595 F. 2d 685 - Ftc Line of Business Report Litigation v. Federal Trade Commission

We review the decisions of the District Court granting summary judgment to the Federal Trade Commission (Commission or FTC) and enforcing the Commission's orders requiring appellant corporations to file financial performance reports as part of the Line of Business (LB) and Corporate Patterns Report (CPR) surveys.1 These two broad-based statistical surveys are conducted by the FTC pursuant to its authority under Section 6(b) of the Federal Trade Commission Act, which empowers the Commission to require corporations to file informational reports regarding the company's "organization, business, conduct, practices, management, and relation to other corporations."2

A. The Line of Business Program.

In August 1975, as part of the Line of Business survey, the Commission ordered 450 of the nation's largest domestic manufacturing concerns to file reports disclosing certain indicia of financial performance for 1974.3 The 1974 LB form sent to each corporate respondent consists of four schedules.4 Schedule I seeks information identifying the company and its subsidiaries. Schedule II elicits a description of the company's lines of business. Schedule III, the heart of the form, exacts specific financial and statistical data including revenues, costs, profits and assets for each of the company's lines of business. Schedule IV requires reconciliation with other parts of the form and with the company's published financial data. The key feature of the survey is its requirement that each company present its financial performance statistics in terms of a uniform set of market categories.5

The Commission proposes to aggregate the LB statistics within each market category in order to identify areas of the economy in which profits are relatively high or low and to assess relationships between market structure and performance, and to use this information to target particular markets for industry-wide investigations into potential antitrust violations or unfair trade practices.6 Since corporate financial performance data otherwise available to the Commission are not reported in terms of uniform market categories, the LB survey is expected to provide the only performance statistics susceptible to comparison on an industry-by-industry basis.7 Aside from internal use of the LB data, the Commission has indicated an interest in publishing the aggregate market statistics to facilitate efforts by investors, managers and scholars to further the effectiveness of the competitive system.8

The Commission began developing the Line of Business form in 1970. After extended consideration and extensive revisions, a limited survey was conducted to collect 1973 data.9 Revisions were made as a result of the Commission's experience with the 1973 survey, and in April 1975 the Commission published the proposed 1974 LB form in the Federal Register and solicited comments.10 In addition, the FTC distributed copies of the proposed form and the Commission's supporting statement to numerous interested parties, inviting their responses.11 On May 20, 1975, the full Commission conducted a hearing at which testimony was elicited from twenty witnesses regarding the proposed LB program.12 After considering the nearly 100 comments received and the testimony presented, the FTC revised the LB form and submitted it to the General Accounting Office (GAO) for clearance under the Federal Reports Act.13 Notice was published again in the Federal Register and comments were solicited by the GAO.14 Upon consideration of the comments received, the GAO approved the LB form for use by the FTC in a letter detailing its deliberations.15 The Line of Business orders were subsequently served on approximately 450 corporations.16 Motions to quash the LB orders were made by 180 companies17 and denied by the Commission in a statement responding to the objections advanced by the corporations.18

B. The Corporate Patterns Report Program.

The Corporate Patterns Report survey requires over 1100 major domestic corporations to report the value of shipments from their domestic manufacturing establishments in 1972, in terms of product classifications developed by the Census Bureau for use in the Quinquennial Census of Manufactures.19 The CPR survey also solicits 1972 data regarding, Inter alia, consolidated net manufacturing activities and major acquisitions and disposals since 1972.20 As with the LB program, the FTC proposes to use the CPR survey to create a data bank on market structures for use by the Commission in antitrust enforcement, economic analysis and policy planning.21 The value of shipments data will be used in conjunction with aggregate data published by the Census Bureau based on similar information contained in the 1972 Census of Manufactures.22

The Corporate Patterns Report survey was considered initially by the Commission in 1972.23 After testing the proposed form on a small number of companies and effecting some modifications,24 the FTC submitted the CPR form to the General Accounting Office for clearance as required under the Federal Reports Act. The GAO published notice of the proposed survey in the Federal Register and solicited comments.25 The comments received were duly considered, and the GAO approved the CPR form in a letter to the FTC detailing the substance of these comments.26 In addition to entertaining the comments supplied by the GAO, the FTC conferred with representatives from the Census Bureau and the Office of Management and Budget in a public meeting in June 197527 and less formally on other occasions. In July 1975 the Commission adopted a resolution authorizing the use of compulsory process,28 and the Corporate Patterns Report orders were served on 1100 companies.29 In response, motions to quash were filed by 390 companies raising numerous factual and legal objections.30 In an effort to accommodate corporate claims, the Commission deleted an unduly burdensome requirement that each company rank itself as to each product category and responded to each of the corporations' objections in a letter denying the motions to quash.31

