(1932), the Court, in discussing the nature of a consent decree issued in an antitrust case, specifically rejected the argument that a consent decree is to be treated as a contract, and held that it was a judicial act. It would appear therefore that a decree or order does not, because of consent vehicle alone, differ from a litigated decree or order. If any difference is perceptible, it seems to be based on the concept that a respondent subject to a consent order has equitable considerations which may militate in its favor.

For example in United States v. Atlantic Rfg. Co., 360 U.S. 19 (1959), the United States brought suit against appellees for violation of the Elkins and Interstate Commerce Acts. The suit was settled by a consent decree. For a period of sixteen (16) years, the decree was construed by both parties to have the same meaning. The Government finally challenged this interpretation, arguing that the terms of the decree supported a new interpretation just as well as the old, and that the new interpretation would more nearly effectuate the purpose of the statutes under which the original suit was brought. In making it clear that the issue here was the propriety of administrative interpretation, not modification, the Court said it would not substantially change the meaning of the words of a decree to which the parties had consented without an adjudication of the issues. The Court specifically said:

"Where the language of a consent decree in its normal meaning supports an interpretation; where that interpretation has been adhered to over many years by all the parties, including those government officials who drew up and administered the decree from the start; and where the trial court concludes that this interpretation is in fact the one the parties intended, we will not reject it simply because another reading might seem more consistent with Government's reasons for entering into the agreement in the first place." (at 23)

In United States v. Int. Harvester, 274 U.S. 693 (1927), the Government petitioned the Court to obtain further relief under an outstanding consent decree. The Court refused to approve a construction of the decree which "would plainly be repugnant to the agreement approved by the court, and embodied in the decree, which has become binding upon all parties, and upon which the International Harvester Company has, in the exercise of good faith, been entitled to reply." (at 703)

The rationalization of these cases would seem to militate against more stringent interpretations of an order sans reopening, where both the Government and a respondent have adhered to a previous interpretation over a protracted period of time. For present purposes we must also recognize the fact that the Commission has approved many compliance reports based on the pre-Fred Meyer interpretation of Section 2(d), and the fact that the Commission's theory of violation in many instances was plead on a fact premise more narrow than the Meyer doctrine; e.g., discrimination between direct buyers. In addition, the Commission has in at least one instance issued an advisory opinion in relation to an order admitting of a more liberal standard of compliance than now statutorily imposed by Meyer. The Commission, on the other hand, might argue that the new interpretation of the word "customers" in its Section 2(d) orders would more nearly effectuate the meaning of the statute as construed by the Supreme Court. We note, however, that the Court refused a similar argument in the Atlantic Rfg., Co., case, although there made in a different fact context than arising out of the current Meyer opinion.

In F.T.C. v. Standard Brands, Inc., 189 F. 2d 510, (2nd Cir. 1951), the Commission issued its order after a proceeding in which the Commission's complaint charged that the respondent's sales unlawfully affected competition among its customers. The complaint did not charge, nor did the Commission ultimately specifically find, that the respondent's activities had had any unlawful effects upon the respondent's competitors on the primary level.

The Commission later conducted hearings which indicated that the respondent's activities were substantially lessening competition between Standard Brands and some of its competitors, and thereafter made application for a decree affirming and enforcing the order. The Court held that the Commission's finding of substantial lessening of competition at the primary line level did not dovetail with the coverage of the Commission's order. The Court stated: "Perhaps this conclusion may seem somewhat formalistic. For the Commission may at once begin a new proceeding pursuant to a complaint charging violations of the Act as to Standard Brands' competitors and, in such a proceeding, the Commission may properly consider the evidence heretofore taken in the violation hearing. Nevertheless, this seeming formalism is desirable in

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fairness to respondent since, in such a new proceeding, it may be able to offer evidence proving that its actions were not unlawful vis-a-vis its own competitors.” [at 513]

The language in Standard Brands takes on more meaning in light of the Supreme Court's decision in F.T.C. v. Henry Broch & Co., 368 U.S. 360 (1962). The Broch case involved a pre-Finality Act, Section 2(c) Clayton Act order. The Court of Appeals, on petition to review, limited a portion of the order. The Supreme Court held that the Court of Appeals acted inappropriately and prematurely in limiting that portion of the order which prohibited acts other than those which the respondent was shown to have literally perpetrated. The court held that such overbroadness, if such it was, could be considered in enforcement proceedings, and upheld the right of the Commission to, in its discretion, formulate a remedy. However, the Court went on to state:

