
received in camera subject to the provisions of Sec.  4.9 of this 
chapter.
    (c) Communications to Commissioners and Commissioners' personal 
staffs--(1) Communications by outside parties. Except as otherwise 
provided in this subpart or by the Commission, after the Commission 
votes to issue a notice of proposed rulemaking, comment on the proposed 
rule should be directed as provided in the notice. Communications with 
respect to the merits of that proceeding from any outside party to any 
Commissioner or Commissioner's advisor will be subject to the following 
treatment:
    (i) Written communications. Written communications, including 
written communications from members of Congress, received within the 
period for acceptance of initial or rebuttal written comments or other 
written submissions will be placed on the rulemaking record. Written 
communications received outside of the time periods designated for 
acceptance of written comments or other written submissions will be 
placed on public record unless the Commission votes to place them on 
the rulemaking record.
    (ii) Oral communications. Oral communications to a Commissioner or 
Commissioner's advisor are permitted only when advance notice of such 
oral communications is published by the Commission's Office of Public 
Affairs in its Weekly Calendar and Notice of ``Sunshine'' Meetings. A 
Commissioner's advisor will ensure such oral communications are 
transcribed verbatim or summarized at the discretion of the 
Commissioner or Commissioner's advisor to whom such oral communications 
are made and promptly placed on the rulemaking record. Memoranda 
summarizing such

[[Page 38551]]

oral communications must list all persons attending or otherwise 
participating in the meeting at which the oral communication was made, 
and summarize all data presented and arguments made during the meeting.
    (iii) Congressional communications. The provisions of paragraph 
(c)(1)(ii) of this section do not apply to communications from Members 
of Congress. Memoranda prepared by the Commissioner or Commissioner's 
advisor setting forth the contents of any oral congressional 
communications will be placed on the public record. If the 
communication occurs within the comment period and is transcribed 
verbatim or summarized, the transcript or summary will be promptly 
placed on the rulemaking record. A transcript or summary of any oral 
communication which occurs after the time period for acceptance of 
written comments will be placed promptly on the public record.
    (2) Communications by certain officers, employees, and agents of 
the Commission. After the Commission votes to issue a notice of 
proposed rulemaking, any officer, employee, or agent of the Commission 
with investigative or other responsibility relating to any rulemaking 
proceeding within any operating bureau of the Commission is prohibited 
from communicating or causing to be communicated to any Commissioner or 
to the personal staff of any Commissioner any fact which is relevant to 
the merits of such proceeding and which is not on the rulemaking record 
of such proceeding, unless such communication is made available to the 
public and is included in the rulemaking record. The provisions of this 
subsection do not apply to any communication to the extent such 
communication is required for the disposition of ex parte matters as 
authorized by law.

0
31. Revise Sec.  1.19 to read as follows:


Sec.  1.19  Modification of a rule by the Commission at the time of 
judicial review.

    If a reviewing court orders, under section 18(e)(2) of the Federal 
Trade Commission Act (15 U.S.C. 57a(e)(2)), further submissions and 
presentations on the rule, the Commission may modify or set aside its 
rule or make a new rule by reason of the additional submissions and 
presentations. Such modified or new rule will then be filed with the 
court together with an appropriate statement of basis and purpose and 
the return of such submissions and presentations.

0
32. Revise Sec.  1.20 to read as follows:


Sec.  1.20  Alternative procedures.

    If the Commission determines at the commencement of a rulemaking 
proceeding to employ procedures other than those established in this 
subpart, it may do so by announcing those procedures in the Federal 
Register notice commencing the rulemaking proceeding.

    By direction of the Commission.
April J. Tabor,
Secretary.

The Following Will Not Appear in the Code of Federal Regulations

Statement of Commissioner Rebecca Kelly Slaughter Joined by Chair Lina 
Khan and Commissioner Rohit Chopra Regarding the Adoption of Revised 
Section 18 Rulemaking Procedures

    The FTC's revisions to Parts 0 and 1 of the Commission's Rules of 
Practice will bring the Commission's procedures for promulgating Trade 
Regulation Rules under Section 18 of the FTC Act in line with the 
statute's requirements. These changes reflect the Commission's serious 
appreciation of its statutory obligation to ``avoid unnecessary costs 
or delay'' \1\ in those proceedings and our commitment to using all of 
our available tools robustly to protect consumers from the unfair and 
deceptive tricks and traps they face in our modern economy.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 57a(c)(2).
---------------------------------------------------------------------------