Enforcement actions were commenced in the District Court against the companies that had refused to comply with the Commission's orders.32 Dissatisfied in several respects with the disposition rendered by the trial court, the corporations perfected this appeal. Appellants contend first that the orders in both the LB and CPR surveys were issued in violation of the rulemaking requirements of the Administrative Procedure Act (APA).33 Second, appellants urge that the CPR survey is invalid because it violates the confidentiality provisions of the Census Act.34 Third, appellants assert both substantive and procedural errors by the District Court in the enforcement proceeding.35 Finally, appellants submit that the LB orders are infirm because of the alleged failure of the Comptroller General to review the LB forms in accordance with the requirements of the Federal Reports Act.36 We address each of these contentions in turn.

A. Lawfulness of the FTC Report Orders.

1. Nonapplicability of the Administrative Procedure Act's Rulemaking Requirements.

The Federal Trade Commission Act (FTC Act)37 provides a clear basis of authority for the Commission to issue orders requiring corporations to submit informational reports to the FTC. Section 6(b) of the Act states that the Commission shall have the power

To require by general or special orders, persons, partnerships, and corporations, engaged in or whose business affects commerce, excepting banks and common carriers subject to the Act to regulate commerce or any class of them or any of them, respectively, to file with the Commission in such form as the Commission may prescribe annual or special, or both annual and special, reports or answers in writing to specific questions, furnishing to the Commission such information as it may require as to the organization, business, conduct, practices, management, and relation to other corporations, partnerships, and individuals of the respective persons, partnerships, and corporations filing such reports or answers in writing.38

Appellants claim that the Commission's exercise of this authority, which they do not challenge,39 in the development and implementation of the Line of Business and Corporate Patterns Report surveys was procedurally improper because the Commission failed to comply with the rulemaking requirements of the Administrative Procedure Act.40

Our first inquiry is whether the Federal Trade Commission Act obligates the Commission to observe APA rulemaking procedures when exercising its authority to require informational reporting pursuant to Section 6(b) of the FTC Act. We conclude that neither Section 6(b) nor any other section of the FTC Act requires adherence to the APA's rulemaking procedures nor does any section of the Act prescribe other procedural prerequisites to the exercise of the Commission's authority to require reporting. Section 6(b) states that the Commission by order may require corporations "to file with the Commission in such form as the Commission may prescribe . . . reports or answers in writing to specific questions, furnishing the Commission such information as it may require. . . ."41 This section assuredly imposes no procedural qualification on the exercise of the Commission's authority to gather information. Section 6(g) of the FTC Act empowers the Commission to make rules and regulations for the purpose of carrying out the first eighteen sections of the Act.42 But this section does not Require that the FTC engage in rulemaking to implement 6(b) or any other section.43 Rather, 6(g) simply authorizes the Commission to promulgate rules and regulations if it so desires. This is confirmed by the fact that the first eighteen sections include the subpoena authority of the FTC,44 the exercise of which is not subject to rulemaking requirements.45 Hence, Section 6(g) in no wise impugns the Commission's prerogative to order reporting pursuant to Section 6(b) without preliminarily pursuing rulemaking procedures.46

Similarly, the Administrative Procedure Act47 does not independently require rulemaking prior to the issuance of FTC informational report orders. The language and legislative history of the APA suggest a classification of agency activity into three basic categories: rulemaking, adjudication and investigation. The issuance of agency orders to compel the filing of informational reports was plainly regarded an investigative act by the drafters of the APA, not a rule48 or adjudication. Congressman Walter, a principal sponsor of the APA, described investigative activity in the following terms during floor debate in the House of Representatives:The third type of administrative compulsory power may be incidental to either legislative or judicial powers of administrative agencies, or it may be entirely independent of either. I refer to the compulsory action of administrative agencies when they issue subpoenas, require records or reports, or undertake mandatory inspections. These functions are investigative in nature.49

Investigative acts, specifically including report orders, are encompassed in Section 6(c) of the APA, which states "process, requirement of a report, inspection, or other investigative act or demand may not be issued, made, or enforced except as authorized by law."50 Section 6(c), then, manifestly applies to the surveys in issue, which exact informational reports from selected corporations. Thus, that provisions's limitation that investigative orders "may not be issued, made, or enforced except as authorized by law" has direct bearing on this litigation. That phrase, however, simply refers to the statute authorizing the activity. In this case, the enabling statutory provision is Section 6(b) of the FTC Act, which, as we demonstrated above, does not impose rulemaking upon the FTC.51 Accordingly, the Commission is not obligated under the Administrative Procedure Act to pursue rulemaking proceedings prior to implementation of the LB and CPR programs.

