Archives For Magnuson-Moss

[This post is an entry in Truth on the Market’s FTC UMC Rulemaking symposium. You can find other posts at the symposium page here. Truth on the Market also invites academics, practitioners, and other antitrust/regulation commentators to send us 1,500-4,000 word responses for potential inclusion in the symposium.]

The Federal Trade Commission’s (FTC) Aug. 22 Advance Notice of Proposed Rulemaking on Commercial Surveillance and Data Security (ANPRM) is breathtaking in its scope. For an overview summary, see this Aug. 11 FTC press release.

In their dissenting statements opposing ANPRM’s release, Commissioners Noah Phillips and Christine Wilson expertly lay bare the notice’s serious deficiencies. Phillips’ dissent stresses that the ANPRM illegitimately arrogates to the FTC legislative power that properly belongs to Congress:

[The [A]NPRM] recast[s] the Commission as a legislature, with virtually limitless rulemaking authority where personal data are concerned. It contemplates banning or regulating conduct the Commission has never once identified as unfair or deceptive. At the same time, the ANPR virtually ignores the privacy and security concerns that have animated our [FTC] enforcement regime for decades. … [As such, the ANPRM] is the first step in a plan to go beyond the Commission’s remit and outside its experience to issue rules that fundamentally alter the internet economy without a clear congressional mandate. That’s not “democratizing” the FTC or using all “the tools in the FTC’s toolbox.” It’s a naked power grab.

Wilson’s complementary dissent critically notes that the 2021 changes to FTC rules of practice governing consumer-protection rulemaking decrease opportunities for public input and vest significant authority solely with the FTC chair. She also echoed Phillips’ overarching concern with FTC overreach (footnote citations omitted):

Many practices discussed in this ANPRM are presented as clearly deceptive or unfair despite the fact that they stretch far beyond practices with which we are familiar, given our extensive law enforcement experience. Indeed, the ANPRM wanders far afield of areas for which we have clear evidence of a widespread pattern of unfair or deceptive practices. … [R]egulatory and enforcement overreach increasingly has drawn sharp criticism from courts. Recent Supreme Court decisions indicate FTC rulemaking overreach likely will not fare well when subjected to judicial review.

Phillips and Wilson’s warnings are fully warranted. The ANPRM contemplates a possible Magnuson-Moss rulemaking pursuant to Section 18 of the FTC Act,[1] which authorizes the commission to promulgate rules dealing with “unfair or deceptive acts or practices.” The questions that the ANPRM highlights center primarily on concerns of unfairness.[2] Any unfairness-related rulemaking provisions eventually adopted by the commission will have to satisfy a strict statutory cost-benefit test that defines “unfair” acts, found in Section 5(n) of the FTC Act. As explained below, the FTC will be hard-pressed to justify addressing most of the ANPRM’s concerns in Section 5(n) cost-benefit terms.

Discussion

The requirements imposed by Section 5(n) cost-benefit analysis

Section 5(n) codifies the meaning of unfair practices, and thereby constrains the FTC’s application of rulemakings covering such practices. Section 5(n) states:

The Commission shall have no authority … to declare unlawful an act or practice on the grounds that such an act or practice is unfair unless the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition. In determining whether an act or practice is unfair, the Commission may consider established public policies as evidence to be considered with all other evidence. Such public policy considerations may not serve as a primary basis for such determination.

In other words, a practice may be condemned as unfair only if it causes or is likely to cause “(1) substantial injury to consumers (2) which is not reasonably avoidable by consumers themselves and (3) not outweighed by countervailing benefits to consumers or to competition.”

This is a demanding standard. (For scholarly analyses of the standard’s legal and economic implications authored by former top FTC officials, see here, here, and here.)

First, the FTC must demonstrate that a practice imposes a great deal of harm on consumers, which they could not readily have avoided. This requires detailed analysis of the actual effects of a particular practice, not mere theoretical musings about possible harms that may (or may not) flow from such practice. Actual effects analysis, of course, must be based on empiricism: consideration of hard facts.

Second, assuming that this formidable hurdle is overcome, the FTC must then acknowledge and weigh countervailing welfare benefits that might flow from such a practice. In addition to direct consumer-welfare benefits, other benefits include “benefits to competition.” Those may include business efficiencies that reduce a firm’s costs, because such efficiencies are a driver of vigorous competition and, thus, of long-term consumer welfare. As the Organisation for Economic Co-operation and Development has explained (see OECD Background Note on Efficiencies, 2012, at 14), dynamic and transactional business efficiencies are particularly important in driving welfare enhancement.

In sum, under Section 5(n), the FTC must show actual, fact-based, substantial harm to consumers that they could not have escaped, acting reasonably. The commission must also demonstrate that such harm is not outweighed by consumer and (procompetitive) business-efficiency benefits. What’s more, Section 5(n) makes clear that the FTC cannot “pull a rabbit out of a hat” and interject other “public policy” considerations as key factors in the rulemaking  calculus (“[s]uch [other] public policy considerations may not serve as a primary basis for … [a] determination [of unfairness]”).

It ineluctably follows as a matter of law that a Section 18 FTC rulemaking sounding in unfairness must be based on hard empirical cost-benefit assessments, which require data grubbing and detailed evidence-based economic analysis. Mere anecdotal stories of theoretical harm to some consumers that is alleged to have resulted from a practice in certain instances will not suffice.

As such, if an unfairness-based FTC rulemaking fails to adhere to the cost-benefit framework of Section 5(n), it inevitably will be struck down by the courts as beyond the FTC’s statutory authority. This conclusion is buttressed by the tenor of the Supreme Court’s unanimous 2021 opinion in AMG Capital v. FTC, which rejected the FTC’s claim that its statutory injunctive authority included the ability to obtain monetary relief for harmed consumers (see my discussion of this case here).

The ANPRM and Section 5(n)

Regrettably, the tone of the questions posed in the ANPRM indicates a lack of consideration for the constraints imposed by Section 5(n). Accordingly, any future rulemaking that sought to establish “remedies” for many of the theorized abuses found in the ANPRM would stand very little chance of being upheld in litigation.

The Aug. 11 FTC press release cited previously addresses several broad topical sources of harms: harms to consumers; harms to children; regulations; automated systems; discrimination; consumer consent; notice, transparency, and disclosure; remedies; and obsolescence. These categories are chock full of questions that imply the FTC may consider restrictions on business conduct that go far beyond the scope of the commission’s authority under Section 5(n). (The questions are notably silent about the potential consumer benefits and procompetitive efficiencies that may arise from the business practices called here into question.)