"Upon any future enforcement proceedings the Commission and the Court of Appeals will have ready at hand interpretative tools-the employment of which we have previously sanctioned for use in tailoring the order, in the setting of a specific asserted violation, so as to meet the legitimate needs of the case. They will be free to construe the order as designed strictly to cope with the threat of future violations identical with or like or related to the violations which Broch was found to have committed, or as forbidding no activities except those which it continued would directly aid in perpetuating the same old unlawful practices Federal Trade Comm'n v. Cement Institute, 333 U.S. 683, 727 [4 S. & D. 676]. They need not-as we have already made clear-read the order as denying [367] to Broch the benefit of statutory defenses or exceptions. Federal Trade Comm'n v. Ruberoid, supra, at 475-476; Federal Trade Comm'n v. National Lead Co., 352 U.S. 419, 426 [6 S. & D. 193]. Nor need the order be construed as prohibiting anything as clearly lawful as a uniform reduction in commissions. And, we repeat. these various interpretive aids will have to be brought to bear by a Court of Appeals upon a particular practice of Broch, and will have to yield the announced result that such practice violates the order, before Broch can be subjected to penalties because of still a second repetition of the violation." [at 366] (Emphasis supplied.)

In relation to post-Finality Act orders the Supreme Court, in addition, stated: "We do not wish to be understood, however, as holding that the generalized language of paragraph (2) would necessarily withstand scrutiny under the 199 amendments. The severity of possible penalties prescribed by the amendments for violations of orders which have become final underlines the necessity for fashioning orders which are, at the outset, sufficiently clear and precise to avoid raising serious questions as to their meaning and application. See Labor Board v. Express Pub. Co., 312 U.S. 426, 435–437; Federal Trade Comm'n v. Cement Institute, 333 U.S. 683, 726 [4 S. & D. 676]; Federal Trade Comm'n v. Morton Salt Co., 334 U.S. 37, 54 [4 S. & D. 716]. Compare New Haven R. Co. v. Interstate Commerce Comm'n, 200 U.S. 361, 404; Swift & Co. v. United States, 196 U.S. 375, 400–401" [at 367]

We feel that Standard Brands and Broch supplement the availability of an equitable defense to a pre-Meyer respondent. It can be well argued from such standpoint that many pre-Meyer complaints, and correspondingly the resulting orders, were substantially premised on theories of violations less stringent than the Meyer doctrine and that a statutorily phrased order is correspondingly Do broader than the fact structure which premised its issuance.

Such a defense would not be available, of course, to respondents bound by orders entered under different circumstances. In any case where an order has been written in statutory language, and the complaint and/or findings show i record basis for a Fred Meyer type of situation, the Standard Brands and Brock principles might not prove stumbling blocks to enforcing such an order, because the order, in the light of the complaint and findings, could be interpreted to cover the Fred Meyer type of situation.

While we recognize the possibility of the above occurrences, it nevertheless appears to be true that most orders written in statutory language prior to Frid Meyer were not preceded by a record basis coextensive with the Fred Meyer theory. In addition the standards of compliance reasonably anticipated under such orders did not require the kind of statutory business behavior the Suprece Court has now said is necessary.

Other cases exist which bear on the question of the availability of equitable and substantive arguments being available to respondents should the Commissi attempt to apply Meyer to past orders, even if the application would be made as to future conduct and with reasonable notice.

In F.T.C. v. Nash Finch Company, 288 F. 2d 407 (D.C. Cir. 1961) and Sperry Rand v. F.T.C., 288 F. 2d 403 (D.C. Cir 1961), an attempt by the Commission to apply post-Finality Act standards to orders issued prior to the finality amendment of the Clayton Act were successfully challenged. In these cases, however, the Courts, premised their conclusions on the fact that the suggested construction of the statutory amendment did not countenance coverage of pre-existing orders.

In a very recent case, National Dairy Products Corporation v. Federal Trade Commission, Civil Action No. 1071-68 (D.D.C. 1968), a preliminary injunction was issued against the Commission by the District Court after the Commission attempted to substantively interpret the order prohibitions against asset acquisitions so as to include a there defined market share concept. National Dairy stated in its complaint that it was asking the court to act because plaintiff was subject to a suit for civil penalties for failure to obey the order as expanded through administrative interpretation, and that plaintiff was consequently entitled to immediate relief. The court agreed, saying in the injunction that:

"There exists between the parties a justiciable controversy in respect of which the plaintiff is entitled under the Declaratory Judgment Act, 28 USC 2201-02 to a declaration of its rights by this Court."

However valid its observations, the court nevertheless suggested that a reopening proceeding would provide more equitable safeguards to the affected respondent.