Our determination that these statistical surveys are investigative in character and therefore not subject to rulemaking procedures is buttressed by an earlier decision of this court in Montship Lines, Ltd. v. Federal Maritime Board,52 which held that notice and hearing was not a prerequisite to the issuance of an industry-wide order by the Federal Maritime Board requiring the filing of statistical reports. In the same vein, the Fifth Circuit, in United States v. W. H. Hodges & Co.,53 rejected the argument that the Secretary of Agriculture was subject to rulemaking requirements in directing stockyard marketing agencies to file special reports pursuant to a statutory authority that incorporates Section 6(b) of the FTC Act. The Court stated:

The order at issue here was clearly investigatory in nature, as opposed to an adjudicatory or rulemaking process, and hence not subject to the procedures governing rule-making outlined in the APA. Cf. Genuine Parts Co. v. F.T.C., 445 F.2d 1382, 1388 (5th Cir. 1971); K. Davis, Administrative Law Treatise, § 3.01 at 159, n.1 (1958).54

The LB and CPR surveys, too, are "clearly investigatory in nature" and just as plainly exempt from the Administrative Procedure Act's compulsory rulemaking requirements.552. Confidentiality Provisions of the Census Act.

We next consider whether the Corporate Patterns Report Program impermissibly affronts the Census Act.56 Specifically, appellants contend that the CPR survey violates the confidentiality provision of the Census Act, which safeguards company-retained copies of census reports from compelled disclosure to any government agency.57 Appellants insist that this provision protects not only the actual file copy of the census report, but also the company's statistical data that has been prepared in an assertedly "unique fashion" for the purpose of reporting to the Census Bureau.58 The corporations argue that the Census Act's protection of retained census report copies insulates companies from any future requirement to respond to questions similar to those which the company has already answered in reports to the Census Bureau. Since the CPR survey includes a question essentially identical to an item on the Census Bureau's 1972 Annual Survey of Manufactures,59 appellants contend that the FTC is demanding information which the Census Act protects from compelled disclosure.

Both the CPR survey and the 1972 Survey of Manufactures require the respondent corporation to report the value of shipments60 from its domestic manufacturing establishments during 1972 in terms of product categories developed by the Census Bureau.61 The Commission plans to assess "the position of firms and of competitive conditions in various product markets" by comparing the CPR individual company value-of-shipments aggregates from the Survey of Manufactures.62 To maximize the comparative value of the CPR information, the FTC has concededly utilized definitions and product-class codes similar to those employed by Census.63

The confidentiality provision of the Census Act upon which appellants rely, Section 9(a)(3), is explicit in identifying the subject of its protection as "copies of census reports which have been retained."64 It states that

(n)o department, bureau, agency, officer, or employee of the Government, except the Secretary in carrying out the purposes of this title, shall require, for any reason, copies of census reports which have been retained by any such establishment or individual. Copies of census reports which have been so retained shall be immune from legal process, and shall not, without the consent of the individual or establishment concerned, be admitted as evidence or used for any purpose in any action, suit, or other judicial or administrative proceeding.65

This language unambiguously protects actual file copies of census reports retained by corporations. In fact, appellants' construction extends so far beyond the statute's plain terms that we might fairly reject it without further inquiry. In any event, an examination of the legislative history and purpose of the confidentiality provision of the Census Act equally belies appellants' assertion that the FTC's value-of-shipments inquiry is a circumvention of the Census Act's intended protection.66

Section 9(a)(3) was added to the Census Act in 196267 in response to the Supreme Court's holding in St. Regis Paper Co. v. United States68 that a company's retained copy of its census form was not immune from compulsory disclosure to the Federal Trade Commission under the then-existing confidentiality provision of the Census Act. Prior to St. Regis, the Act's immunity, which expressly applied only to census reports in the hands of the Census Bureau,69 had been construed by some lower federal courts to apply with equal force to the company's retained copy.70 The Census Bureau had encouraged companies to preserve copies of their census reports in order to facilitate consistency in their reporting from year to year, and had expressly assured corporations that their reports would not be used "for purposes of taxation, investigation or regulation."71 The Supreme Court in St. Regis held that the Census Bureau's promises could not be enforced without rewriting the Act to protect the company's retained copy of their report a task for Congress and not the Court.72

