Rockefeller, Edwin S.

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Notre Dame Law ReviewVolume 41 | Issue 3 Article 132-1-1966Compliance Procedures and Industrywide ProjectsEdwin S. RockefellerFollow this and additional works at: http://scholarship.law.nd.edu/ndlrPart of the Law CommonsThis Article is brought to you for free and open access by NDLScholarship. It has been accepted for inclusion in Notre Dame Law Review by anauthorized administrator of NDLScholarship. For more information, please contact lawdr@nd.edu.Recommended CitationEdwin S. Rockefeller, Compliance Procedures and Industrywide Projects, 41 Notre Dame L. Rev. 398 (1966).Available at: http://scholarship.law.nd.edu/ndlr/vol41/iss3/13COMPLIANCE PROCEDURES AND INDUSTRYWIDE PROJECTSEdwin S. Rockefeller*It is important to grasp three fundamentals. First, there is no ethical con-tent in any of the matters with which we are here concerned. It has been mygood fortune to spend the past nine years working on these matters - abouthalf that time on the FTC staff and the other half in private practice. Twothings which seem clear to me are: (1) you can't learn what it is like to be onthe other side, government or private, without being on it for a while, and (2) anemotional or evangelistic approach toward compliance, relying on some kindof ethical considerations, is a mistake on either side. Whether you are the govern-ment attorney whose duty it is to enforce the laws in the best interest of thepublic (with due regard to the demands of practical politics) or the privateattorney whose duty it is to counsel the businessman on compliance with thelaws (with due regard for the profit and loss statement), you should make noquick or general assumptions about who are the good guys and who are thebad guys.Second, I want to be counted among those who would emphasize that theRobinson-Patman Act is not as complicated as a lot of those with a heavy invest-ment in complexity might have you think. On the other hand, there are situationswhere the law, which we might think of as one or even two dimensional, mustbe applied to evolving business situations of three and four dimensions. Thisdemands something more than an evangelistic tone and an admonition to thebusinessman to devote his ingenuity toward developing techniques for compliancerather than presenting his lawyer and the FTC with difficult situations. Suchan approach often leads to an overabundance of caution, a tendency to inactionand a likelihood of missing the competitive opportunity. If all a businessmanwants to do is to comply with the Robinson-Patman Act he can sell to all comersat one price and pay no brokerage, no promotional allowances and grant noservices. But if it is competition that should regulate the economy, that approachis wrong.Third, it is counsel's duty as an officer of the court to encourage compliancewith the law. Nevertheless, it is his role as a counselor of private business notonly to state the law where it is clear and try to where it is not but also toassist the business client to evaluate the risks of alternative courses of action inorder that the businessman may make an informed judgment as to what todo next. Consider a situation in which the current Commission interpretationof a particular section is not realistic in the business context in which an attorneyfinds himself. For example, suppose the only court which has dealt with thequestion has overruled the Commission,' but the Commission has in effectrejected the court's decision.2 As an officer of the court surely one can be* Member, Connecticut Bar, District of Columbia Bar; A.B., Yale University, 1948; LL.B.,Yale Law School, 1951; Chairman, Advisory Board, Bureau of National Affairs Antitrust andTrade Regulation Report; former Assistant to General Counsel, former Executive Assistant toChairman, Federal Trade Commission; partner, Wald, Harkrader & Rockefeller, Washington,D.C.1 Sunshine Biscuits, Inc. v. FTC, 306 F.2d 48 (7th Cir. 1962).2 FTC News Release, November 23, 1962.COMPLIANCE PROCEDURES AND INDUSTRYWIDE PROJECTS 399justified in relying on the court's view of the law. But what one must alsotake into account are the risks of (1) detection and (2) possible enforcementaction. I will omit discussion of the techniques for minimizing the likelihood ofdetection. Evaluation of the risk of enforcement action combines a mixture ofpsychology, politics, timing, and luck.With these three fundamentals in mind, I proceed to my subject whichis the method of enforcement open to the Commission. Whether we view enforce-ment as industrywide or otherwise, there are two kinds of compliance- (1)voluntary compliance without threat of penalty and (2) compliance whichresults from Commission action to restrain violations of the law.The Commission may assist voluntary compliance efforts