A few of the many questions set forth under just four of these topical listings (harms to consumers, harms to children, regulations, and discrimination) are highlighted below, to provide a flavor of the statutory overreach that categorizes all aspects of the ANPRM. Many other examples could be cited. (Phillips’ dissenting statement provides a cogent and critical evaluation of ANPRM questions that embody such overreach.) Furthermore, although there is a short discussion of “costs and benefits” in the ANPRM press release, it is wholly inadequate to the task.

Under the category “harms to consumers,” the ANPRM press release focuses on harm from “lax data security or surveillance practices.” It asks whether FTC enforcement has “adequately addressed indirect pecuniary harms, including potential physical harms, psychological harms, reputational injuries, and unwanted intrusions.” The press release suggests that a rule might consider addressing harms to “different kinds of consumers (e.g., young people, workers, franchisees, small businesses, women, victims of stalking or domestic violence, racial minorities, the elderly) in different sectors (e.g., health, finance, employment) or in different segments or ‘stacks’ of the internet economy.”

These laundry lists invite, at best, anecdotal public responses alleging examples of perceived “harm” falling into the specified categories. Little or no light is likely to be shed on the measurement of such harm, nor on the potential beneficial effects to some consumers from the practices complained of (for example, better targeted ads benefiting certain consumers). As such, a sound Section 5(n) assessment would be infeasible.

Under “harms to children,” the press release suggests possibly extending the limitations of the FTC-administered Children’s Online Privacy Protection Act (COPPA) to older teenagers, thereby in effect rewriting COPPA and usurping the role of Congress (a clear statutory overreach). The press release also asks “[s]hould new rules set out clear limits on personalized advertising to children and teenagers irrespective of parental consent?” It is hard (if not impossible) to understand how this form of overreach, which would displace the supervisory rights of parents (thereby imposing impossible-to-measure harms on them), could be shoe-horned into a defensible Section 5(n) cost-benefit assessment.

Under “regulations,” the press release asks whether “new rules [should] require businesses to implement administrative, technical, and physical data security measures, including encryption techniques, to protect against risks to the security, confidentiality, or integrity of covered data?” Such new regulatory strictures (whose benefits to some consumers appear speculative) would interfere significantly in internal business processes. Specifically, they could substantially diminish the efficiency of business-security measures, diminish business incentives to innovate (for example, in encryption), and reduce dynamic competition among businesses.

Consumers also would be harmed by a related slowdown in innovation. Those costs undoubtedly would be high but hard, if not impossible, to measure. The FTC also asks whether a rule should limit “companies’ collection, use, and retention of consumer data.” This requirement, which would seemingly bypass consumers’ decisions to make their data available, would interfere with companies’ ability to use such data to improve business offerings and thereby enhance consumers’ experiences. Justifying new requirements such as these under Section 5(n) would be well-nigh impossible.

The category “discrimination” is especially problematic. In addressing “algorithmic discrimination,” the ANPRM press release asks whether the FTC should “consider new trade regulation rules that bar or somehow limit the deployment of any system that produces discrimination, irrespective of the data or processes on which those outcomes are based.” In addition, the press release asks “if the Commission [should] consider harms to other underserved groups that current law does not recognize as protected from discrimination (e.g., unhoused people or residents of rural communities)?”

The FTC cites no statutory warrant for the authority to combat such forms of “discrimination.” It is not a civil-rights agency. It clearly is not authorized to issue anti-discrimination rules dealing with “groups that current law does not recognize as protected from discrimination.” Any such rules, if issued, would be summarily struck down in no uncertain terms by the judiciary, even without regard to Section 5(n).

In addition, given the fact that “economic discrimination” often is efficient (and procompetitive) and may be beneficial to consumer welfare (see, for example, here), more limited economic anti-discrimination rules almost certainly would not pass muster under the Section 5(n) cost-benefit framework.     

Finally, while the ANPRM press release does contain a very short section entitled “costs and benefits,” that section lacks any specific reference to the required Section 5(n) evaluation framework. Phillips’ dissent points out that the ANPRM:

…simply fail[s] to provide the detail necessary for commenters to prepare constructive responses” on cost-benefit analysis. He stresses that the broad nature of requests for commenters’ view on costs and benefits renders the inquiry “not conducive to stakeholders submitting data and analysis that can be compared and considered in the context of a specific rule. … Without specific questions about [the costs and benefits of] business practices and potential regulations, the Commission cannot hope for tailored responses providing a full picture of particular practices.

In other words, the ANPRM does not provide the guidance needed to prompt the sorts of responses that might assist the FTC in carrying out an adequate Section 5(n) cost-benefit analysis.

Conclusion

The FTC would face almost certain defeat in court if it promulgated a broad rule addressing many of the perceived unfairness-based “ills” alluded to in the ANPRM. Moreover, although its requirements would (I believe) not come into effect, such a rule nevertheless would impose major economic costs on society.

Prior to final judicial resolution of its status, the rule would disincentivize businesses from engaging in a variety of data-related practices that enhance business efficiency and benefit many consumers. Furthermore, the FTC resources devoted to developing and defending the rule would not be applied to alternative welfare-enhancing FTC activities—a substantial opportunity cost.

The FTC should take heed of these realities and opt not to carry out a rulemaking based on the ANPRM. It should instead devote its scarce consumer protection resources to prosecuting hard core consumer fraud and deception—and, perhaps, to launching empirical studies into the economic-welfare effects of data security and commercial surveillance practices. Such studies, if carried out, should focus on dispassionate economic analysis and avoid policy preconceptions. (For example, studies involving digital platforms should take note of the existing economic literature, such as a paper indicating that digital platforms have generated enormous consumer-welfare benefits not accounted for in gross domestic product.)

One can only hope that a majority of FTC commissioners will apply common sense and realize that far-flung rulemaking exercises lacking in statutory support are bad for the rule of law, bad for the commission’s reputation, bad for the economy, and bad for American consumers.


[1] The FTC states specifically that it “is issuing this ANPR[M] pursuant to Section 18 of the Federal Trade Commission Act”.

