ROBERT P. SMITH, Jr., Judge.
Anheuser-Busch appeals from an order of the Division of Alcoholic Beverages and Tobacco
Anheuser-Busch, licensed in Florida as a beer manufacturer, sells its products to distributors who in turn sell to retail vendors. To promote its products, the manufacturer sponsored free beer parties in 16 Daytona Beach bars and taverns during the college Spring break in 1978. Anheuser-Busch paid the vendors their usual retail price for Anheuser-Busch beer consumed by the vendors' customers during those parties and paid conventional tips to the vendors' employees who served that beer. Appropriately enough, this is called manufacturer's "bar spending." For beer and service Anheuser-Busch paid approximately $7,000 to selected Daytona Beach vendors and their employees during a four-day period in March 1978.
The Division charged that the manufacturer's bar spending constituted "the giving of a gift, loan of money or property or ... the giving of a rebate" to retail vendors, in violation of Section 561.42(1), which provides:
Exercising its power to "establish rules ... to enforce the herein established limitation upon credits and other forms of assistance," Section 561.42(8), the Division has promulgated Rules 7A-1.09 and 7A-1.10, Fla. Admin. Code, amplifying the terms "rebate" and "gift" as used in the statute:
The Division and Anheuser-Busch presented the present licensee discipline complaint to a hearing officer of the Division of Administrative Hearings on a barebones stipulation of facts, substantially as recited above, which concluded:
The Division argued to the hearing officer that bar spending "incorporating all of the features" of this particular promotional campaign constituted a "rebate" or "gift" by the sponsoring manufacturer to the retail vendors in that the retailers received increased gross revenues as a result of the parties, or they received increased profits
The hearing officer recommended an order finding that the charges had not been sustained.
The Division's final order, while purporting to accept the hearing officer's findings of fact, drew the different conclusion that "the entire party from beginning to end was a gift to the vendor" which had "substantial intrinsic if not precise worth to the vendor in the party's effect on the vendor's profit, overhead, cash flow, promotional value, competitive edge, advertising and good will." The Department's order concluded:
Thus the Division's order in this case equates the antitrust, antifavoritism and antipredator purposes of Section 561.42(1) with the perceived dangers of manufacturers' bar spending. Through this order there begins to emerge a Division policy, rooted in the statute, which condemns manufacturers' bar spending in a certain volume or when carried out with a certain sophistication and forethought ("The instant matter does not involve the situation in which a member of Respondent's promotional staff went in to a vendor's place of business unknown to the vendor and bought a round of the Respondent's products for the patrons. Instead, it involves a promotional scheme ...").
On this record the Division cannot successfully dispute the hearing officer's findings that there was no proof of a manufacturer's "gift" or "rebate" in the sense of discounts realized by vendors in purchasing greater than usual quantities of Anheuser-Busch beer from distributors or in the sense of income or profits realized by serving greater than usual quantities of beer to their patrons. The record is not susceptible
The Division correctly suggests that having rules which particularly define one sort of conduct within the reach of a regulatory statute does not foreclose the Division's application of the statute to other conduct through adjudication. If by promulgating a single set of interpretative rules an agency should lose power to further interpret the statute through adjudication, then not only the regulatory statute but APA processes as well would be frustrated. Agencies may expound statutes given in their charge by rules or by orders, or by both rules and orders. The model of responsible agency action under the APA is action faithful to statutory purposes and limitations, foretold to the public as fully as practicable by substantive rules, and refined and adapted to particular situations through orders in individual cases. See McDonald v. Dept. of Banking and Finance, 346 So.2d 569 (Fla. 1st DCA 1977).
Notwithstanding the continued availability of adjudication as a means of Section 561.42(1) policy development within the Division's delegated authority, this plainly is a case of policymaking for which rules are preferable to orders. Florida Cities Water Co. v. Public Serv. Comm'n, 384 So.2d 1280, 1281 (Fla. 1980); City of Plant City v. Mayo, 337 So.2d 966, 974-75 (Fla. 1976); McDonald, supra; General Development Corp. v. Division of State Planning, 353 So.2d 1199, 1209 (Fla.1st DCA 1977). That is so, first, because "established industry-wide policy is being altered" by the imposition of new restraints on a heretofore common but unregulated industry practice, Florida Cities, supra, 384 So.2d at 1281; and second, because rules make policy prospectively after notice, whereas orders extract policy from events viewed retrospectively, and a licensee discipline order under Section 120.60 has the added potential of assessing severe and judicially unreviewable penalties for violation of a statutory norm made explicit only by the disciplinary order. Here, for example, while the Division may be entirely justified in construing the Tied House Evil statute to prohibit certain (or all) manufacturer's bar spending, it surely is too much to claim, as the Division's order seemingly does, that the statute's prohibition of bar spending is "clear and unambiguous," i.e., readily ascertainable by a licensee: reasonably susceptible to that construction, yes; clear and unambiguous, no.