I. Background

    The mandate of the Federal Trade Commission is to address ``unfair 
or deceptive acts or practices'' and ``unfair methods of competition'' 
in or affecting commerce. In 1975, Congress passed the Magnuson-Moss 
Warranty--Federal Trade Commission Improvement Act \2\ laying out 
specific procedures for the promulgation of ``Trade Regulation Rules'' 
to protect consumers in a dynamic and changing economic landscape. 
Indeed, the Commission rightfully responded to this grant of authority 
by initiating more than a dozen rulemakings in the few months and years 
after its passage.\3\ Yet, in the intervening decades, we have nearly 
abandoned using Section 18 rulemaking as it was intended: To provide a 
participatory, dynamic process for setting out clear conduct rules for 
industry. The change in approach began in the early 1980s amid a broad 
deregulatory wave, including at the Commission. The Federal Trade 
Commission Improvements Act of 1980 instituted some lasting revisions 
around the edges of FTC rulemaking, including adding a requirement to 
issue an Advance Notice of Proposed Rulemaking (ANPRM) before 
initiating rulemaking.\4\ However, the true and lasting changes to the 
FTC were self-imposed limitations through bureaucratic organization.
---------------------------------------------------------------------------

    \2\ Public Law 93-637, 88 Stat. 2183 (1975).
    \3\ Though few of the Trade Regulation Rules from that initial 
burst of Section 18 activity have survived the ensuing deregulatory 
backlash, many other TRRs under various FTC authorities have 
continued to provide important regulatory guidance on issues of 
public concern. Among those are: The Negative Option Rule (16 CFR 
part 425); the Franchise Rule (16 CFR part 436); the Business 
Opportunity Rule (16 CFR part 437); the Credit Practices Rule (16 
CFR part 444); the Funeral Rule (16 CFR part 453); and the Eyeglass 
Rule (16 CFR part 456).
    \4\ Public Law 96-252, Section 8(a)(3).
---------------------------------------------------------------------------

    The FTC of the 1980s sought to radically reduce the agency's 
rulemaking capacity. A fundamental part of that posture are the agency-
promulgated rules of practice. Parts 0 and 1 of these rules shape 
Commission behavior and process for Section 18 rulemaking. The 
imposition of requirements beyond what Congress provided in statute has 
led to the widespread belief among some commentators and policymakers 
that Section 18 rulemaking is too difficult to address many of the 
unfair and deceptive practices prevalent in the economy today.

II. Changes to the Rules of Practice

    These changes to the rules of practice realign Commission practice 
with our statutory requirements and remove those extraneous and onerous 
procedures that serve only to delay Commission business. These 
streamlined Section 18 rules still provide far greater transparency, 
process, and opportunity for the public and businesses alike to be 
heard than APA notice-and-comment rulemaking procedures.
    These changes include providing the Commission with greater 
accountability and control over Section 18 rulemaking including 
deciding the final list of disputed material facts to be resolved, 
deciding who will make oral presentations to the Commission and who 
will cross examine or present rebuttals submissions. The chair will now 
either serve as or designate the Chief Presiding Officer and the 
Commission will ensure orderly conduct for those rulemakings. 
Previously, the Chief Administrative Law Judge was designated as Chief 
Presiding Officer in Part 0, which reinforced the myth that Section 18 
rulemakings required elaborate, interminable judicial processes instead 
of straightforward public participation. Additionally, these 
streamlined

[[Page 38552]]

provisions allow Commission to designate disputed issues of material 
fact earlier in the rulemaking proceeding with the issuance of the 
Notice of Proposed Rulemaking (NPRM) and avoid delaying proceedings 
with unrelated matters late in the process.
    These procedures also enhance Commission transparency by requiring 
that records of both written and oral communications to a Commissioner 
or their advisors during a rulemaking proceeding will be placed in the 
rulemaking record and be available to the public.
    The revised rules respect the underlying statutory requirements of 
Section 18 that provide ample transparency and opportunity for public 
participation in the promulgation of Trade Regulation Rules. These 
requirements include: The publication of an ANPRM for comment; the 
advance submission of the ANPRM to our congressional oversight 
committees; the publication of an NPRM; the advance submission of the 
NPRM to the congressional committees; an informal hearing to resolve 
any disputed issue of material fact; and publication of a final rule 
accompanied by a statement of basis and purpose.\5\ These statutory 
guidelines provide for substantially greater public engagement and 
congressional oversight than the Administrative Procedure Act, under 
which most federal rulemaking is conducted. The Commission's rules of 
practice should--and now do--adhere closely to this statutory 
framework.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 57a.
---------------------------------------------------------------------------