[2] Deceptive practices that might be addressed in a Section 18 trade regulation rule would be subject to the “FTC Policy Statement on Deception,” which states that “the Commission will find deception if there is a representation, omission or practice that is likely to mislead the consumer acting reasonably in the circumstances, to the consumer’s detriment.” A court reviewing an FTC Section 18 rule focused on “deceptive acts or practices” undoubtedly would consult this Statement, although it is not clear, in light of recent jurisprudential trends, that the court would defer to the Statement’s analysis in rendering an opinion. In any event, questions of deception, which focus on acts or practices that mislead consumers, would in all likelihood have little relevance to the evaluation of any rule that might be promulgated in light of the ANPRM.    

[On Monday, June 27, Concurrences hosted a conference on the Rulemaking Authority of the Federal Trade Commission. This conference featured the work of contributors to a new book on the subject edited by Professor Dan Crane. Several of these authors have previously contributed to the Truth on the Market FTC UMC Symposium. We are pleased to be able to share with you excerpts or condensed versions of chapters from this book prepared by authors of of those chapters. Our thanks and compliments to Dan and Concurrences for bringing together an outstanding event and set of contributors and for supporting our sharing them with you here.]

[The post below was authored by former Federal Trade Commission Acting Chair Maureen K. Ohlhausen and former FTC Senior Attorney Ben Rossen.]

Introduction

The Federal Trade Commission (FTC) has long steered the direction of competition law by engaging in case-by-case enforcement of the FTC Act’s prohibition on unfair methods of competition (UMC). Recently, some have argued that the FTC’s exclusive reliance on case-by-case adjudication is too long and arduous a route and have urged the commission to take a shortcut by invoking its purported authority to promulgate UMC rules under Section 6(g) of the Federal Trade Commission Act.

Proponents of UMC rulemaking rely on National Petroleum Refiners Association v. FTC, a 1973 decision by the U.S. Court of Appeals for the D.C. Circuit that upheld the commission’s authority to issue broad legislative rules under the FTC Act. They argue that the case provides a clear path to UMC rules and that Congress effectively ratified the D.C. Circuit’s decision when it enacted detailed rulemaking procedures governing unfair or deceptive acts or practices (UDAP) in the Magnuson Moss Warranty-Federal Trade Commission Improvement Act of 1975 (Magnuson-Moss).

The premise of this argument is fundamentally incorrect, because modern courts reject the type of permissive statutory analysis applied in National Petroleum Refiners. Moreover, contemporaneous congressional reaction to National Petroleum Refiners was not to embrace broad FTC rulemaking, but rather to put in strong guardrails on FTC UDAP rulemaking. Further, the congressional history of the particular FTC rule at issue—the Octane Ratings Rule—also points in the direction of a lack of broad UMC rulemaking, as Congress eventually adopted the rule solely as a UDAP provision, with heightened restrictions on FTC rulemaking.

Thus, the road to UMC rulemaking, which the agency wisely never tried to travel down in the almost 50 years since National Petroleum Refiners, is essentially a dead end. If the agency tries to go that route, it will be an unfortunate detour from its clear statutory direction to engage in case-by-case enforcement of Section 5.

Broad UMC-Rulemaking Authority Contradicts the History and Evolution of the FTC’s Authority

The FTC Act grants the commission broad authority to investigate unfair methods of competition and unfair and deceptive acts or practices across much of the American economy. The FTC’s administrative adjudicative authority under “Part 3” is central to the FTC’s mission of preserving fair competition and protecting consumers, as reflected by the comprehensive adjudicative framework established in Section 5 of the FTC Act. Section 6, meanwhile, details the commission’s investigative powers to collect confidential business information and conduct industry studies.

The original FTC Act contained only one sentence describing the agency’s ability to make rules, buried inconspicuously among various other provisions. Section 6(g) provided that the FTC would have authority “[f]rom time to time [to] classify corporations and . . . to make rules and regulations for the purpose of carrying out the provisions of this [Act].”[1] Unlike the detailed administrative scheme in Section 5, the FTC Act fails to provide for any sanctions for violations of rules promulgated under Section 6 or to otherwise specify that such rules would carry the force of law. This minimal delegation of power arguably conferred the right to issue procedural but not substantive rules.

Consistent with the understanding that Congress did not authorize substantive rulemaking, the FTC made no attempt to promulgate rules with the force of law for nearly 50 years after it was created, and at various times indicated that it lacked the authority to do so.

In 1962, the agency for the first time began to promulgate consumer-protection trade-regulation rules (TRRs), citing its authority under Section 6(g). Although these early TRRs plainly addressed consumer-protection matters, the agency frequently described violations of the rule as both an unfair method of competition and an unfair or deceptive trade practice. As the commission itself has observed, “[n]early all of the rules that the Commission actually promulgated under Section 6(g) were consumer protection rules.”

In fact, in the more than 100 years of the FTC Act, the agency has only once issued a solely competition rule. In 1967, the commission promulgated the Men and Boys’ Tailored Clothing Rule pursuant to authority under the Clayton Act, which prohibited apparel suppliers from granting discriminatory-advertising allowances that limited small retailers’ ability to compete. However, the rule was never enforced or subject to challenge and was subsequently repealed.

Soon after, the FTC promulgated the octane-ratings rule at issue in National Petroleum Refiners. Proponents of UMC rulemaking, such as former FTC Commissioner Rohit Chopra and current Chair Lina Khan, point to the case as evidence that the commission retains the power to promulgate substantive competition rules, governed only by the Administrative Procedure Act (APA) and, with respect to interpretations of UMC, entitled to Chevron deference. They argue that UMC rulemaking would provide significant benefits by providing clear notice to market participants about what the law requires, relieving the steep expert costs and prolonged trials common to antitrust adjudications, and fostering a “transparent and participatory process” that would provide meaningful public participation.

With Khan at the helm of the FTC, the agency has already begun to pave the way for new UMC rulemakings. For example, President Joe Biden’s Executive Order on promoting competition called on the commission to promulgate UMC rules to address noncompete clauses and pay-for-delay settlements, among other issues. Further, as one of Khan’s first actions as chair, the commission rescinded—without replacing—its bipartisan Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act. More recently, the commission’s Statement of Regulatory Priorities stated that the FTC “will consider developing both unfair-methods-of-competition rulemakings as well as rulemakings to define with specificity unfair or deceptive acts or practices.” This foray into UMC rulemaking is likely to take the FTC down a dead-end road.

