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Price v. Philip Morris12/15/2005
h the enactment of the Labeling Act. However, the FTC's "Statement of Basis and Purpose of the Trade Regulation Rule" (Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed. Reg. at 8325-75 (hereinafter 1964 FTC Statement)), contains valuable insights into the FTC's use of rulemaking and adjudication in the regulatory process.
The 1964 FTC Statement offers "ten reasons why a formal rule-making proceeding may be preferable to an adjudicative proceeding, or a series of adjudicative proceedings." 1964 FTC Statement, 29 Fed. Reg. at 8368. Among these reasons are: in formal rulemaking proceedings, all interested persons are given an opportunity to be heard; the rules of evidence and other procedural safeguards that operate in the adjudicative process are not tailored to the needs of rulemaking; and rulemaking through adjudication may be a more costly and time-consuming means of dealing with a problem common to an entire industry. 1964 FTC Statement, 29 Fed. Reg. at 8366-68. Nevertheless, the Statement clearly reveals that the FTC considered the adjudicative process as an alternative means of rulemaking:
"Rule-making through adjudication is not always completely fair and even handed in its results. This is especially true where a practice sought to be eliminated is industry-wide and the agency sues the members of the industry one-by-one to stop the practice." 1964 FTC Statement, 29 Fed. Reg. at 8367.
In addition,
"The focus in adjudication is on settling a dispute over past practices, and while a rule may be announced in the process, it tends to be done incidentally and without sufficient concern for laying down clear guidelines for the future. Most often, rules contained in adjudicative decisions, whether judicial or administrative, are not designated as rules or stated in the form of rules. The rule must be inferred from the language of the opinion and the facts of the case; it is implicit rather than explicit; and it may remain uncontroversial and uncertain until many subsequent adjudications have refined and clarified it. It may take a long time for a rule even to be recognized and understood as such." 1964 FTC Statement, 29 Fed. Reg. at 8367.
Despite these concerns, however, the FTC did not repudiate adjudication as a regulatory tool:
"We do not suggest, however, that the agencies in general, or the Federal Trade Commission in particular, should abandon reliance on the adjudicative method in all situations where a substantive principle or standard of conduct having general application is to be declared. The force of each of the reasons discussed above varies with the concrete situation in which a choice between approaches is presented. That is why the supreme court has held that the choice between rule-making and adjudicative proceedings is ordinarily within the agency's discretion." 1964 FTC Statement, 29 Fed. Reg. at 8368, citing Securities & Exchange Comm'n v. Chenery Corp., 332 U.S. 194, 202, 91 L.Ed. 1995, 2002, 67 S.Ct. 1575, 1580 (1947).
The 1964 FTC Statement did not mention the use of advisory opinions or the resolution of adjudicative actions by consent order. However, the expressed concern about the ability of regulated entities to discern clear rules from the opinions rendered after adjudication is not present when the enforcement action is resolved by entry of a consent order. Such an order is clearly intended to serve as a rule, at least with respect to the parties to the consent order. The question for this court is whether the entry of a consent order, expressly directing one industry member to behave in a certain way, is an implicit authorization fo
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