by focusing pub-licity on unlawful practices and by educational and guidance efforts. In thepast, most industrywide projects were of this sort. In many instances a greatdeal was accomplished. In other situations, failure to follow up the educationalprogram with serious enforcement proceedings resulted in an erosion of industryresolve to comply. Mr. MacIntyre's discussion of the gasoline marketing inquiry,the fresh fruit and vegetable trade practice conference rules and the packageof garment industry orders provides a complete spectrum of possible methods forencouraging compliance.' Ultimately, there is really only one method availableto the Commission for the effective insistence upon compliance, and that is thecomplaint and order proceeding provided in the statute. A trade practice con-ference, a trade regulation rule proceeding or a general Commission inquirymay or may not result in rules of greater or lesser substance. Such proceduresmay or may not result in findings of fact. These rules and these findings maybe used to shorten a subsequent individual proceeding for a cease and desistorder. But the enforcement proceeding remains basically the same.Section 11 of the Clayton Act,4 like section 5 of the Federal Trade Com-mission Act,' provides that whenever the Commission shall have reason to be-lieve that any person is violating or has violated any of the provisions of, amongothers, section 2 (which contains the Robiuson-Patman Act amendments), theCommission shall issue and serve upon the respondent a complaint stating itscharges with a notice setting a time and place for hearing at least 30 days afterservice of the complaint. According to the statute, the person so complainedof has the right to appear at the hearing and "show cause why an order shouldnot be entered by the Commission"s requiring the respondent to cease anddesist from the violation of law charged in the complaint. The Commission stillincludes this wording in its notice but does not expect the respondent to carrythe burden of showing such cause.' The statute directs that the testimony takenin the proceeding shall be reduced to writing and filed in the Commission'soffice. The statute further provides that if upon such hearing the Commission3 See, MacIntyre, 'Some Criteria for Applying Industrywide Enforcement Measures Underthe Robinson-Patmanr Act, 41 NOTRE DAME LAWYER 389 (1966).4 38 Stat. 734 (1914), 15 U.S.C. § 21 (1964).5 38 Stat. 719 '(1914), 15 U.S.C. § 45 (1964).6 38 Stat. 734 (1914), 15 U.S.C. § 21 (1964).7 It has never been clear to me how or why the statutory scheme has been subverted on thispoint, but perhaps the Administrative Procedure Act has in effect amended these provisions byimplication.NOTRE DAME LAWYERshall be of opinion that any of the provisions of law have been or are beingviolated "it shall make a report in writing, in which it shall state its findings asto the facts," and it shall issue and serve on the respondent an order "requiringsuch person to cease and desist from such violations." (Emphasis added.) 8Prior to 1959, the Clayton Act provided for the enforcement of Commis-sion orders by application of the Commission to an appropriate United StatesCourt of Appeals with a showing that the order had been violated. This ordi-narily required a prior investigational hearing with findings by the Commission offacts of violation. The court could affirm, modify or set aside the Commission'sorder. Following affirmation in whole or in part, the court could then issue anorder of enforcement which, as the court's own order, would subject a violatorto possible punishment for contempt.The pre-1959 statute also provided that the respondent might petition anappropriate court to review the Commission's order. Before 1952 this some-times resulted in orders of enforcement where the order reviewed was affirmed,but in that year the Supreme Court held that the courts of appeals were withoutauthority to issue an order commanding obedience to an order of the Commis-sion until the Commission had first established violations of its order.9In 1959 Congress amended section 11 of the Clayton Act "to provide forthe more expeditious enforcement of cease and desist orders."'0 The amendinglaw contained two sections. The first section amended section 11 by providingfinality for the Commission's Clayton Act orders similar to that already providedin 1938 by the Wheeler-Lea amendments of the Federal Trade CommissionAct. Under these provisions, if the respondent does not petition for reviewwithin 60 days of service of a Commission cease-and-desist order, the order be-comes final and violations of the order are subject to civil penalties of up to5,000 dollars for each violation, recoverable in a civil action brought by theUnited States. Section 2 of the amending law stated that section 1 should have"no application to any proceeding initiated before the date of enactment ofthis Act."11 It was explicitly provided that each such proceeding was to begoverned by the provisions of section 11 as they existed previously. Under thenew provisions, there is also a method for review by the court of appeals uponrespondent's petition and a provision that "to the extent that the order of theCommission is affirmed, the court shall issue its own order commanding obedienceto the terms of such order of the Commission."' 