The Signs Are Clear: National Petroleum Refiners Does Not Comport with Modern Principles of Statutory Interpretation

The FTC’s authority to conduct rulemaking under Section 6(g) has been tested in court only once, in National Petroleum Refiners, where the D.C. Circuit upheld the commission’s authority to promulgate a UDAP and UMC rule requiring the disclosure of octane ratings on gasoline pumps. The court found that Section 6(g) “clearly states that the Commission ‘may’ make rules and regulations for the purpose of carrying out the provisions of Section 5” and liberally construed the term ‘rules and regulations’ based on the background and purpose of the FTC Act.” The court’s opinion rested, in part, on pragmatic concerns about the benefits that rulemaking provides to fulfilling the agency’s mission, emphasizing the “invaluable resource-saving flexibility” it provides and extolling the benefits of rulemaking over case-by-case adjudication when developing agency policy.

National Petroleum Refiners reads today like an anachronism. Few modern courts would agree that an ambiguous grant of rulemaking authority should be construed to give agencies the broadest possible powers so that they will have flexibility in determining how to effectuate their statutory mandates. The Supreme Court has never adopted this approach and recent decisions strongly suggest it would decline to do so if presented the opportunity.

The D.C. Circuit’s opinion is in clear tension with the “elephants-in-mouseholes” doctrine first described by the U.S. Supreme Court in Whitman v. Am. Trucking Ass’n, because it largely ignored the significance of the FTC Act’s detailed adjudicative framework. The D.C. Circuit’s reasoning—that Congress buried sweeping legislative-rulemaking authority in a vague, ancillary provision, alongside the ability to “classify corporations”—stands in direct conflict with the Supreme Court’s admonition in Whitman.

Modern courts would also look to interpret the structure of the FTC Act to produce a coherent enforcement scheme. For instance, in AMG Capital Management v. FTC, the Supreme Court struck down the FTC’s use of Section 13(b) to obtain equitable monetary relief, in part, because the FTC Act elsewhere imposes specific limitations on the commission’s authority to obtain monetary relief. Unlike National Petroleum Refiners, which lauded the benefits and efficiencies of rulemaking for the agency’s mission, the AMG court reasoned: “Our task here is not to decide whether [the FTC’s] substitution of § 13(b) for the administrative procedure contained in § 5 and the consumer redress available under § 19 is desirable. Rather, it is to answer a more purely legal question” of whether Congress granted authority or not. The same rationale applies to UMC rulemaking.

The unanimous AMG decision was no judicial detour, and the Supreme Court has routinely posted clear road signs that Congress is expected “to speak clearly when authorizing an agency to exercise powers of vast economic and political significance,” as UMC rulemaking would do. Since 2000, the Court has increasingly applied the “major questions doctrine” to limit the scope of congressional delegation to the administrative state in areas of major political or economic importance. For example, in FDA v. Brown & Williamson, the Supreme Court declined to grant Chevron deference to an FDA rule permitting the agency to regulate nicotine and cigarettes. Crucial to the Court’s analysis was that the FDA’s rule contradicted the agency’s own view of its authority dating back to 1914, while asserting jurisdiction over a significant portion of the American economy. In Utility Air Regulatory Group v. EPA, the Court invoked the major questions doctrine to strike down the Environmental Protection Agency’s greenhouse-gas emissions standards as an impermissible interpretation of the Clean Air Act, finding that “EPA’s interpretation is [] unreasonable because it would bring about an enormous and transformative expansion in [the] EPA’s regulatory authority without clear congressional authorization.”

Most recently, in West Virginia v. EPAthe Court relied on the major questions doctrine to strike down EPA emissions rules that would have imposed billions of dollars in compliance costs on power plants, concluding that Congress had not provided “clear congressional authorization” for the rules despite explicitly authorizing the agency to set emissions levels for existing plants.  Because broad UMC-rulemaking authority under Section 6(g) is similarly a question of potentially “vast economic and political significance,” and would also represent a significant departure from past agency precedent, the FTC’s efforts to promulgate such rules would likely be met by a flashing red light.

Finally, while National Petroleum Refiners lauded the benefits of rulemaking authority and emphasized its usefulness for carrying out the FTC’s mission, the Supreme Court has since clarified that “[h]owever sensible (or not)” an interpretation may be, “a reviewing court’s task is to apply the text of the statute, not to improve upon it.” Whatever benefits rulemaking authority may confer on the FTC, they cannot justify departure from the text of the FTC Act.

The Road Not Taken: Congress Did Not Ratify UMC-Rulemaking Authority and the FTC Did Not Assert It

Two years after National Petroleum Refiners, Congress enacted the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act of 1975 (Magnuson-Moss). Section 202(a) of Magnuson-Moss amended the FTC Act to add a new Section 18 that, for the first time, gave the FTC express authority to issue UDAP rules, while imposing heightened procedural requirements for such rulemaking. Magnuson-Moss does not expressly address UMC rulemaking. Instead, it says only that Section 18 “shall not affect any authority of the Commission to prescribe rules (including interpretive rules), and general statements of policy, with respect to unfair methods of competition in or affecting commerce.” Section 6(g) currently authorizes the FTC “(except as provided in [section 18] of this title) to make rules and regulations for the purpose of carrying out the provisions of this subchapter.”

UMC-rulemaking proponents argue Magnuson-Moss effectively ratified National Petroleum Refiners and affirmed the commission’s authority with respect to substantive UMC rules. This revisionist interpretation is incorrect. The savings provision in Section 18(a)(2) that preserves “any authority” (as opposed to “the” authority) of the commission to prescribe UMC rules reflects, at most, an agnostic view on whether the FTC, in fact, possesses such authority. Rather, it suggests that whatever authority may exist for UMC rulemaking was unchanged by Section 18 and that Congress left the question open for the courts to resolve. The FTC itself appears to have recognized this uncertainty, as evidenced by the fact that it has never even attempted to promulgate a UMC rule in the nearly 50 years following the enactment of Magnuson-Moss.

Congressional silence on UMC hardly endorses the commission’s authority and is not likely to persuade an appellate court today. To rely on congressional acquiescence to a judicial interpretation, there must be “overwhelming evidence” that Congress considered and rejected the “precise issue” before the court. Although Congress considered adopting National Petroleum Refiners, it ultimately took no action on the FTC’s UMC-rulemaking authority. Hardly the “overwhelming evidence” required to read National Petroleum Refiners into the law.

The Forgotten Journey: The History of the Octane-Ratings Rule Reinforces the FTC’s Lack of UMC Rulemaking Authority

Those who argue that National Petroleum Refiners is still good law and that Congress silently endorsed UMC rulemaking have shown no interest in how the journey of the octane-ratings rule eventually ended. The FTC’s 1971 octane-ratings rule declared the failure to post octane disclosures on gasoline pumps both an unfair method of competition and an unfair or deceptive practice. But what has remained unexplored in the debate over FTC UMC rulemaking is what happened to the rule after the D.C. Circuit’s decision upheld rulemaking under Section 6(g), and what that tells us about congressional and agency views on UMC authority.