Supporting this theory is Abbott Laboratories, et al. v. Gardner, 387 U.S. 136 (1967). There the Commissioner of Food and Drugs issued regulations as to labeling and advertising of drugs. Violations of the regulations were subject to penalty. Upon challenge the Court held that the administrative action was properly reviewable because it would affect the ". . . day to day business of . . . companies; its promulgation put petitioner in a dilemma that was the very purposes of the Declaratory Judgment Act to ameliorate." [at 152]

If however the Commission changed the compliance necessary under existing 2(d) orders without reopening and modifying, such a Commission action, though questioned, may not technically be considered ripe for judicial action in a court of appeals. Rettinger v. Federal Trade Commission, F.2d (2nd Cir. 1968), Vulcanized Rubber and Plastics Company v. Federal Trade Commission, 258 F.2d 684 (D.C. Cir. 1958). This is not to suggest however, that such a redetermination of compliance standards would not be considered justifiable by a District Court in a declaratory judgment proceeding.

There are other analogies in case precedent lending credence to the postulate that courts react very conservatively with respect to administrative attempts to expand coverage of orders beyond what may be considered a reasonable and clearly understood relationship between the questioned acts and practices and the language of the order as originally postured in relation to such acts and practices. U.S. v. International Nickel Co., 203 F. Supp. 739 (S.D.N.Y. 1962) Ashville Tobacco Board of Trade, Inc. v. F.T.C. 294 F.2d 619 (4th Cir. 1961), Carter Paint Co. v. F.T.C. 333 F2d 654 (5th Cir. 1964).

2

In exploring the possibility of applying Meyer to previously issued statutory orders, the Meyer decision may be characterized as not being a change of law out rather an interpretation of what the statute always meant, irrespective of he fact that less stringent concepts may have motivated past enforcement. It nay be argued that the construction by the Supreme court did not make new aw, but merely clarified the meaning of the statute, and the Commission, acting n the public interest must expand its interpretation of such orders to give literal

2 See Hanover Shoe, Inc. v. United Shoe Machinery Corp., 377 F.2d (3rd Cir. 1967), reersed on other grounds, U.S. (1968), where the court expressed its opinion that etroactivity should be determined from the facts of a particular case, having in mind the urpose which the new rule seeks to accomplish and the comparative benefits and evils of etroactivity. It emphasized that in civil unlike criminal cases, it is appropriate to ecognize that businessmen must rely on counsel, who are in turn guided by the existing recedents in making decisions in relation to the antitrust laws on specific business onduct. The theory of the Court of Appeals seems to have been that when a party has relied pon a clear and established doctrine, and the retrospective application of a newly declared octrine would upset that justifiable reliance to his substantial injury, considerations of istice and fairness would require that the new rule be applied prospectively only.

It should be noted that recent Supreme Court decisions involving criminal cases have ade it clear that the theory that the law has always been what the latest case for the rst time declares it to be, i.e., the Blackstonian view, must yield to the practical realization at conduct had occurred in reliance on earlier rules of law, e.g., Linkletter v. Walker, 31 U.S. 618 (1965) to Mapp v. Ohio, 397 U.S. 643 (1961).

effect to the intended statutory proscriptions. Further, the equitable concept of estoppel will not bar the Commission from so applying the new interpretation to such orders, P. Lorillard v. F.T.C. 186 F.2d 52 (4th Cir. 1950).

Pursuing this rationalization, a respondent subject to a statutorily phrased order is arguably bound by all subsequent and expanding statutory interpretations by the highest Court and a respondent who consents to such an order consents to such a judicial probability. Such an argument, however, suffers from a mathematical deficiency in the sense that, assuming the accuracy of our research, no such literal instance has been found in existing precedent.

Our conclusion with respect to the application of legal principles to the present problem is that the rationalization of the previously cited cases militate against the probability of the Commission successfully applying Meyer to previous orders without some form of notice and opportunity to be heard whether through reopening of said orders or through other procedures.

As a practical consideration, however, the Commission has approved compliance reports in over one hundred and fifty (150) cases where the standards of compliance do not measure up to the Meyer requirements. Minimally, any attempt, to apply Meyer to said orders must countenance the requirements of the Section 3.61 of the Commission's Rules. In Section (a) thereof it is provided. inter alia, that "The Commission will review such reports of compliance and will advise each respondent whether the actions set forth therein evidence compliance with the Commission's order."

In Section (d) of said Rule it is further provided:

"The Commission may at any time reconsider its approval of any report of compliance or any advice given under this section and, where the public interest requires, rescind or revoke its prior approval or advice. In such event the re spondent will be given notice of the Commission's intent to revoke or rescind and will be given an opportunity to submit its views to the Commission. The Com mission will not proceed against a respondent for violation of an order with respect to any action which was taken in good faith reliance upon the Commission's approval or advice under this section, where all relevant facts were fully, completely, and accurately presented to the Commission and where such action was promptly discontinued upon notification of rescission or revocation of the Commission's approval."

The previous approval of lesser compliance standards than statutorily imposed by Meyer would make it incumbent to remove such prior approval as a preceder: to taking any action designed to apply Meyer to such orders. Correspondingly. and aside from the application of Meyer to said orders, it would seem desirable. if not essential, for the Commission, as a minimum, to make it clear in some form of notification to affected respondents that such previous approval of compliance reports will not in any way militate against the Commission's future application of statutory standards to respondents under outstanding orders.

