On September 25, 2008, the Federal Trade Commission (FTC) issued a Notice of Proposed Rulemaking (NPRM) seeking public comment on proposed rule revisions to Parts 3 and 4 of the FTC’s Rules of Practice for adjudicative proceedings. The FTC’s stated rationale for its proposed amendments is to “further expedite its adjudicative proceedings, improve the quality of adjudicative decision making, and clarify the respective roles of the Administrative Law Judge (ALJ) and the Commission in Part 3 proceedings.” To achieve these goals, the proposed rules set shorter time limits on the adjudicatory process, impose significant limitations on discovery and motions practice, and expand the role of the Commission vis-à-vis ALJs in the oversight and resolution of adjudicative proceedings.
Public comments on the NPRM were due on November 6, 2008, 30 days after the NPRM’s publication in the Federal Register. Several parties filed comments, including the Antitrust Section of the American Bar Association, the United States Chamber of Commerce, and Whole Foods Market, Inc. Although the specific comments varied, all of the commenters agree that the proposed rule changes are overreaching and have the potential to disadvantage respondents in adjudicative proceedings before the FTC. For example, most of the commenters believe that requiring the Commission (rather than ALJ) to resolve certain prehearing, interlocutory, and dispositive proceedings and motions removes the important procedural safeguard of a neutral, independent adjudicator because of the Commission’s dual role as investigator / prosecutor and adjudicator. In addition, while the commenters generally agree that shorter time limits could reduce protracted proceedings, they are concerned that the proposed rules shorten some deadlines too much (at the expense of respondents) while failing to address the most significant cause of protracted proceedings: Commission delay in issuing a final decision. Some commenters also believe that any limited efficiency gain from the proposed rules that limit, for example, discoverable FTC materials, expert discovery, depositions, interrogatories and hearsay rule protections is outweighed by the potential for these rules to unfairly disadvantage respondents in adjudicatory proceedings. Another common criticism of the proposed rules is that they are designed to reinforce the approach pursued by the FTC in FTC v. Inova Health Systems Foundation and FTC v. Whole Foods, discussed in detail in the Summer 2008 issue of this publication. In Whole Foods, the FTC departed from long-established precedent and appealed the federal district court’s denial of a preliminary injunction (PI). In Inova, the FTC took the extraordinary steps of designating Commissioner Rosch as the presiding ALJ and refusing to stay the administrative proceedings pending the outcome of the FTC’s PI motion in federal district court. The FTC also convinced the federal district court to decide the PI motion without discovery or an evidentiary hearing by assuring the court that it would complete its administrative proceedings on an expedited schedule. The apparent effect of these decisions and the proposed rules is to shift the trial on the merits from the PI motion in federal district court to FTC administrative proceedings. The commenters argue that such a shift is problematic because of both the insurmountable delay this approach would impose on unconsummated mergers and because the approach would result in significantly greater divergence between FTC and DOJ enforcement procedures. It will be interesting to follow this process to see if the FTC alters its proposed rules as the commenters suggest, or maintains them as proposed. If the proposed rule is not altered, litigants in FTC Part 3 proceedings will certainly experience significant procedural differences which, in some cases, could affect case outcomes.