The octane-ratings rule upheld by the D.C. Circuit never took effect and was ultimately replaced when Congress enacted the Petroleum Marketing Practices Act (PMPA), Title II of which addressed octane-disclosure requirements and directed the FTC to issue new rules under the PMPA. But despite previous claims by the FTC that the rule drew on both UDAP and UMC authority, Congress declined to provide any authority beyond UDAP. While it is impossible to say whether Congress concluded that UMC rulemaking was unwise, illegal, or simply unnecessary, the PMPA—passed just two years after Magnuson-Moss—suggests that UMC rulemaking did not survive the enactment of Section 18. A brief summary of the rule’s meandering journey follows.

After the D.C. Circuit remanded National Petroleum Refiners, the district court ordered the FTC to complete an environmental-impact statement. While that analysis was pending, Congress began consideration of the PMPA. After its enactment, the commission understood Congress to have intended the requirements of Title II of the PMPA to replace those of the original octane-ratings rule. The FTC treated the enactment of the PMPA as effectively repealing the rule.

Section 203(a) of the PMPA gave the FTC rulemaking power to enforce compliance with Title II of the PMPA. Testimony in House subcommittee hearings centered on whether the legislation should direct the FTC to enact a TRR on octane ratings under expedited procedures that would be authorized by the legislation, or whether Congress should enact its own statutory requirements. Ultimately, Congress adopted a statutory definition of octane ratings (identical to the method adopted by the FTC in its 1971 rule) and granted the FTC rulemaking authority under the APA to update definitions and prescribe different procedures for determining fuel-octane ratings. Congress also specified that certain rules—such as those requiring manufacturers to display octane requirements on motor vehicles—would have heightened rulemaking procedures, such as rulemaking on the record after a hearing.

Notably, the PMPA specifically provides that violations of the statute, or any rule promulgated under the statute, “shall be an unfair or deceptive act or practice in or affecting commerce.” Although Section 203(d)(3) of the PMPA specifically exempts the FTC from the procedural requirements under Section 18, it does not simply revert to Section 6(g) or otherwise leave open a path for UMC rulemaking.

The record makes clear, however, that Congress was aware of FTC’s desire to claim UMC authority in connection with the octane-ratings rule, as FTC officials testified in legislative hearings that UMC authority was necessary to regulate octane ratings. After Magnuson-Moss was enacted, however, neither Congress nor the FTC tried to include UMC rulemaking in the PMPA. In a written statement reflecting the FTC’s views on the PMPA incorporated in the House report, the FTC described its original octane-ratings rule as UDAP only.[2] While not dispositive, the FTC’s apparent abandonment of its request for UMC authority after Magnuson-Moss, and Congress’ decision to limit the PMPA exclusively to UDAP, certainly suggests that UMC did not survive National Petroleum Refiners and that Congress did not endorse FTC UMC rulemaking.

Conclusion

The FTC appears poised to embark on a journey of broad, legislative-style competition rulemaking under Section 6(g) of the FTC Act. This would be a dead end. UMC rulemaking, rather than advancing clarity and certainty about what types of conduct constitute unfair methods of competition, would very likely be viewed by the courts as an illegal left turn. It would also be a detour for the agency from its core mission of case-by-case expert adjudication of the FTC Act—which, given limited agency resources, could result in a years-long escapade that significantly detracts from overall enforcement. The FTC should instead seek to build on the considerable success it has seen in recent years with administrative adjudications, both in terms of winning on appeal and in shaping the development of antitrust law overall by creating citable precedent in key areas.


[1]     H. Rep. No. 95-161, at 45, Appendix II, Federal Trade Commission—Agency Views, Statement of Federal Trade Commission by Christian S. White, Asst. Director for Special Statutes (Feb. 23, 1977).

[2]     38 Stat. 722 § 6(g), codified as amended at 15 U.S.C. §  46(g).


[This guest post from Yale Law School student Leah Samuel—the third post in our FTC UMC Rulemaking symposiumis a condensed version of a full-length paper. Please reach out to Leah at leah.samuel@yale.edu if you would like a copy of the full draft. It is the first of two contributions to the symposium posted today, along with this related post from Corbin K. Barthold of TechFreedom. You can find other posts at the symposium page here. Truth on the Market also invites academics, practitioners, and other antitrust/regulation commentators to send us 1,500-4,000 word responses for potential inclusion in the symposium.]

Introduction

The Federal Trade Commission’s (FTC) ability to conduct substantive rulemaking under both its “unfair methods of competition” (UMC) and “unfair and deceptive practices” (UDAP) mandates was upheld by the U.S. Court of Appeals for the D.C. Circuit in 1973’s National Petroleum Refiners Association v. FTC. Nonetheless, the FTC has seldom exercised this authority with respect to UMC—its antitrust authority. And various scholars and commentators have suggested that such an attempt would quickly be rejected by the U.S. Supreme Court.

I argue that the plain text and procedural history of the 1975 Magnuson–Moss Warranty Act demonstrate that Congress implicitly ratified the National Petroleum decision as it applied to UMC rulemaking. The scholarly focus on the intentions of the framers of the 1914 Federal Trade Commission Act with respect to substantive rulemaking is therefore misplaced—whether the FTC has exercised its UMC rulemaking powers in recent decades, its ability to do so was affirmed by Congress in 1974.

When the FTC first began to promulgate substantive rules under Section 5, neither the agency nor reviewing courts readily distinguished between UMC and UDAP authority. In 1973, the D.C. Circuit determined that the FTC was empowered to promulgate a legally binding trade regulation rule that required the posting of octane numbers at gas stations as a valid legislative rule under both UMC and UDAP. The given trade regulation rule was not clearly categorized as consumer protection or antitrust by the court. In 1975, Congress passed the Magnuson-Moss Act, which added procedural requirements to UDAP rulemaking without changing the processes applicable to UMC rulemaking as it stood after National Petroleum. In 1980, Congress added additional cumbersome procedural hurdles, as well as certain outright prohibitions to so-called Magnuson-Moss rulemaking with the Federal Trade Commission Improvements Act (FTCIA), still leaving UMC untouched.