2There arose the question of possible enforcement of orders issued by theCommission under section 11 of the Clayton Act prior to the amendment as towhich no enforcement proceeding had been initiated at the time of the amend-ing act's passage. No provision was made for enforcement of such orders; theamending statute simply substituted the new provisions for the old, and pro-vided explicitly only for those old orders as to which enforcement proceedingshad already been initiated.The Commission sought to close what it regarded as a gap by the issuance8 38 Stat. 734 (1914), 15 U.S.C. § 21(b) (1964).9 FTC v. Ruberoid Co., 343 U.S. 470 (1952).10 73 Stat. 243 (1959).11 73 Stat. 245 (1959).12 73 Stat. 244'(1959).COMPLIANCE PROCEDURES AND INDUSTRYWIDE PROJECTS 401of a press release stating that unless a petition to review an old order was filedwithin 60 days, it would regard the old order as final in the same manner asorders issued since the amendment. I say "what it regarded as a gap" becausethere may indeed have been none. Congress may very well have felt that, wherethe Commission could find a violation of a pre-1959 Clayton Act order, it couldon the same facts proceed for a new order, which would carry with it thefinality provisions and that this would provide more expeditious enforcement inany case than retention of the former method which the Commission itself hadlong regarded as cumbersome and ineffectual. Several firms against whichClayton Act orders had been issued prior to the 1959 amendment, not wishingto run the risk that the Commission's press release view might prevail and civilpenalties later be assessed, sought immediate relief through declaratory judg-ment actions. The Court of Appeals for the District of Columbia sustainedthese efforts and overruled the Commission's press release.1" In these proceed-ings, the Commission argued that, unless the old orders could be blanketed inand made subject to the new-type enforcement, they would be lost forever ashaving any enforceability. However, the Commission is now seeking to enforceone such order through application to the Ninth Circuit as though the old pro-visions were still in effect.14Since 1954, public complaints apparently initiating the sort of proceedingdescribed in section 11 of the Clayton Act have been disposed of without hearings,without findings, and even without respondent's admission or denial of the factsalleged, upon respondent's signing an agreement accepting the issuance of anorder prohibiting future violations and waiving any further review. It waslong debated at the Commission whether, in view of the wording of section 11,orders to cease and desist issued without findings would be enforceable underthe procedures provided in the statute for properly issued orders. In 1954 theview that they would be enforceable finally prevailed, and the Commission'sprocedure has continued substantially in its present form since that time. Thevalidity of the Commission's present view has never been directly challengedin court except for that proceeding in the Ninth Circuit referred to above, wherethe Commission is seeking to enforce an order issued under its consent procedure.There is a lot of talk these days about "industrywide" enforcement of theRobinson-Patman Act. The reason that industrywide treatment has currentlybecome a matter of such concern may be that violations of the act are so in-dustrywide. If most firms are complying and only a few are in violation, thena handful of cease-and-desist order proceedings is all that is called for, and thereis no need for elaborate industry projects. Unfortunately, as the Commissionhas increasingly recognized, such is not now the case. The present Commissionhas shown flexibility and imagination in trying to deal with the problem. TheCommission has been able to turn the current state of widespread violation ofa law, for the enforcement of which it has been responsible for nearly thirtyyears, into cause for praise for the Commission. This is a triumph in the publicrelations art which certainly has my admiration.13 Sperry-Rand Corp. v. FTC, 288 F.2d 403 (D.C. Cir. 1961).14 FTC v. Jantzen, Inc., No. 20021, 9th Cir. application filed, April 23, 1965.

Compliance Procedures and Industrywide Projects

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