In the wake of the St. Regis decision, and at the request of the Commerce Department,73 Congress moved promptly to enact legislation "clarifying the intent of the Census Act."74 In so doing, the legislative history reveals, Congress sought to accommodate both the interest of the Census Bureau in protecting the file copies of respondents' reports and the interest of the federal regulatory agencies in collecting information needed for regulatory purposes.75 The House committee considering the amendment specifically rejected language that would have made census "information, reports and other data" immune from legal process, thus clearly undermining appellants' assertion that Congress conferred such broad protection.76 In its stead, Congress enacted a provision protecting only "copies of census reports which have been retained."77 In determining not to immunize a company's census "data" and "information" from disclosure, the committee accepted the recommendation of the administration presented in a letter from the Bureau of the Budget included in the House report:

(C)are must be taken not to extend confidentiality to such an extent as to interfere unduly with responsibilities of other agencies of Government in carrying out functions which require information. These include the antitrust acts and other regulatory acts. . . . (T)he protection to the respondent's file copy of the census reports should apply only to the file copy and not to the information itself or to other records and documents of the company . . . . (A)ny extension of confidentiality beyond the census copy would be strongly opposed by the administration. . . .78

In addition, both the House and Senate reports include a letter from the Commerce Department favoring the restriction of the amendment's immunity to actual file copies and interpreting the impact that the limited protection would have on the ability of regulatory agencies to collect information. It stated:

(T)he ability of a regulatory agency to formulate inquiries, even one identical with those asked by Census, would not be affected. The only restriction would be that the inquiry would not demand an answer by definition identical with that furnished the Census Bureau in another context and for another purpose.79

This distinction between a regulatory agency asking a Question identical to that posed by the Census Bureau, which the FTC concedes it is doing,80 and requiring an identical Answer, which the FTC is not doing, is important, for it goes to the very purpose of affording immunity to census reports and their copies.

The legislative history of the 1962 amendment indicates two reasons why confidentiality was considered essential to candid and expeditious census reporting. First, in order to encourage prompt replies to Census questionnaires, companies are implored by the Bureau to "authorize subordinate officials to furnish information directly, without time-consuming formal clearance by comptrollers, auditors, or legal counsel concerned with problems other than statistical reporting."81 Second, due to the differences in corporate accounting practices and the unavailability of final data at the time census reports are made, respondents are encouraged to use estimates and approximations.82 Since a company's unreviewed, estimated or preliminary answers to the Census Bureau might not be suitable for submission to regulatory agencies for uses potentially detrimental to the corporation, the Census Bureau must be able to assure respondents that they will not be required to provide another agency with answers necessarily identical to those given to the Census Bureau.83

The CPR survey, by presenting a question essentially identical to the Census inquiry with respect to value of shipments, does not "demand an answer by definition identical with that furnished the Census Bureau."84 Simply put, the corporation is under no compulsion to supply the FTC with the same answer reported to Census, although it is certainly at liberty to do so.85 While some corporations may use their census figures directly in responding to the CPR questionnaire, other corporations, by their own affidavits, have indicated that the unreviewed answers to the census inquiry are not sufficiently reliable for the certification of truthfulness required of their answers to the Federal Trade Commission.86 These latter appellants would not be inhibited in any respect from amending their census responses so as to effect full and well-considered compliance with the demands of the CPR program. It follows, then, that by merely including in the Corporate Patterns Report form a question similar to the inquiry made by the Census Bureau in the Survey of Manufactures, the Commission has not occasioned a breach of the Census Act's rigorous but carefully delineated assurance of confidentiality.

B. Judicial Enforcement of FTC Informational Report Orders.

1. The Applicable Standards of Review.

Section 9 of the Federal Trade Commission Act87 vests jurisdiction in the district courts to command compliance, by mandamus, with FTC informational report orders issued pursuant to Section 6(b) of the FTC Act.88 Prior to commanding compliance with the LB and CPR orders, the District Court reviewed these FTC programs under the criteria and summary procedures applicable to judicial enforcement of compulsory process by administrative agencies set forth by the Supreme Court in United States v. Morton Salt Co.,89 and by this court in FTC v. Texaco, Inc.90 Appellants contend that a higher standard of review and a plenary review preceding was required on the theory that the LB and CPR programs are "agency action" subject to the arbitrary and capricious standard of Section 706(2) of the Administrative Procedure Act.91 We reject this argument because in our view the limited scope of review found by the Supreme Court and this court to be appropriate for compulsory process enforcement is applicable to enforcement of the Section 6(b) report orders being enforced in this proceeding.

