TAMM, Circuit Judge:
This case presents, precisely and concisely, the question whether the Federal Trade Commission is authorized to issue a factual news release concerning pending adjudicatory proceedings before it.
Appellee corporations operate and grant franchises for the operation of schools offering various courses in modeling, fashion merchandising, charm, and self-improvement. The individual appellee is the controlling stockholder of two of the corporations and the principal stockholder of the third appellee corporation.
Following an investigation, the appellant Federal Trade Commission, on February 13, 1967, issued a complaint (Docket No. 8729) against appellees, stating that the Commission, "having reason to believe" that the appellees had violated the Federal Trade Commission Act by engaging in unfair or deceptive practices and the use of false and misleading advertising in the operation of their business, was initiating a proceeding in respect thereto "in the public interest." Thereafter, the complaint enumerated the specific details constituting the charge and set forth quotations from the advertising alleged to be deceptive. The complaint identified the alleged falsities in the advertising, described the conduct claimed to constitute unfair or deceptive practices, and concluded with the customary allegation that the identified courses of conduct were in violation of section 5 of the Federal Trade Commission Act.
This complaint was mailed to appellees on February 17, 1967. On February 20, 1967, appellees, "mindful and aware of the FTC's practice of issuing news releases and the adverse effects resulting therefrom,"
On March 2, the appellees commenced the present action by filing a complaint in the United States District Court for the District of Columbia in which they sought a restraining order against the issuance of the news release. The motion for the restraining order was denied by a District Court judge on March 2; and on March 3, the Commission promulgated a news release announcing and describing the issuance of the complaint against appellees. As a result, accounts of the complaint appeared in at least two Washington newspapers.
On March 22, 1967, appellees filed in the District Court an amended and supplemental complaint, seeking injunctive and declaratory relief against the Commission's issuance of further news releases with respect to the proceedings in Docket No. 8729 and requested the court to issue a preliminary injunction retraining any such action by the Commission. Appellees charged, in affidavits supporting the complaint, that the Commission's news releases resulted in cancellation of courses by students, inquiries from financial institutions and others with whom appellees were doing business and were generally harmful to appellees' business. On March 31, the Commission filed in the District Court a cross motion to dismiss the amended complaint.
At a hearing held in the District Court on April 13, 1967, the Commission's motion to dismiss the complaint was denied. At the same time, the preliminary injunction requested by appellees was granted, and the Commission thereby was restrained from issuing any news release in Docket No. 8729 "until the Commission, after a full adjudication of the case, has issued either a cease and desist order or an order dismissing the Complaint, pending the final hearing and determination of this cause."
The Commission seeks before this court to reverse the District Court's order enjoining the Commission's issuance of press releases and denying its motion to dismiss the complaint.
At the threshold of this case, we are confronted with the question of whether we have jurisdiction to consider the entire case on the merits or whether our review is confined at this time to the propriety of the issuance of the injunction. The pleadings before us are at best ambiguous as to whether the Commission
Congress, in 1914, enacted the Federal Trade Commission Act.
Section 5 of the Federal Trade Commission Act
Section 6 of the Federal Trade Commission Act, 15 U.S.C. § 46, (1964) provides in pertinent part:
Section 1.132 of the Commission's General Procedures in effect when Docket No. 8729 was initiated, 16 C.F.R. § 1.132 (1967)
The appellees, in their amended and supplemental complaint filed in the District Court, charged that while it has been the "uniform and long-established practice" of the Commission to issue news releases in its cases, the action, is unlawful because the Federal Trade Commission Act does not authorize such action by the Commission, violates the Due Process Clause of the Constitution, and constitutes an alignment, or appearance
We have no doubt that a press release of the kind herein involved results in a substantial tarnishing of the name, reputation, and status of the named respondent throughout the related business community as well as in the minds of some portion of the general public. Three hundred eighty-eight volumes ago, it was observed that "[w]here much has been said, something will be believed. * *"
Confronted in 1933 with the question of the Commission's right to hold an open or public session for the purpose of taking testimony on a complaint against the then appellant charging false and fraudulent advertising and unfair trade methods in commerce, we ruled unanimously that such proceedings were within the Commission's authority. E. Griffiths Hughes, Inc. v. FTC, 61 App.D.C. 386, 63 F.2d 362 (1933). The thrust of the District Court's order granting the injunction and denying the Commission's motion to dismiss is that while the adjudicatory proceedings before the Commission may be public they may not be the subject of a factual press release. Section 1.132 and successor sections 4.8 and 4.9 of the Commission's General Procedures, supra, make the pleadings, transcripts of testimony, documents, etc., matters of public record, open for public inspection by anyone interested in reviewing them and allow the release of additional information. These regulations, we hold, are a legal exercise of the Commission's discretionary authority, broadly conferred by subsection (f) of 15 U.S.C. § 46 (1964).