Interpretative Method

A textualist reading of the Magnuson-Moss Act should lead to the conclusion that the FTC has the power to conduct substantive UMC rulemaking. Because Congress was actively aware of and responding to the National Petroleum decision and the FTC’s Octane Rule, the Magnuson-Moss Act should be read to leave UMC rulemaking intact under the Administrative Procedure Act (APA).

Interpreting Magnuson-Moss to acknowledge the existence of, and therefore validate, UMC rulemaking does the least violence to the text, in keeping with the supremacy-of-text principle, as described by Justice Antonin Scalia and Bryan A. Garner in “Reading Law: The Interpretation of Legal Texts.” Absent any express statement eliminating or bracketing that authority, the contextual meaning of Magnuson-Moss § 202(a)(2)—“[t]he preceding sentence shall not affect any authority of the Commission to prescribe rules…with respect to unfair methods of competition”—is most clearly understood as protecting the existence of UMC rulemaking as it existed in law at the moment of the bill’s passage. In his famous concurrence in Green v. Bock Laundry Machine Co., Justice Scalia explained that:

The meaning of terms on the statute books ought to be determined, not on the basis of which meaning can be shown to have been understood by a larger handful of the Members of Congress; but rather on the basis of which meaning is . . . most compatible with the surrounding body of law into which the provision must be integrated—a compatibility which, by a benign fiction, we assume Congress always has in mind.

In Branch v. Smith, Scalia applied this method to the Voting Rights Act, reasoning that Congress has a constructive awareness of lower-court decisions when it amends a statute. While that constructive awareness, and the statutory meaning that it implies, cannot trump the plain text of the amended statute, it is an important aid to interpretation. Here, the benign fiction of constructive awareness is actually a demonstrable fact: Congress was aware of National Petroleum and took it to be the legal default. Where the lower court decision-making process and the legislative process were closely intertwined, the presumption that Congress knew and adopted the D.C. Circuit’s reasoning is more defensible from a textualist perspective than any other reading of Section 202.

This is not an argument derived from legislative silence or inaction, canons disfavored by today’s textualists. Here, Congress definitively acted, amending the FTC Act multiple times over the decade. To read into the text of the Magnuson-Moss Act a provision stripping the FTC of its UMC rulemaking authority and overturning National Petroleum would be to violate the omitted case canon, as Scalia and Garner put it: “The absent provision cannot be supplied by the courts. What the legislature ‘would have wanted’ it did not provide, and that is the end of the matter.” In sum, the Congresses of 1974 and 1980 affirmed the existence of UMC rulemaking under APA procedures.

FTC Rulemaking Before the Octane Rule

During its first 50 years, the FTC carried out its mandate exclusively through nonbinding recommendations called “trade practice rules” (TPRs), alongside case-by-case adjudications. TPRs emerged from FTC-facilitated “trade practice conferences,” where industry participants formulated rules around what constituted unfair practices within their industry. In the early 1960s, Kennedy-appointed FTC Chair Phil Elman began to push the agency to shift away from a reactive “mailbag approach” based on individual complaints and toward a systematic approach based on binding agency rules. The result was the promulgation of “trade regulation rules” (TRRs) through notice-and-comment rulemaking, which the FTC initiated by amending its procedural rules to permit binding rulemaking in 1962. The FTC’s first TRR, promulgated in 1964, explicitly relied upon the agency’s UDAP authority. However, its statement of basis and purpose contained a full-throated defense of FTC rulemaking in general, including UMC rulemaking. The history of these early rulemaking efforts has been documented comprehensively by Luke Herrine.

Of the TRRs that the FTC promulgated before the Octane Rule, only one appears to have been explicitly identified as an exercise of antitrust rulemaking under Section 6(g) of the FTC Act. That rule, promulgated in 1968, identified its authority as sections 2(d) and 2(e) of the Clayton Act, rather than UMC under Section 5 of the FTC Act. The agency itself, upon repealing the rule, found that no enforcement actions were ever brought under it. Given the existence, however underutilized, of the 1968 rule—alongside the 1971 Octane Rule described below—it is clear that FTC personnel during the 1960s and 1970s did not understand TRRs to mean only consumer protection rules under UDAP. Furthermore, the Congress that enacted the Magnuson-Moss Act was aware of and legislating against the background fact that the FTC had already promulgated two final rules drawing on antitrust authority.

The National Petroleum Decision

In December 1971, the FTC promulgated a TRR through APA notice-and-comment rulemaking declaring that the failure to post octane ratings on gas pumps constituted a violation of Section 5 of the FTC Act, citing both UMC and UDAP as its authorizing provisions. Quoting from the statement of base and purpose of the 1964 Cigarette Rule, the FTC declared that it was empowered to promulgate the TRR under the “general grant of rulemaking authority in section 6(g) (of the Federal Trade Commission Act), and authority to promulgate it is in any event, implicit in section 5(a) (6) (of the Act) and in the purpose and design of the Trade Commission Act as a whole.”

Like the Octane Rule itself, Judge J. Skelly Wright’s 1973 National Petroleum decision affirming the FTC’s authority to promulgate the rule did not distinguish between UMC and UDAP rulemaking and did not limit its holding to one or the other.

Wright’s opinion rested first on a plain language reading of 15 U.S.C. § 46(g), which provides that the FTC may “[f]rom time to time … classify corporations and … make rules and regulations for the purpose of carrying out the provisions of sections 41 to 46 and 47 to 58 of this title.” He rejected appellees’ claim that the placement of § 6(g) in the section of the FTC Act that empowers the commission to systematically investigate and collect industry reports (colloquially referred to as 6(b) orders) manifests Congress’s intent to limit 6(g) rulemaking to the FTC’s “nonadjudicatory, investigative and informative functions.” As he pointed out, the text of 6(g) as adopted applied to section 45, which corresponds to § 5 of the FTC Act.

Wright acknowledged, however, that in theory 6(g) could be limited to rules of procedure and practice—such was the holding of the district court. Wright declined to follow the district court, holding instead that, “while the legislative history of Section 5 and Section 6(g) is ambiguous, it certainly does not compel the conclusion that the Commission was not meant to exercise the power to make substantive rules with binding effect in Section 5(a) adjudications. We also believe that the plain language of Section 6(g)…confirms the framers’ intent to allow exercise of the power claimed here.”Finding the legislative history “cryptic” and inconclusive, Wright argued that “the need to rely on the section’s language is obvious.”