III. Conclusion

    Revitalizing the Commission's ability to issue timely Trade 
Regulation Rules under Section 18 will provide much needed clarity 
about how our century-old statute applies to contemporary economic 
realities and will allow the FTC to define with specificity what acts 
or practices are unfair or deceptive under Section 5 of the FTC Act.
    Prospective trade rules will give businesses and consumers concrete 
guidance about their responsibilities and rights. Importantly the 
Commission will be able to exercise its prosecutorial discretion to 
seek a wide variety of relief, including redress, civil monetary 
penalties, reformation of contracts, and other relief, against first-
time violators of Trade Regulation Rules under Section 19 of the FTC 
act. While rulemaking is no substitute for a permanent fix to our 
Section 13(b) authority to obtain monetary relief, trade rules can help 
ensure businesses will no longer be able to take advantage of consumers 
and cement their market position by engaging in practices that do 
people real harm until we catch them and take them to court the first 
time.
    Self-imposed red tape has only created uncertainty and delay for 
the important business of this Commission. The imposition of those 
requirements decades ago was the FTC's signal to the business world 
that the brief era of Section 18 rulemaking had come to an end. With 
the adoption of these streamlined procedures we wish to signal a change 
in Commission practice and ambition: We intend to fulfil our mission to 
protect against unfair and deceptive practices in commerce and provide 
consumers and businesses with due process, clarity, and transparency 
while crafting the rules to do so.

Dissenting Statement of Commissioner Christine S. Wilson

    Regulations, even well-intentioned ones, impose costs that stifle 
innovation, raise the costs of doing business, limit consumer choice 
and increase the prices that consumers must pay, and ultimately 
undercut America's global competitiveness.\1\ Congress empowered the 
FTC to issue trade regulations when it passed the Magnuson-Moss Act.\2\ 
At the same time, it imposed significant procedural obligations on the 
Commission to cabin the agency's broad rulemaking discretion.
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    \1\ I have issued several statements discussing this previously. 
See Regulatory Review of Safeguards Rule, Dissenting Statement of 
Commissioner Noah Joshua Phillips and Commissioner Christine S. 
Wilson (Mar. 5, 2019), available at https://www.ftc.gov/system/files/documents/publicstatements/1466705/reg_review_of_safeguards_rule_cmr_phillips_wilson_dissent.pdf; 
Notice of Proposed Rulemaking: Energy Labeling Rule, Dissenting 
Statement of Christine S. Wilson (Dec. 10, 2018), available at 
https://www.ftc.gov/system/files/documents/publicstatements/1433166/2018-12-7_statement_of_c_wilson_energy_labeling.pdf.
    \2\ Magnuson-Moss Warranty Act, Public Law 93-637, 88 Stat. 
2183.
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    In the wake of the Magnuson-Moss Act, the agency engaged in a 
flurry of rulemaking activity that sought to regulate broad swaths of 
the economy.\3\ The negative reaction from businesses and many in 
Congress was swift. During this period, the Washington Post famously 
accused the agency of attempting to be the ``national nanny.'' \4\ 
Congress found that the agency's rulemaking efforts were filled with 
``excessive ambiguity, confusion, and uncertainty.'' \5\ Backlash from 
the agency's sweeping regulatory efforts of the late 1970s culminated 
in the Federal Trade Commission Improvements Act of 1980, which imposed 
additional procedural obligations on Section 18 rulemaking efforts.\6\ 
In other words, Congress sought to cabin the agency's discretion even 
more in what famed legal scholar Earnest Gellhorn characterized as 
``The Wages of Zealotry.'' \7\
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    \3\ I have described some of these rulemaking initiatives in 
recent statements. See Notice of Proposed Rulemaking for the Energy 
Labeling Rule, Dissenting Statement of Commissioner Christine S. 
Wilson (Dec. 22, 2020), available at https://www.ftc.gov/system/files/documents/public_statements/1585242/commission_wilson_dissenting_statement_energy_labeling_rule_final12-22-2020revd2.pdf; Advance Notice of Proposed Rulemaking for 
Regulatory Review of the Amplifier Rule, Concurring Statement of 
Commissioner Christine S. Wilson (Dec. 17, 2020), available at 
https://www.ftc.gov/system/files/documents/public_statements/1585038/p974222amplifierrulewilsonstatement.pdf.
    \4\ The FTC as National Nanny, Wash. Post (Mar. 1, 1978), 
https://www.washingtonpost.com/archive/politics/1978/03/01/the-ftc-as-national-nanny/69f778f5-8407-4df0-b0e9-7f1f8e826b3b/.
    \5\ S. Rep. No. 96-500, at 3 (1979).
    \6\ Federal Trade Commission Improvements Act of 1980, Public 
Law 96-252, 94 Stat. 374.
    \7\ Ernest Gellhorn, The Wages of Zealotry: The FTC Under Siege, 
4 Regulation 33 (1980).
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    Considering the backlash to this agency's earlier era of unbounded 
rulemaking activity, I am gravely concerned about today's proposals to 
pare down procedural safeguards embedded in our rules of practice 
related to Section 18 rulemaking. I want to thank Commissioner 
Slaughter for her transparency in explaining the materials included in 
the Commission's Section 18 rule proposal. Making this kind of 
information available to the public helps to foster the public's 
understanding of our proposal and also creates an opportunity for more 
open dialogue. Considering the proposal outlined by Commissioner 
Slaughter today, I would find it constructive to discuss a number of 
questions.
    First, with respect to the objective management of the rulemaking 
process: The role of a Presiding Officer is to oversee the fair 
adjudication of the hearing process and make independent 
recommendations to the Commission based on relevant and material 
evidence. During the 1970s rulemaking spree, the Presiding Officer was 
viewed as a puppet of agency management, leading to the perception that 
outcomes were biased and predetermined. To address this issue and build 
trust in the rulemaking process, Congress imposed obligations designed 
to ensure the independence of the Presiding Officer.\8\ The Commission, 
heeding Congressional concerns regarding independence, required the 
Chief Administrative Law Judge to serve as the Chief Presiding Officer 
and