Proceeding, then, to consider whether the Commission may act affirmatively and on its own initiative in publicizing items relating to pending adjudicatory matters by releasing factual information from its own records, we turn, first of course, to the statute creating and empowering the Commission. By 15 U.S.C. § 45(a) (6) (1964), the Commission is "empowered and directed to prevent * * * unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce." The Commission is required by 15 U.S.C. § 45(b) (1964), when it "shall have reason to believe" that a person or corporation has been, or is, using "any unfair method of competition or unfair or deceptive act or practice in commerce," and if in the Commission's judgment a proceeding in respect thereto "would be to the interest of the public," to issue a complaint, serve it on the respondent, and set a date for a hearing. The complaint (and any additional pleadings or orders) becomes, as heretofore pointed out, a matter of public record. That the basic purpose of the Act is the protection of the public is evident from the clause, "would be to the interest of the public," quoted above, and as emphasized at 15 U.S.C. § 46(f) (1964), supra, "as it shall deem expedient in the public interest." Indeed, court decisions hold, "[t]he purpose of the Federal Trade Commission Act is to protect the public, not to punish a wrongdoer, * * * and it is in the public interest to stop a deception at its incipiency." Regina Corporation v. FTC, 322 F.2d 765, 768 (3d Cir. 1963), citing Gimbel Bros., Inc. v. FTC, 116 F.2d 578, 579 (2d Cir. 1941),
In defining the Commission's authority and responsibility in protecting the public interest, Congress specifically authorized the Commission "[t]o make public from time to time such portions of the information obtained by it hereunder * * * as it shall deem expedient in the public interest * * *." 15 U.S.C. § 46(f) (1964). We reject appellees' contention that this subsection is applicable only to the antitrust responsibilities of the Commission. We construe "hereunder" in the quoted phraseology as applying to the entire chapter 2 of Title 15 U.S.C., restricted of course by the specific limitations set forth in the chapter itself.
Since the Commission is charged by the broad delegation of power to it to eliminate unfair or deceptive business practices in the public interest, and since it is specifically authorized to make public information acquired by it, we conclude that there is in fact and law authority in the Commission, acting in the public interest, to alert the public to suspected violations of the law by factual press releases whenever the Commission shall have reason to believe that a respondent is engaged in activities made unlawful by the Act which have resulted in the initiation of action by the Commission. The press releases predicated upon official action of the Commission constitute a warning or caution to the public, the welfare of which the Commission is in these matters charged. We note that there is no contention in this case that the allegations in the Commission's complaint were knowingly false.
We recognize that in legislating in the public interest and for the public welfare, Congress was acting to afford protection on a broad and comprehensive scale to millions of citizens residing and working at points far from the scene of Commission complaint, hearing, or other action. Moreover, "[t]he law is not made for experts but to protect the public, — that vast multitude which includes the ignorant, the unthinking and the credulous, who, in making purchases, do not stop to analyze but too often are governed by appearances and general impressions." Aronberg v. FTC, 132 F.2d 165, 167 (7th Cir. 1942), citing Florence Manufacturing Co. v. Dowd, 178 F. 73 (2d Cir. 1910).
If the unsophisticated consumer is to be protected in any measure from deceptive or unfair practices, it is essential that he be informed in some manner as to the identity of those most likely to prey upon him utilizing such prohibited conduct. Certainly advice through news media as to the actions being taken by a government agency in his behalf constitutes a prophylactic step addressed ultimately to the elimination of the conduct prohibited by the statute.
The Commission, in attempting to bring its action relative to what it has reason to believe is unlawful conduct to the attention of the widely spread public by the issuance of factual press releases, is, we conclude, acting within its authority as defined by statute. In addition, we observe that Congress obviously has long been aware of and acquiesced in the Commission's press release procedures. See: 1962 FTC ANN.REP. 20; 1961 FTC ANN.REP. 20; 1956 FTC ANN. REP. 18; Hearings before the Subcommittee on Independent Office Appropriations for 1960 of the House Appropriations Committee, 86 Cong., 1st Sess. 109 (1959). Replies From Federal Agencies to Questionnaire Submitted by the Special Subcommittee on Governmental Information of the Committee on Government Operations, 84th Cong., 1st Sess. 207-221, Nov. 1, 1955.