This, then, is not a case in which licensee discipline is sought for violation of an explicit statute or rule, or for an act tainted by standards which are commonly understood though only generally expressed by statute. This is rather a case in which licensee discipline is imposed for violation of rather general, morally neutral, and somewhat technical statutory standards which the order makes explicit only retrospectively and only in terms of the discrete facts at hand. Federal administrative agencies are thus permitted to "proceed retroactively by adjudication to find past conduct illegal, even though such conduct has not been identified as illegal by an agency rule." SEC v. Chenery, 332 U.S. 194, 67 S.Ct. 1575, 91 L.Ed. 1995 (1947), characterized by Mayton, The Legislative Resolution of the Rulemaking
In other words, a reviewing court may be expected to defer to the executive's Chapter 120 privilege, wide in scope but not unlimited, to say when its emerging policy within statutory bounds has settled sufficiently for rulemaking. But though we will ordinarily "withhold judicial imperatives" for rulemaking, in deference to a coordinate branch of government, we are bound to give full effect to the APA's "self-enforcing" incentives for rulemaking — those requirements concerning orders by which "agencies will be pressed toward rulemaking by the necessity otherwise to explicate and defend policy repeatedly in Section 120.57 proceedings... ." Hill v. School Board of Leon County, 351 So.2d 732, 733 (Fla. 1st DCA 1977).
From an agency's point of view, the case-by-case emergence of incipient policy through adjudication has certain understandably attractive features in comparison to rulemaking. Chief among those seeming advantages are retroactivity, particularity, and flexibility. To make a substantive rule an agency must think comprehensively, risk rebuff by the legislature's administrative procedures committee, Section 120.545, and be willing to live with a basic policy choice, making refinements by adjudication, until that choice is changed by more rulemaking. But policymaking by adjudication has certain costs as well. Foremost among those costs to the agency is that the accuracy of every factual premise and the rationality of every policy choice which is identifiable and reasonably debatable must be shown by some kind of evidence undergirding the order which makes that policy choice on that factual premise.
In other words — by way of example drawn from the circumstances of this case — if by reason of the generality of the statute certain conduct is not predictably objectionable, but it may be proscribed or not depending on how the agency views the effect of that conduct and the objects of the statute, then, to the extent the agency's reasoning can be isolated, identified, and demonstrated by evidence appropriate to the occasion, the agency must create a record foundation for its order that the conduct objected to has effects which the statute is construed to condemn. It is insufficient for an agency to prove only the empirical events which are the chosen vehicle for policymaking — that, say, Anheuser-Busch bought a lot of its beer from various Daytona Beach taverns in the Spring of 1978 — and then to expound elegantly, but without a record foundation, that those purchases were forbidden by Section 561.42(1).
We find, therefore, that there is no evidentiary basis in the stipulation or elsewhere in the record for the Division's factual premise that the bar spending complained of gave "promotional value, competitive edge, advertising and good will" to the host bars and taverns. The hearing officer rightly said "the proof does not indicate that particular benefit." And even if that factual premise were shown, the Division's proof does not show further why conferring such a "benefit" through manufacturers' bar spending should be regarded under Section 561.42(1) as equivalent to giving a gift or rebate to, or acquiring a financial interest in, a vendor. We decline to accept these elements in the Division's reasoning as a matter of common knowledge, economic
Our decision here was foretold by McDonald:
See also State Dept. of Administration v. Harvey, 356 So.2d 323, 326 (Fla. 1977):
Recently the Supreme Court endorsed the "record foundation" discipline for nonrule policymaking. Florida Cities, supra, 384 So.2d at 1281:
To further illustrate the point: in McDonald we found that certain statutory criteria for the issuance of a bank charter — the bank's "reasonable promise of success" and the skill of its proposed management, Sections 659.03(2)(b), (d) — were "ultimate facts ... infused by policy considerations for which the agency has special responsibility," and so were subject to elaboration and decision by the Department of Banking and Finance notwithstanding contrary findings of the hearing officer. Nevertheless, we pointed out that
Because the Department of Banking and Finance could show no record predicate for its preferred standards elaborating the subsections (b) and (d) criteria, we held the Department foreclosed from further consideration of those issues, though the case was remanded for discretionary action on issues on which the Department had created a satisfactory record.
The Supreme Court dealt similarly with a silent record in Florida Cities, a water/sewer rate case in which the Public Service Commission reversed its prior "industry-wide policy" and denied the utility the benefit of claiming, as an expense affecting rates, depreciation of the value of construction money or property advanced or contributed to the utility by customers and developers.
Because the Division's final order in this case undertook to establish and is based upon nonrule policy which we judge was susceptible of verification by evidence in the proceedings before the hearing officer, but which was not proved by the Division, the order finding violations of Section 561.42(1) and assessing civil penalties lacks a record foundation and is therefore VACATED.
BOOTH and SHIVERS, JJ., concur.
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