In United States v. Morton Salt Co.,92 the Supreme Court reviewed Federal Trade Commission orders requiring salt producers to file informational reports designed to determine whether these corporations were complying with a court order to cease and desist certain unfair trade practices. These FTC orders were issued pursuant to Section 6(b) of the Federal Trade Commission Act, the same authority invoked by the Commission here. Appellants, nevertheless, would have us find Morton Salt inapposite because the report orders in Morton Salt were part of a focused FTC investigation, whereas the LB and CPR orders are incident to general statistical surveys. The FTC's authority to require reports under Section 6(b) is not limited to pursuing a focused theory of unlawful activity. The Supreme Court in Morton Salt discussed the nature and scope of this authority in some detail.

The only power that is involved here is the power to get information from those who best can give it and who are most interested in not doing so. Because judicial power is reluctant if not unable to summon evidence until it is shown to be relevant to issues in litigation, it does not follow that an administrative agency charged with seeing that the laws are enforced may not have and exercise powers of original inquiry. It has a power of inquisition, if one chooses to call it that, which is not derived from the judicial function. It is more analogous to the Grand Jury, which does not depend on a case or controversy for power to get evidence but can investigate merely on suspicion that the law is being violated, or even just because it wants assurance that it is not.93

The Court went on to state that the purpose of the investigation may be nothing more than to satisfy "official curiosity," because "law enforcing agencies have a legitimate right to satisfy themselves that corporate behavior is consistent with the law and the public interest."94 Indeed, as we noted in FTC v. Texaco, Inc., the investigative power of the Commission may be used to reveal the need for changes in the law for the purpose of making recommendations to Congress.95 The Commission's purpose in conducting the LB and CPR surveys falls clearly within the purview of its broad investigative powers under Section 6(b). The objective of the Line of Business program is described in the following Commission statement:

(T)he Federal Trade Commission has made a vigorous effort in recent years to improve the effectiveness of its law enforcement resources allocations for antitrust and consumer protection. One consequence has been a shift toward investigations and cases which are industry-wide in scope. To choose as wisely as possible which industry-wide investigations best serve the public interest, accurate industry-by-industry performance information is needed. The Commission's efforts in this respect have been hampered by the decline over time in the quality of the information available. The Line of Business program was conceived to help fill those information needs.96

Similarly, the Commission states that the CPR data banks will be used for "enforcement efforts, economic studies, and policy planning activities."97 Thus, as to both programs, the FTC seeks to establish data banks for use in targeting areas for investigating and enforcement efforts.

Although the investigative powers of the regulatory agencies are broad, they are not unlimited, and are subject to judicial review "(t)o protect against mistaken or arbitrary orders."98 As we stated in Texaco, however, "while the court's function is 'neither minor nor ministerial,' Oklahoma Press Publishing Co. v. Walling, 327 U.S. at 217 n.57, 66 S.Ct. 494, 90 L.Ed. 614, the scope of issues which may be litigated in an enforcement proceeding must be narrow, because of the important governmental interest in the expeditious investigation of possible unlawful activity."99 The agency's investigative order, whether it is a subpoena or an information-report order, must be enforced if it does not transcend the agency's investigatory power, the demand is not unduly burdensome or too indefinite, and the information sought is reasonably relevant.

2. The Relevance and Burdensomeness Determinations.

The corporate appellants argue that if the FTC report orders are summarily enforceable as ordinary compulsory process, as we have concluded they are, the District Court erred in evaluating the relevance and burdensomeness of the Line of Business orders.100 We understand appellants to make three claims. First, that the District Court failed to determine that the LB data sought was relevant to the agency's general purpose as required by Texaco. Second, that it was error for the District Court to decide the question of burdensomeness on the basis of five corporate affidavits and the testimony of two corporate witnesses. And finally, that the Court erred in considering relevance and burdensomeness independently.

As recognized in Texaco, relevance is to be measured against the agency's general purpose in gathering the investigative material.101 The District Court found that "the record in this action provides an ample basis for drawing the limited conclusion, without further evidentiary hearing, that the data sought in the LB program is not totally useless. . . ."102 If anything, the District Court was too guarded in its assessment of the relevance of the LB data. Indeed, in our view, the record reflects that the Line of Business data sought is reasonably relevant to the Commission's general purpose of collecting corporate financial information in order to assess industry-by-industry performance and market structure.103 As we are assured that the FTC surveys satisfy this degree of relevance, we need not decide if a lesser standard would suffice.