Invoking a constitutional ground, the appellees, in the proceedings in the District Court, contended that the Commission has a duty in a quasi-judicial proceeding to avoid prejudgment, or giving the appearance of prejudgment, and that the press release program, by violating this duty, constitutes a violation of their due process rights. In substance, it was contended that the Commission, although it must ultimately pass judgment upon the merits of its complaint against the appellees, does, by the issuance of press releases appearing to support and justify its action, prejudge — or give the appearance of prejudging — the complaint before the respondents have been afforded a hearing. Declaring due process in an administrative hearing must meet the standards prescribed for criminal proceedings, the appellees conclude that "Due process requires that the accused receive a trial by an impartial jury free from outside influences." Sheppard v. Maxwell, 384 U.S. 333, 362, 86 S.Ct. 1507, 1522, 16 L.Ed.2d 600 (1966). Pointing out that the Commission's press releases set forth to the public that the Commission has found "reason to believe" that the law has been violated, the appellees conclude that the Commission members are thereafter under a very real pressure to vindicate themselves and justify the charges to which the publicity has been given. "[A]gency members have a more active and affirmative commitment to achieving the goals and effectuating the policies declared by Congress; their success is measured by the agency's results in striving to obtain those positive objectives." Elman, A Note on Administrative Adjudication, 74 YALE L.J. 652, 653 (1965).
Congress has, as a general practice, vested administrative agencies with both the specified power to act in an accusatory capacity through the initiation of an action designed to enforce compliance with or prevent further violation of a statutory provision and with the responsibility of ultimately determining the merits of the charges so presented. In fact, this procedure is recognized by the Administrative Procedure Act, 5 U.S.C. § 500 (Supp. II, 1965-6), et seq. More specifically, while 5 U.S.C. § 554(d) (Supp. II, 1965-6) requires separation of the adjudicatory and prosecutorial functions in an agency, subpart (C) of subsection (d) excepts the "agency" or a "member or members of the body comprising the agency" from that requirement. The Federal Trade Commission's practice of reviewing the recommendations of subordinate investigative employees of the Commission and then making the decision to initiate a complaint is clearly within this exception to the Administrative Procedure Act. DAVIS ADMINISTRATIVE LAW, § 13.10, p. 242 (2d ed. 1959). "It is well settled that a combination of investigative and judicial functions within an agency does not violate due process. Belizaro v. Zimmerman, 200 F.2d 282 (3rd Cir., 1952); United States ex rel. Catalano v. Shaughnessy, 197 F.2d 65 (2nd Cir., 1952); Levers v. Berkshire, 159 F.2d 689 (10th Cir., 1947); Roccaforte v. Mulcahey, 169 F.Supp. 360 (D.C.Mass. 1958), aff'd. per curiam, 1 Cir., 262 F.2d 957; Brikley v. Hassig, 83 F.2d 351 (10th Cir., 1936); 2 Davis, Administrative Law Treatise, § 13.02. See, Federal Trade Comm. v. Cement Institute, 333 U.S. 683, 68 S.Ct. 793, 92 L.Ed. 1010 (1948)." Pangburn v. CAB, 311 F.2d 349, 356 (1st Cir. 1962). While we are unwilling to go as far as the Fifth Circuit in declaring "the contention that the press release in some manner denied petitioner due process of law in that it prevented the Hearing Examiner and the Judicial Officer from acting fairly in the premises is frivolous,"
One further aspect of this case requires brief comment. As we have already
The quoted caution was well intended and is commendable. We have no doubt, however, that its practical value in minimizing the derogatory inferences upon the respondents' integrity was at best minimal, "for many will read the charge who may never see the answer * * *." Respublica v. Oswald, 1 U.S. (1 Dall.) 319, 324, 1 L.Ed. 155 (1788). We agree with the learned and experienced trial judge that "[i]n the event the final adjudication in Docket No. 8729 were to be in Plaintiffs' [appellees] favor, Plaintiffs would not be able to repair or remedy the damage suffered by them through the issuance and distribution of these news releases."
The action of the District Court in denying the Commission's motion to dismiss is reversed, and the case is remanded to that court with instructions to dismiss appellees' complaint.
