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Price v. Philip Morris12/15/2005
, 657 F.2d 55, 60 (4th Cir. 1981).
This authority demonstrates that it is simply incorrect for the court to refer to the 1971 and 1995 consent orders as establishing FTC policy. Only the FTC commissioners can formally adopt policy. The FTC staff members who drafted the consent orders cannot make agency policy. Further, the orders have not been subjected to adversarial testing. The 1971 and 1995 consent orders must be viewed only as what they are: two private agreements between the FTC and individual cigarette companies without industrywide force of law.
It is clear from the long history of FTC regulation of the cigarette industry, as described in the court's opinion, that consent orders are economic, i.e., they are not based on substantive law. The cases before the FTC are filed as a result of competitors complaining one against the other. They are simply administrative and are not binding authority. At most they may be persuasive to other participants in the industry. Indeed, in Part I(A) of the court's opinion ("History of FTC Regulation of the Cigarette Industry"), the court mentions Federal Trade Comm'n v. Brown & Williamson Tobacco Corp., 778 F.2d 35, 37 (D.C. Cir. 1985), which I believe to be instructive on this point. Slip op. at 14-15. In Brown & Williamson, the manufacturer claimed that its Barclay brand of cigarettes contained 1 milligram of tar. Brown & Williamson's competitors complained that the design of the Barclay filter caused it to register very low tar measurements. Publishing its findings, the FTC determined that the Barclay claim was false and deceptive. The FTC attempted to require Brown and Williamson to state a higher tar content. Brown & Williamson refused and retained the 1 milligram claim, but voluntarily qualified the claim. The FTC thereafter sought an injunction to prevent such advertising. Brown & Williamson, 778 F.2d at 37-38. Even after making published findings, the FTC nonetheless had to resort to a court order to enforce compliance. In my view, this demonstrates why the FTC's "voluntary" compliance scheme cannot equate to formal agency rulemaking.
Despite the uncertain nature of FTC involvement in this area, the court today concludes that the FTC's "informal regulatory activity, including the use of consent orders," satisfies the requirement of section 10b(1) (slip op. at 61) and has the force of law. I very much doubt, however, that a federal court would regard the FTC consent orders as "law" in the context of section 10b(1). For example, in Wabash Valley Power Ass'n v. Rural Electrification Administration, 903 F.2d 445 (7th Cir. 1990), the Seventh Circuit Court of Appeals was presented with the issue of whether a letter from a federal agency to the regulated business was sufficient for federal preemption. The court held that it was not. The court recognized that to preempt state authority, the agency was required to establish rules with the force of law, and that regulations adopted after notice and comment rulemaking have the effect of law. Wabash Valley Power, 903 F.2d at 453-54. However, the court recognized that the agency sent the regulated business a letter. "There was no notice, no opportunity for comment, no statement of basis, no administrative record, no publication in the Federal Register-none of the elements of rulemaking under the [Administrative Procedure Act]. 5 U.S.C. ยง553." Wabash Valley Power, 903 F.2d at 454 (collecting cases). The court concluded: "Procedural shortcomings prevent giving this letter the force of law." Wabash Valley Power, 903 F.2d at 454.
In the present case, as in Wabash Valley Power, the FTC has never promulgated an industrywide formal rule. Just as the agency letter in Wabash
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