Part III Adjudication
Pages | 187-226 |
187
CHAPTER VI
PART III ADJUDICATION
A. Separation of Functions
A key difference between the Antitrust Division of the United States
Department of Justice (Antitrust Division) and the Federal Trade
Commission (FTC or Commission) is the availability of administrative
adjudication at the FTC. The FTC’s adjudicative functions are governed
by Section 5(b) of the FTC Act,1 the Administrative Procedure Act
(APA),2 and Parts 3 and 4 of the FTC Rules of Practice (FTC’s Rules or
Rules).3 The Federal Rules of Civil Procedure and the Commission’s
Operating Manual4 also provide guidance.
Adjudicative proceedings are often described as “Part III” matters.
Part III adjudication tracks federal court procedures in many respects.
The process begins once the Commission votes to issue an administrative
complaint.5 A significant difference from federal court, however, is that
the adjudicative function is carried out by the same agency that
investigates and prosecutes the alleged violation.6 In order to preserve
the impartiality and independence of decision makers, the APA prohibits
any employee engaged in the investigation or prosecution of a matter
from participating in the decision or agency review of the matter.7
Additionally, the FTC’s Rules strictly regulate communication within the
agency and with nonemployees regarding Part III matters.
1.
Ex Parte Communication
Once the Commission issues the complaint, the investigative and
prosecutorial functions separate from the decisional process. Ex parte
rules require that any “employee or agent of the Commission who
1. 15 U.S.C. § 45(b).
2. 5 U.S.C. § 554.
3. 16 C.F.R. §§ 3.1.-3.72, 4.1-4.7. These regulations specifically apply to
adjudicative proceedings.
4. FTC, FTC OPERATING MANUAL § 10 (1997) [hereinafter FTC OPERATING
MANUAL].
5. 16 C.F.R. § 3.11A.
6. 5 U.S.C. § 554.
7. 5 U.S.C. § 554(d).
188 FTC Practice and Procedure Manual
performs investigative or prosecuting functions in adjudicative
proceedings” is prohibited from any ex parte communication with
commissioners, the Office of General Counsel, the administrative law
judge (ALJ), or other employees involved in the decisional process.8
Rule 4.7 also prohibits the ALJ, commissioners, and any employee
involved in the decisional process from engaging in ex parte
communication with anyone outside the Commission or with
Commission employees involved in the investigative phase of the
pending litigation.
The ban on ex parte communications applies only to the merits of the
proceeding not on the public record. Agency employees may comment
on the pending litigation as long as the comments are limited to subjects
on the public record, such as the complaint. In practice, however,
commissioners and their attorney advisors usually avoid even casual
discussion of a matter with those members of the Commission who are
on the other side of the wall once the matter enters the adjudicative
process. Letters sent to individual commissioners from third parties
regarding a matter in administrative litigation are placed on the public
record by the Office of the Secretary.
In the event of an ex parte communication, the agency employee
must provide all written communication to the Secretary of the
Commission. If the ex parte communication is oral, the employee is
required to submit a memorandum stating the substance and
circumstances of the prohibited communication to the Secretary.9 The
Secretary will then put the relevant portions of the ex parte
communication on the public record, though the communication will not
become part of the record for purposes of the Commission decision
unless introduced into evidence.10 If a party to the proceeding knowingly
makes or causes an ex parte communication, the ALJ may require the
party to show cause as to why its claim should not be dismissed or
otherwise adversely affected as a result of the violation.11 The
8. 16 C.F.R. § 4.7(b)(1).
9. Id. § 4.7(c).
10. Id.
11. Courts have found that ex parte communications do not invalidate the
Commission’s decision. An agency’s decision is voidable only if the
decision-making process was so irrevocably tainted as to make the
ultimate judgment of the agency unfair to an innocent third party or the
public interest. Sw. Sunsites, Inc. v. FTC, 785 F.2d 1431, 1436 (9th Cir.
1986) (citing PATCO v. FLRA, 685 F.2d 547, 564 (D.C. Cir. 1982)).
Part III Adjudication 189
Commission may also bar or suspend from practicing before the
Commission an attorney who knowingly makes or causes a prohibited ex
parte communication.12
2.
Office of the Administrative Law Judges
According to organizational Rules of the FTC, the Office of
Personnel Management both appoints and approves each ALJ.13 The
Chairman of the FTC designates the chief ALJ.14 As the first order of an
adjudicative proceeding, the chief ALJ designates an ALJ to preside over
the proceeding.15
The role of the ALJ is to conduct fair and impartial hearings.16 The
Commission’s Rules require ALJs to base their findings of fact and
initial rulings on legal conclusions that conform to Commission
decisions, policy directives, and Rules.17 In certain circumstances where
the ALJ lacks authority to act, Rule 3.42 authorizes the ALJ to certify
questions to the Commission for its determination18
3.
Complaint Counsel
Attorneys that represent the Commission in an administrative
proceeding are referred to as complaint counsel. While the Bureau
Director’s Office in the Bureau of Competition (BC) or the Bureau of
Consumer Protection (BCP) is responsible for determining the allocation
of resources for each matter, staff attorneys and bureau management that
12. 16 C.F.R. § 4.7(d) (citing 16 C.F.R. § 4.1(e)(2)). A nonparty to the
proceeding is subject to the same sanctions if he subsequently becomes a
party.
13. Id. § 0.14 . The Office of Personnel Management also regulates the pay
for ALJs. 5 U.S.C. § 5372. Adverse action against an ALJ may only be
taken for good cause as determined by the Merit Systems Board.
5 U.S.C. § 7521.
14. FTC Chairman Muris appointed Stephen J. McGuire as chief ALJ in
February 2003. See Mcguire Appointed Chief FTC Administrative Law
Judge, http://www.ftc.gov/opa/2003/02/mcguirestephenj.htm.
15. 16 C.F.R. § 3.42(b).
16. An ALJ may disqualify himself on his own initiative or be disqualified by
motion of a party. 16 C.F.R. § 3.42(g)(2).
17. Id. § 0.14.
18. Id. § 3.42(c). For a discussion of these circumstances, see part M.5 of
this chapter.
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