The next question is whether the District Court abused its discretion in determining that the Line of Business reporting requirements do not impose an undue burden on the respondent corporations.104 As we indicated in Texaco, the onus of demonstrating that a request is unduly burdensome is the corporation's.105 When the inquiry is conducted pursuant to a lawful purpose and the request is relevant to that objective, its reasonableness will be presumed absent a showing that compliance threatens to disrupt or unduly hinder the normal operations of a business.106 Concerned that the administrative record was insufficient to permit resolution of the question of burdensomeness, and in view of the corporations' representations that they might lay an adequate evidentiary foundation with financial presentations from a "small number" of their group, the District Court invited the corporate parties to submit five affidavits on the cost of compliance with each of the two reporting programs.107 In addition, a hearing was held at which all of the affiants were summoned to present oral testimony.108 The District Court concluded that, assuming the accuracy of the most extravagant cost estimates, the costs of compliance were De minimis relative to the overall corporate operating budgets.109 We think that under the circumstances appellants were extended ample opportunity to establish their claims of burdensomeness, and we are unable to perceive any error in the District Court's assessment of the inadequacy of their showing in that regard.

Finally, appellants have failed to persuade us that the District Court erred in its refusal to disregard the long and consistent line of authority supporting independent consideration of relevance and burdensomeness.110

3. Enforcement Procedures.

The corporations further argue that enforcement of the FTC's report orders by summary mandamus procedures violates Federal Rules of Civil Procedure 81(a)(3) and 81(b), which, they contend, require full compliance with the federal rules, including commencement of suit by the filing of a complaint and the issuance of a summons in a plenary proceeding.111

Rule 81(b) abolishes the writ of mandamus and provides that relief in the nature of mandamus may be obtained "by appropriate action or by appropriate motion."112 It is clear that the substitution of motion and action practice for writ practice has not abolished the remedy of mandamus.113 Appellants contend, however, that Rule 81(a)(3),114 which permits district courts to deviate from the rules in subpoena enforcement cases, compels by implication full application of the rules in other types of mandamus proceedings. The Notes of the Advisory Committee belie appellants' suggestion that this rule was intended to create only a narrow exception to the comprehensive application of the rules in mandamus proceedings. The Committee stated that "although the provision allows full recognition of the fact that the rigid application of the rules in the proceedings themselves may conflict with the summary determination desired (citations omitted), it is drawn so as to permit application whenever the district court deems them useful."115 Moreover, the decided cases are contrary to appellants' position. The District Court,116 in rejecting the corporations' argument, followed the line of decisions in this jurisdiction117 endorsing the position first delineated in United States v. Associated Merchandising Corp.:

As a general rule, district courts do not issue directions in the nature of mandamus except in aid of jurisdiction already acquired. . . . However, where the Court was able to discover a congressional authorization for use of a writ of mandamus, it approved the issuance upon a petition of a peremptory writ. (citations omitted) By (Section 9 of the FTC Act) Congress has expressly conferred jurisdiction to issue a writ of mandamus. Therefore, it seems clear that Congress has expressly authorized the court to proceed summarily to enforce orders of the Federal Trade Commission for the production of documents.118

We find the very thin thread of logic offered by appellants insufficient to support their argument that summary mandamus enforcement proceedings for FTC report orders is prohibited by unyielding adherence to the Federal Rules of Civil Procedure.

4. Confidentiality Claims.

Appellants ask to be excused from complying with the LB and CPR orders because of potential jeopardy to confidential information sought by the Commission if LB and CPR data or data aggregates are published.119 The District Court held that appellants' confidentiality claims are premature prior to a final Commission decision to publish the data from these surveys and are improperly presented to the Court prior to exhaustion of administrative remedies.120 Moreover, as noted by the District Court, even if appellants' claims were meritorious, they would not excuse compliance with the Commission order to supply information to the agency.121 To ensure efficacious assertion of future claims with respect to the release of CPR data, the District Court issued a protective order obligating the FTC to provide ten days notice to companies prior to publication of CPR data for which confidential treatment had been requested and denied.122 No protective order was issued with regard to the Line of Business data. We uphold the District Court in all respects.