SPOTTSWOOD W. ROBINSON, III, Circuit Judge (concurring in the result):
Coupling the Federal Trade Commission's statutory call "to prevent * * * unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce"
When the Commission informed appellees of the denial of their request that no news release pertaining to the filing of the complaint be issued, it proffered this explanation:
If my understanding of the court's opinion and the Commission's justifying statement is correct, they present diverging views as to what the Commission had in mind when it promulgated the release that precipitated this lawsuit. The court says the release was designed as a warning to that segment of the public with which appellees were or might be dealing.
This difference I mention at the outset because it is fundamental in terms of the nature of the problem with which we are confronted. "The effective functioning of a free government like ours depends largely on the force of an informed public opinion."
An incidental and wholesome consequence of general publicity of proceedings challenging the fairness and honesty of particular commercial practices may well be the generation of a desirable if unnecessary measure of public caution in dealings with those identified with such practices.
We dealt with the public nature of the Commission's adjudicative proceedings in E. Griffiths Hughes, Inc. v. FTC.
We noted that Hughes' case was "confined to the assertion that the Commission has no right to determine to hear evidence in public; that until its final determination its function is wholly inquisitional,
Our appellees do not press on so broad a front as did Hughes. They do not vie for sealed records or nonpublic hearings in the adjudicative proceeding. They do say that the Commission may not enhance the attendant publicity by a news release — a proposition promotive of rather curious results. Thus, while the papers on file in the proceeding constitute a public record, the Commission could not attract public attention to the record. While an enterprising reporter might flush out newsworthy information from the public docket, the Commission could not focus the attention of the press upon that information. And while individual citizens could, for informational purposes, themselves examine the Commission's public records and attend the public proceeding, the Commission could not assist affirmatively in the transmission of the same information to them through regular news channels. I turn now to consider whether the restriction for which appellees contend is required either by the Act or by the Constitution.
The Act commands the Commission "[t]o gather and compile information concerning, and to investigate from time to time the organization, business, conduct, practices, and management of" unexempted corporations "engaged in commerce."
When this litigation was at the administrative level, the Commission had by rule classified as public information "[t]he pleadings, transcript of testimony, exhibits and all documents received in evidence or made a part of the record in adjudicative proceedings (except
Congress did not, however, confer upon the Commission an unqualified license to propagate the intelligence it garners in the course of its operations. Not only did it prohibit the disclosure of "trade secrets and trade names of customers" but, by providing for publication of "such portions of the information. * * * as it shall deem expedient in the public interest," it articulated two preconditions to divulgence of information of any other type. The first is a judicious exercise of administrative discretion preceding a resolve to publish,
I perceive no basis, however, on the record for interfering with the Commission's observance of its regular practice of periodic news releases during the course of the administrative proceeding against appellees. In justification of its decision to publicize the filing of the complaint, the Commission pointed to the fact that the public was interested in its adjudicative proceedings and to the further fact that the complaint it had filed was a public document.
There is no hint that the course the Commission contemplated was a manifestation of discrimination against appellees.
The record is skimpy as to some of the transpirations prior to the time appellees came to the District Court.
Congress committed the guardianship of the public interest to the Commission, and it was for it to make the determination which appellees later subjected to judicial scrutiny. Constitutional considerations aside, the Commission's action could properly be overturned only if it were beyond its statutory powers or if it were proven to be arbitrary.
Appellees' constitutional plea is an effort to equate Commission preparation of the prehearing news releases it dispenses with prejudgment of the administrative issues yet to be heard. It appears that all releases are cleared by a Commission attorney and the Commission's chairman, and are then distributed by the Commission's Office of Information. The gist of appellees' contention, which the District Court respected, is that such a release, once made, presents an insurmountable obstacle to objectivity.
This position lacks the support of judicial opinion. While occasionally, on particular facts, a predecisional release has been criticized for the outside appearances it created,
Like my colleagues, I am unpersuaded by appellees' argument, particularly as it must be related to the circumstances of this case. From all that appears, the only person with adjudicative responsibilities who performs any activity with reference to news releasing is the Commission's chairman, and he only checks proposed releases for accuracy. So minimal a participation in a strictly factual summary of pending charges hardly produces a subjective impact so inimical to fairness as to tender a due process issue.
The so-called "Freedom of Information Act," Pub.L. 89-487, 80 Stat. 250 (1966), effective July 4, 1967, as incorporated by Pub.L. 90-23, 81 Stat. 54 (1967) into 5 U.S.C. § 552, while not bearing directly on the issue presented in this case, evidences a clear congressional purpose to open the information possessed by federal administrative agencies to the general public on much the same basis that it is accessible to litigants in agency proceedings.
The Commission tells us that its present practice is to incorporate such a notice in all news releases.