[[Page 38553]]

empowered the Presiding Officers to lead the hearing process.
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    \8\ Federal Trade Commission Improvements Act of 1980, Public 
Law 96-252, 94 Stat. 374.
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     In light of these Congressional concerns, why does today's 
proposal move away from using independent ALJs as Presiding Officers? 
How can we avoid public perception that the Commission is politicizing 
the rulemaking process if the Chair appoints the Presiding Officer?
     How can we preserve the independence of the Presiding 
Officer if the Commission, not the Presiding Officer, decides which 
issues will be discussed at the hearing and which parties will be 
permitted to testify, conduct cross-examination, and offer rebuttal 
evidence?
     How can the Commission ensure we get a neutral and 
thorough accounting of evidence and data instead of a cherry-picked 
record that serves an agenda?
     Under the revised rules, the Commission, not the Presiding 
Officer, will determine the list of disputed issues of material facts. 
How can stakeholders ensure that their proposed factual disputes will 
be part of the rulemaking record if their input is out of step with the 
majority view of the Commission?
    Second, with respect to procedural limitations that impact public 
understanding and opportunities for input: The rule revisions remove 
self-imposed restrictions I view as deliberate choices by this agency 
to comply not just with the letter of our Congressional mandate but the 
spirit of the law. Following our rulemaking spree in the 1970s, the FTC 
was stripped of funding, stripped of legal authorities, and required to 
institute new and substantial rulemaking steps to foster public trust 
in our trade rules.\9\ Recognizing this agency was on the brink of 
being shuttered, our rules of practice adopted a number of rulemaking 
procedures that provided for additional public comment periods, 
publication of a staff report, and multiple opportunities for the 
public to weigh in on disputed issues of material fact. While the 
procedures as revised may comply with the statute as drafted, I support 
the FTC's existing approach that provides for robust additional public 
input.
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    \9\ Id. See also J. Howard Beales III, The Federal Trade 
Commission's Use of Unfairness Authority: Its Rise, Fall, and 
Resurrection, 22 J. Pub. Pol'y & Mktg. 192 (2003).
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     If the agency is preparing to remove discretionary steps 
from our rulemaking process, are we concerned the more limited process 
will fail to identify unintended consequences of proposed rules, 
particularly those that could harm small businesses and marginalized 
communities?
     Is the Commission concerned that the public will view the 
more limited opportunities to comment on proposed rules as running 
counter to the democratic rationales for rulemaking my colleagues have 
previously espoused?
    Additionally, rulemaking efforts are enhanced when the public has 
the input from expert staff at agencies overseeing the rulemaking 
process. The FTC has built transparency into our rules of practice by 
requiring that rulemaking staff publish a staff report containing their 
analysis of the rulemaking record and recommendations as to the form of 
the final rule. But the new rules eliminate the staff report 
requirement.
     Considering the value of staff reports, how will the 
Commission build trust in the enforcement of new trade rules without 
transparency into staff's recommendations?
     In what ways will the public's understanding of any final 
rules suffer because the Commission will no longer publish a report 
from expert FTC staff highlighting key issues and formulating 
recommendations based on the record?
    The Commission's proposal to revise its rules of practice related 