Relying on the Supreme Court's opinion in FTC v. Schreiber,123 this court stated recently in FTC v. Texaco, Inc. that "it is the agencies, not the courts, which should, in the first instance, establish the procedures for safeguarding confidentiality."124 In light of this principle, we noted as a general rule that until the subpoenaed information has been tendered to the agency and it has had the opportunity to rule on specific requests for confidential treatment, broad protective orders are "premature and improper."125

Appellants contend that if the Commission decides to publish aggregate Line of Business statistics that these figures may be subject to disaggregation, thereby revealing confidential individual company data. This argument is premature and improper for several reasons. First, the Commission has already promulgated regulations to ensure the confidential treatment of the 1974 Line of Business information.126 They provide, in part, that the LB data shall be used only to compile statistical reports.127 In addition, the FTC is required by its regulations to compile these reports in a fashion that precludes identification of individual company data.128 The regulations further direct the Commission to develop procedures sufficient to prevent improper disclosure of LB data supplied by a particular reporting company.129 Appellants assertion that their individual LB data will be identifiable if LB aggregates are made public assumes that the FTC will forsake its own regulations. We reject this contention as contrary to the well-established presumption of administrative regularity.

Second, the Commission has invited reporting companies to lodge with their LB reports special requests indicating why their reported data may be especially vulnerable to identification if included in published aggregates.130 Appellants must first exhaust their administrative avenues for relief before resorting to the courts for their remedy.131 In light of the numerous administrative safeguards and avenues for relief, we conclude that a protective order is unnecessary and was properly denied by the District Court with respect to the Line of Business program.

In the CPR appeal, appellants contend that the CPR data constitutes " trade secrets" barred from publication by Section 6(f) of the FTC Act.132 The District Court properly concluded that it was premature to reach the merits of appellants' trade secret claim because the Commission has made no final decision to publish individual CPR data.133 Furthermore, as with the claims of confidentiality of the LB data, appellants may demonstrate to the FTC that their CPR data requires special protection and upon receipt of the CPR data, the Commission may rule favorably on particular pleas for confidential treatment. Since the CPR appellants' claims involve the potential release of their individual company data, the District Court decided that a protective order was appropriate "(i)n order to protect the corporate parties from any precipitous action on the part of the FTC" before appellants could exhaust their administrative remedies.134 The District Court's order much like the one issued by this court in Texaco135 requires the Commission to furnish ten days notice of a decision to publish individual company data.136 Although we stated expressly in Texaco that such an order is not required as a general rule, we think the District Court's issuance of a protective order under the circumstances at bar was well within its discretion.137 In sum, the trial court's disposition of the CPR appellants' trade secrets claim was unimpeachable in all respects.

5. Claims of the Adjudicative Appellants.

Nine of the appellant corporations who are respondents in adjudicative proceedings styled In the Matter of Exxon Corporation, et al. and In the Matter of Kellogg Co., et al.138 (hereinafter, adjudicative appellants or adjudicative corporations) raise separate claims of error with respect to the possible use of the LB and CPR data by the Commission's complaint counsel in those proceedings. The corporations' underlying assertion is that complaint counsel might obtain the LB and CPR data for use in the adjudications without complying with the Commission's discovery procedures, thereby violating appellants' rights under the due process clause, the Administrative Procedure Act and the Commission's own rules of practice. Essentially the same claim was made by one of the adjudicative appellants, Atlantic Richfield, in a case recently before this court, FTC v. Atlantic Richfield Company.139 This court, concluding that there was no clear Commission determination of whether FTC rules of practice permitted access by Commission prosecutors to investigatory materials outside the discovery process, remanded the case with instructions to the Commission to interpret its own rules in the first instance.140 The Commission on June 2, 1978, completed its task and concluded that its rules for adjudicative proceedings do not prevent access by complaint counsel to documents and information otherwise properly obtained by the Commission without leave of the Administrative Law Judge in charge of the adjudication and without notice to the adjudicative respondent.141

Adjudicative appellants contend that the LB and CPR orders should not be enforced as to them because of the potential for allegedly unlawful use of the LB and CPR data in the adjudicative proceedings. We agree fully with the District Court that these claims do not go to the question of enforcement because "the potential jeopardy of procedural rights in the adjudicative proceedings cannot impinge upon the FTC's right to collect the information in question, only upon the use to which the information might be put."142 The claims presented by the adjudicative appellants relate not to their rights with respect to the Line of Business and Corporate Patterns Report surveys but rather to claimed rights in the adjudicative proceedings currently pending at the FTC. These assertions must be made first in those administrative proceedings and then pursued, if necessary, in the administrative and judicial avenues of appeal. As this court has stated clearly in Atlantic Richfield :

Subsequent to the Commission's interpretation of its rules, all the legal questions which Atlantic wishes to raise will be comprehended within the Exxon adjudicatory proceeding, and dealt with by the Administrative Law Judge . . . .