He resolved the matter in the FTC’s favor by focusing on the agency’s need for effective tools to carry out its mandate; to force the agency to proceed solely by adjudication “would render the Commission ineffective to do the job assigned it by Congress. Such a result is not required by the legislative history of the Act.”

While contemporary skeptics of the administrative state might take issue with Wright’s statutory interpretation, it is difficult to argue with his textualist premise: nothing in the text of 6(g) limits the provision to procedural rulemaking.

More importantly, the Magnuson-Moss Act was passed Dec. 19, 1974, only a year and a half after the National Petroleum decision. The text and history of the Magnuson-Moss Act evinces an awareness of and attentiveness to the National Petroleum decision—the proposed legislation and the National Petroleum case were both pending during the early 1970s. The text of Magnuson-Moss canonizes Wright’s authorization of FTC rulemaking powers under both UMC and UDAP, while specifying a more rigorous set of procedural hurdles for UDAP rulemaking.

Legislative History of the Magnuson-Moss Act

Some commentators have suggested that the general purpose of Magnuson-Moss with respect to FTC rulemaking must have been to bog down the rule-promulgation process, because the act added procedural requirements like cross-examination to UDAP rulemaking. From that premise, it may be argued that a Congress hostile to FTC rulemaking would not have simultaneously sandbagged UDAP rulemaking while validating UMC rulemaking under the APA. That logical jump oversimplifies the process of negotiation and compromise that typifies any legislative process, and here it leads to the wrong conclusion. Magnuson-Moss was the result of consumer-protection advocates’ painstaking efforts to strengthen the FTC across many dimensions. The addition of trial-type procedures was a concession that they ultimately offered to business interests to move the bill out of the hostile U.S. House Commerce and Finance Subcommittee. However, the bill moved out of conference committee and to the President Gerald Ford’s desk only after its champions were assured that, in the immediate aftermath of National Petroleum, UMC rulemaking would be unimpaired.

Sen. Warren Magnuson’s (D-Wash.) strategy from the beginning was to marry together the popular and relatively easy-to-understand warranty provisions with a revitalization of the FTC. As early as 1971, President Richard Nixon publicized his support for a watered-down version of a warranty-FTC bill. Notwithstanding the political cover from Nixon, House Republicans were reluctant to move any bill forward. Michael Lemov, counsel to Rep. John E. Moss (D-Calif.) during this period, wrote that the House Commerce Committee in the early 70s was increasingly attentive to business interests and hostile to consumer-protection legislation. It ultimately took Moss’ deal-brokering to make Magnuson’s consumer-protection legacy a reality by unsticking multiple consumer-protection bills from the House “graveyard of consumer bills.” While Magnuson succeeded in passing the Magnuson-Moss draft to a full Senate vote three times in between 1970 and 1974, Moss spent years (and 12 full days of hearings) trying to get the bill out of his Commerce and Finance Subcommittee.

What finally unstuck the bill on the House side, according to Lemov, was the participation of the Nixon-appointed but surprisingly vigorous FTC Chair Lewis Engman. Engman testified before the subcommittee on March 19, 1973, that if the cross-examination provisions couldn’t be cut out of the bill, then all of the rulemaking provisions of the bill should be stripped out. By this time, the National Petroleum Refiners decision was pending, and Engman evidently felt that the FTC could do better with the rulemaking authority that might be left to it by Wright’s decision, rather than the burdensome procedure set out in the House draft. The National Petroleum decision came down June 28, 1973, and by Feb. 25, 1974, the U.S. Supreme Court had denied certiorari, such that Congress could and did consider Wright’s decision to be the state of the law. According to Lemov, Moss was upset that Engman blindsided him with his demand to leave the entirety of Section 5 rulemaking under the National Petroleum standard. In response, he doubled down and brokered a deal with key Republican committee member Rep. Jim Broyhill (R-N.C.), which would keep cross-examination but limit it to material issues of fact, not policy or minutia. After being further weakened in the full House Commerce Committee, the bill made it to a floor vote and along to the conference committee on Sept. 19, 1974, to be reconciled with the stronger Senate version.

In conference, the bill was somewhat resuscitated. It made it out of the House and Senate in December 1974 and was signed by Ford in January 1975. The House’s industry-influenced version of cross-examination made it into law, since the Senate version would have left the entirety of FTC rulemaking power under the National Petroleum holding. In short, the burdensome procedures included in the Magnuson-Moss Act, particularly cross-examination, were either devised by or advocated for by industry-friendly interests intending to tie the FTC’s hands. However, at the urging of Engman, both the Senate and House were attentive to the progress of the National Petroleum decision, and ultimately conferred on a bill that deliberately left UMC rulemaking under the simpler APA process permitted by that decision’s precedent.

The Plain Meaning of Magnuson-Moss

The text of the critical passage of the Magnuson-Moss Act, as codified at 15 U.S.C. § 57a, has not been substantially changed since 1975, though two modifications appear in italics:

(a) Authority of Commission to prescribe rules and general statements of policy

(1) Except as provided in subsection (h), the Commission may prescribe–

(A) interpretive rules and general statements of policy with respect to unfair or deceptive acts or practices […] and

(B) rules which define with specificity acts or practices which are unfair or deceptive acts or practices […], except that the Commission shall not develop or promulgate any trade rule or regulation with regard to the regulation of the development and utilization of the standards and certification activities pursuant to this section.Rules under this subparagraph may include requirements prescribed for the purpose of preventing such acts or practices.

(2) The Commission shall have no authority under this subchapter, other than its authority under this section, to prescribe any rule with respect to unfair or deceptive acts or practices […]. The preceding sentence shall not affect any authority of the Commission to prescribe rules (including interpretive rules), and general statements of policy, with respect to unfair methods of competition

Both of the two changes in italics were the result of the 1980 FTCIA, which is discussed in more depth below. An uncodified section of the bill, labeled “15 USC 57a Note,” reads as follows:

(C)(1) The amendment made by subsections (a) and (b) of this section shall not affect the validity of any rule which was promulgated under section 6(g) of the Federal Trade Commission act prior to the date of enactment of this section. Any proposed rule under section 6(g) of such act with respect to which presentation of data, views, and arguments was substantially completed before such date may be promulgated in the same manner and with the same validity as such rule could have been promulgated had this section not been enacted.

Taken together, the language of Section 202 and 202(c) display a consciousness of the FTC’s prior norms of rulemaking authorized by Section 6(g), and an intent to bifurcate the treatment of UDAP and UMC rulemaking. Section 202 (a)(2) limits UDAP rulemaking, whether interpretive or legislative, to the new boundaries established in the bill, while explicitly leaving UMC rulemaking, including, but not limited to, interpretative rules and statements of policy, outside the new constraints and tethered to Section 6(g).