to Section 18 rulemaking procedures is not a small adjustment enacted 
to improve efficiency. These changes have the potential to usher in a 
return to aggressive, unbounded rulemaking efforts that could transform 
entire industries without clear theories of law violations and 
empirical foundations for recommended regulatory burdens. Even as we 
speak, Congress is considering bills that run the gamut from giving the 
FTC expansive new authority and resources to eliminating the agency's 
jurisdiction. In the midst of so much criticism and scrutiny from so 
many angles regarding so many aspects of our jurisdiction, why are we 
embarking on this path of revisiting an era that led to such 
significant constraints on our jurisdiction?
    As the saying goes, if you don't acknowledge the mistakes of the 
past, you are doomed to repeat them. One striking example of this 
disregard for history can be found in the House Judiciary Committee's 
Majority Staff Report, which 12 different times points to railroad 
regulation as a model for Big Tech.\10\ In a stunning omission, nowhere 
in its 450 pages or 2,500 footnotes does the report mention the fact of 
the bipartisan repeal of this regulatory framework because it harmed 
consumers and stifled innovation; neither does it mention the benefits 
that came from deregulation.\11\
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    \10\ For other reactions to the Majority Staff Report, see 
Christine S. Wilson, Remarks for American Bar Association Webcast, 
Interview with Commissioner Wilson and Barry Nigro on the House 
Judiciary Report, (Nov. 13 2020), https://www.ftc.gov/system/files/documents/public_statements/1588040/aba_interview_with_commissioner_wilson_on_the_house_judiciary_report.pdf and Christine S. Wilson, Remarks for the 2020 Global Forum on 
Competition, (Dec. 7 2020), https://www.ftc.gov/system/files/documents/publicstatements/1589376/wilson-oecd-2020remarks.pdf.
    \11\ See Majority Staff Of H. Comm. On The Judiciary, 116th 
Cong., Investigation Of Competition In Digital Markets 7 (2020), 
https://judiciary.house.gov/uploadedfiles/competition_in_digital_markets.pdf at 380 (``In the railroad 
industry, for example, a congressional investigation found that the 
expansion of common carrier railroads into the coal market 
undermined independent coal producers, whose wares the railroads 
would deprioritize in to give themselves superior access to markets. 
In 1893, the Committee on Interstate and Foreign Commerce wrote that 
`[n]o competition can exist between two producers of a commodity 
when one of them has the power to prescribe both the price and 
output of the other.' Congress subsequently enacted a provision to 
prohibit railroads from transporting any goods that they had 
produced or in which they held an interest.''); id. at 382 (``The 
1887 Interstate Commerce Act, for example, prohibited discriminatory 
treatment by railroads.''); id. at 383 (``Historically, Congress has 
implemented nondiscrimination requirements in a variety of markets. 
With railroads, the Interstate Commerce Commission oversaw 
obligations and prohibitions applied to railroads designated as 
common carriers''); see also Christine S. Wilson & Keith Klovers, 
The growing nostalgia for past regulatory misadventures and the risk 
of repeating these mistakes with Big Tech, 8 J. Antitrust 
Enforcement 10, 12-14 (2019), https://academic.oup.com/antitrust/article/8/1/10/564371 (discussing the benefits from dissolving the 
ICC).
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    There are many at the FTC who lived through the 1970s and 1980s and 
experienced the public and Congressional backlash during those dark 
days of the agency's history. There are many others who worked with and 
learned from those who lived through that period. Current management 
would be wise to seek their guidance.
[FR Doc. 2021-15313 Filed 7-21-21; 8:45 am]
BILLING CODE 6750-01-P