In summary, therefore, and supplementing our previous conclusion as to the infirmities of the legal position supporting any attempt to summarily apply Meyer to past orders by way of future compliance requirements, we feel that it is unnecessary to explore the various procedural mechanisms which might be available to respondents who took exception to any such attempt. The vehicles declaratory judgment, and perhaps appeal, suggest themselves as being within the framework of available procedures. Arguments available would include such as the following:

(a) Orders entered by consent admitted of no violation of law and were necessarily premised on the acceptability of compliance standards the recognized.

(b) The framework of the complaints charged law violations on fat situations not countenanced by Meyer, e.g., discriminataions between whole salers or between direct buying retailers and the orders, despite employment of broad statutory language, cannot properly apply to unanticipated eventa alities.

(c) The changed interpretation places respondents in penalty or enforce ment jeopardy in areas never reasonably countenanced.

(d) The Commission had previously recognized, with respect to other cases and in its rules, that where confusion as to coverage of an order exists the fairest procedure is to reopen said order, e.g., Mohr v. F.T.C. 272 FA 401 (9th Cir. 1959); Section 3.72(b) of the Commission's Rules dealing specifically with "changed conditions of . law. . .;" and Section 11 of the Clayton Act, as amended, also specifically providing for reopeniz! of final orders.

...

RECOMMENDED PROCEDURES

We have considered various approaches which the Commission might take to deal with the problem of orders in relation to the decision in Fred Meyer.

The availability of the reopening procedure is, of course, apparent but would involve in all probability not only selected instances of litigation on the basis of previously referenced theories but more practically entail a staff-manpower burden for which the Compliance Division and we believe the Bureau of Restraint of Trade is not presently equipped. Any reopening process would moreover suggest the advisability of Commission investigation to determine what respondents are in fact doing as a necessary prelude to informed decision. We also feel that action looking toward rescission of previous compliance reports should also properly entail at least Commission compliance with the notice and opportunity requirement of Rule 3.61 (d).

We have concluded that two procedures, in the alternative, suggest themselves as being of practical availability under all of the circumstances.

Alternative 1.—This is the procedure which we recommend. Under this proposal the Commission would, following issuance of revised 2(d)-2(e) guides, send an Order to File a Special Report, supported by Resolution and accompanied by a copy of the guides to each respondent under order. In appropriate language the Commission's resolution would recite the existence of the previous order and compliance report approval. In addition, appropriate reference to the Supreme Court's opinion in Meyer would be made. The resolution would make it clear that the Commission is investigating:

(a) to determine the manner and extent of compliance with the order. (b) whether corrective action with respect to Sections 2(d) or 2(e) of the Clayton Act, as amended, should be undertaken,

(c) whether reopening or modification of orders is appropriate, or (d) whether rescission of compliance standards previously approved should be undertaken.

We believe that this approach, if coupled with a requirement to file the special report in one hundred and twenty (120) days, disclosing in detail all aspects of promotional programs in effect from date of receipt of the order to date of filing of the report, will have the following facets:

(a) It looks to the disclosure of a program which can be implemented or altered after receipt of the order to file the report or in any event the program which is then in effect.

(b) It permits a respondent to conform a program to Meyer if it so elects.

(c) It will provide the Commission with a fact premise upon which to evaluate the need for and manner of corrective action on a per case basis. We recognize that this procedure would really be forestalling, at least for a time, the need for definitive appraisal of the basic question as to Meyer's applicability to each of these orders. However, we do feel that the procedure has prophylactic overtones which may key respondents into taking the needed steps to conform their programs to statutory standards. It also will inform the Commission as to what each respondent is in fact doing.

Alternative 2.-This procedure is basically premised on the consideration that Meyer cannot properly be applied to the preponderance of previously entered orders, and that it is desirable to avoid the prodigious burden of reopening all of the affected orders or going through the also considerable and time consuming processes of Alternative 1.

It would entail the Commission's sending a letter notification to affected respondents citing the background of the order and Meyer opinion and advising respondent that its "statutory" compliance standards would in the future be expected to minimally conform to the Court's opinion in Meyer and the instructions of the accompanying guides. No further report would be required although this fact would not be specifically mentioned.

This approach, we recognize, is substituting notice and suggestion for more positive action. However, it also recognizes the practical, legal and manpower problems of endeavoring to do more.

In recommending Alternative 1 we apprise the Commission of the fact that the Compliance Division has but one man assigned to the whole area of 2(d) orders and the present overall case load does not practically admit of our ability to assign more men to this area, despite an existing backlog. If Alternative 1 is adopted, and the garment orders are excluded, I recommend that