Clearly UMC is subject to the residual of FTC rulemaking authority—but the interpreter is left to determine whether that residual:

  1. eliminates UMC rulemaking altogether;
  2. leaves UMC rulemaking viable under 6(g) and the APA procedures as established in National Petroleum; or
  3. is agnostic to UMC rulemaking but repudiates National Petroleum, thereby leaving UMC rulemaking open to interpretation based on the meaning of the 1914 FTCA.

Without reference to legislative history, a textualist approach to determining which of the three possibilities is most plausible is to ask what an enacting Congress with a clear preference would have done (see, e.g., Scalia’s majority opinion in Edmond v. United States). Congress could, with even greater parsimony and clarity in drafting, have limited all rulemaking to the Magnuson-Moss procedures by simply referencing Section 5 in the first sentence of (a)(2), or in the first sentences of (a)(1)(A) and (B). Alternately, if the objective was to prohibit UMC rulemaking while allowing a more procedurally limited form of UDAP rulemaking, Congress could have written the second sentence of (a)(2) as: “The preceding sentence shall not authorize the Commission to prescribe rules (including interpretive rules), and general statements of policy, with respect to unfair methods of competition in or affecting commerce” or “The preceding sentence shall not authorize the Commission to prescribe rules, except interpretive rules and general statements of policy, with respect to unfair methods of competition in or affecting commerce.”

We presume that Congress enacted the Magnuson-Moss Act with, as Scalia put it in Bock Laundry, a meaning “most compatible with the surrounding body of law into which the provision must be integrated—a compatibility which, by a benign fiction, we assume Congress always has in mind.” Therefore, while a textualist would not admit the legislative history and administrative history of the FTC to this interpretation, the history is relevant inasmuch as we presume that Congress legislates against the existing state of the law as it understands it. The foregoing history demonstrates conclusively that Congress was aware of and accounting for the National Petroleum decision at multiple stages of the legislative process. The FTC’s UMC rulemaking history further lends support to the fact that Congress and the agency understood UMC rulemaking power to exist before and after the enactment of Magnuson-Moss.

Rulemaking After the Magnuson-Moss Act and the 1980 FTCIA

Returning to the current statutory text, both of the changes in italics were the result of the 1980 FTCIA, which was designed to rein in perceived FTC overreach in the consumer-protection space. The reference to Subsection (h) incorporates an explicit halt to the FTC’s then-pending consumer-protection rulemaking relating to advertising directed at children. The exception codified at (a)(1)(B) targeted the FTC’s ongoing rulemaking in standards and certification.

The Standards and Certifications Rule was the most significant attempt at competition rulemaking after the Octane Rule, although it was never finalized. Two staff reports indicate that FTC staff in both 1978 and 1983 believed that the agency’s authority to make rules under UMC authority was not abrogated by Magnuson-Moss, nor by the FTCIA. The proposed rule would have authorized the FTC to define situations in which the process of developing standards and certifications for a wide variety of industries may give rise to competitive injuries in violation of Section 5. The 1978 proposed rule and staff teport drew on both UMC and UDAP authority, noting that, in the years since National Petroleum, Magnuson-Moss had codified the FTC’s rulemaking authority and added procedural requirements, but that the act, by its own terms, applied only to UDAP rulemaking. Accordingly, the FTC’s “authority to promulgate rules relating to unfair methods of competition was expressly left unchanged by the Act.” Because of the bifurcation in UMC and UDAP rulemaking procedures, Bureau of Consumer Protection (BCP) staff opted to proceed with the standards and certification rulemaking under the new Magnuson-Moss procedures, on the understanding that meeting the higher procedural bar of Magnuson-Moss would also satisfy the requirements of § 553 of the APA.

By 1983, however, BCP staff had shifted gears. The standards and certification final staff report of April 1983, which would have been delivered to the FTC commissioners for a vote on whether to promulgate the rule or not, recommended UMC rulemaking under 6(g). In drawing on its 6(g) authority, BCP staff acknowledged that the 1980 FTCIA had explicitly removed commission authority to promulgate a standards and certification rule under Section 18 of the FTC Act, referring to the new UDAP section.

Clearly, the 1980 FTCIA was intended as a rebuke to the FTC’s efforts at consumer-protection rulemaking. However, the fact that earlier House and Senate drafts contemplated removing all FTC rulemaking authority, or removing standards and certification rulemaking authority for both UMC and UDAP, strongly suggests that Congress understood that the two rulemaking powers existed, had been affirmed by Magnuson-Moss, and continued to be legally viable, even as their exercise became politically infeasible.

BCP staff was bolstered in this interpretation by the D.C. District Court, which granted summary judgment in February 1982 against the American National Standards Institute, which brought suit against the commission claiming that the proposed Standards and Certification Rule proceeding under 6(g) violated the FTCIA of 1980.In an unpublished opinion, the court held that “the text and legislative history of the FTCIA belie Plaintiffs’ claims,” while also defending the continuing dispositivity of National Petroleum on the question of § 6(g) rulemaking. ANSI did not appeal the district court’s decision.

BCP staff forged ahead with the final report in April 1983, acknowledging that, to the extent that certain substantive requirements around disclosures from the 1978 proposed rule were directed at preventing “deception,” the FTC was no longer able to proceed with such rules. To the extent that such disclosures “would have alleviated unfair methods of competition,” the final rule could “provide similar relief.” The Standards and Certifications Rule was never adopted, however, because by 1983, FTC leadership was actively hostile to regulation. The only mentions of “unfair methods of competition” in the rulemaking context in the Federal Register after the Standards and Certification Rule appears to be in the context of repeals.

Conclusion

The Magnuson-Moss Act explicitly left UMC rulemaking unchanged when establishing an additional set of procedural hurdles for UDAP rulemaking. Congress in 1974 both constructively and demonstrably knew that the legal default against which these changes were made was Judge Wright’s National Petroleum decision, as well as the final agency action embodied in the Octane Rule. A textualist reading of the Magnuson-Moss Act must begin with this background legal context to avoid doing violence to the text of the statute. This interpretation is further reinforced by the FTCIA, which also left UMC rulemaking intact, while banning specific instances of UDAP rulemaking. In short, the FTC has substantive UMC rulemaking authority under FTC Act Section 5.