If Atlantic is dissatisfied with the Commission's construction of its rules, Atlantic can raise these claims in the context of an appeal from the final decision of the agency in the adjudicative proceeding.143

The present litigation is no more appropriately suited to resolution of any claims that the corporations may wish to raise with respect to the Commission's interpretation of its rules than were the proceedings in Atlantic Richfield. Raising these issues at this juncture is improper, and, accordingly, we affirm the District Court's order.

C. The Comptroller General's Review.

Appellants' final allegation of error is that the Comptroller General's approval of the Line of Business form144 was defective because it was premised on a misunderstanding of the criteria for review established by Section 3512 of the Federal Reports Act.145 This statute requires the independent regulatory agencies to submit proposals for the collection of information from ten or more persons to the Comptroller, who must review the form and advise the agency within 45 days whether it satisfies the requirements of the Federal Reports Act.

The Comptroller construes Section 3512 of the Federal Reports Act as establishing two criteria for review of data-collection plans. These two criteria are set forth in Section 3512(b), which states:

In carrying out the policy of this section, the Comptroller General shall review all existing information gathering practices of independent regulatory agencies as well as requests for additional information with a view toward

(1) avoiding duplication of effort by independent regulatory agencies, and

(2) minimizing the compliance burden on business enterprises and other persons.146

In approving the LB form, the Comptroller specifically found that the information sought was not available to the FTC from another federal source and that the Commission had sufficiently minimized the respondents' burden of compliance with the reporting requirement.147

Appellants argue that the Comptroller was obliged to determine additionally that the data sought was "appropriate" to the FTC's expressed need. This third criterion of review, appellants contend, is imposed implicitly by Section 3512(d) of the Federal Reports Act, which states:

While the Comptroller General shall determine the availability from other Federal sources of the information sought and The appropriateness of the forms for the collection of such information, the independent regulatory agency shall make the final determination as to the necessity of the information in carrying out its statutory responsibilities and whether to collect such information. (emphasis added)148

The determination of appropriateness in this context, appellants suggest, should entail a substantive evaluation of the requested data to establish that it meets "some minimum standard of meaningfulness and reliability in terms of the agency's stated need."149 We find appellants' argument at odds with both the language and the legislative history of Section 3512 of the Federal Reports Act.

Section 3512 was added to the Federal Reports Act in 1973 to create a special review procedure for the data-collection plans of the federal regulatory agencies.150 Prior to the 1973 amendment, the regulatory agencies were subject to the clearance authority of the Office of Management and Budget (OMB), which continues to serve this function Vis-a-vis nonregulatory agencies.151 Congress' express purpose in establishing a different review process for the regulatory agencies was

to insure that the existing clearance procedure for questionnaires or requests for data does not become, inadvertently or otherwise, a device for delaying or obstructing the investigations and data collection necessary to carry out the important regulatory functions assigned to the independent agencies by the Congress.152

Prior to the 1973 amendment, the OMB possessed authority to undertake a substantive appraisal of the data that a regulatory agency sought and to bar collection upon a finding that the data were not necessary for effectuation of the agency's function or the particular program's purpose.153 Congress regarded the evaluation of the regulatory agency's need for data as essentially a policy determination and considered the reviewing agency's veto power as a source of interference with the independence of the regulatory agencies.154 So in creating a separate clearance procedure for these agencies, Congress specifically provided in Section 3512(d) that "the independent regulatory agency shall make the final determination as to the necessity of the information in carrying out its statutory responsibilities and whether to collect such information."155 Appellants' construction of "appropriateness" as a requirement that the Comptroller evaluate the data sought in terms of the agency's need is untenable in light of this provision reserving for the agency the determination as to the necessity of the information in carrying out its statutory responsibilities.156 We therefore agree with the District Court157 and the Comptroller General that the term "appropriateness" serves as merely a shorthand reference to the requirement of Section 3512(b)158 that the Comptroller inspect the regulatory agency's information-gathering proposal with a view toward minimizing the compliance burden.159III. CONCLUSION

The judgment of the District Court is affirmed. The corporate parties shall comply with the Line of Business and Corporate Patterns Report orders as issued by the Federal Trade Commission within 30 days of the date of this opinion.

So ordered.