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ALCOA, GMC v. FTC

May 8, 1984

ALUMINUM COMPANY OF AMERICA, GENERAL MOTORS CORPORATION, MINNESOTA MINING and MANUFACTURING COMPANY, and UNION CARBIDE CORPORATION, Plaintiffs
v.
FEDERAL TRADE COMMISSION, Defendant



The opinion of the court was delivered by: SOFAER

MEMORANDUM OPINION AND ORDER

ABRAHAM D. SOFAER, D.J.:

 The plaintiffs, four of America's largest manufacturing companies, have sued the Federal Trade Commission ("FTC") to prevent disclosure of their "line of business" ("LB") financial reports to persons who are not regular, fulltime FTC employees. They have moved for summary judgment on the ground that the FTC's action in allowing access to research consultants violates sections 6(b) and 10 of the FTC Act ("Act"), 15 U.S.C. §§ 46(h), 50, as well as the confidentiality provision of the Criminal Code, 18 U.S.C. § 1905. Plaintiffs also contend that by allowing such access the FTC has authorized conduct in violation of its own rules of ethics, and that the FTC's rule interpreting section 6(h) of the Act was adopted in violation of the Administrative Procedure Act (APA), 5 U.S.C. §§ 553, 706. Plaintiffs seek an order requiring the FTC to modify its confidentiality rules governing LB reports and enjoining the FTC from any further disclosures of plaintiffs' individual company LB data to persons other than officers or regular employees of the FTC.

 The FTC has also moved for summary judgment, asserting that its research consultants are "special employees," who qualify for access to individual company LB data under section 6(h) as a matter of law. It denies any violation of applicable statutes, regulations, or rules of ethics, and claims its adoption of the LB confidentiality rules was procedurally valid. The FTC's arguments are correct and, no material issue of fact being in dispute, judgment must be entered in its behalf.

 I. The LB Program and Access to LB Data.

 The LB program is a major statistical survey designed to collect financial data from large manufacturing companies on sales, intracorporate transfers, costs, profits, and assets; to break down these data by specified lines of business, or product categories; and to aggregate and publish these data in a manner that does not reveal the individual data of constituent companies. The FTC hopes to use individual and aggregated LB Data to identify areas of the economy in which profits are relatively high or low and to assess relationships between market structure and performance. Relevant findings could thereafter be used to target particular markets for industry-wide investigations into potential antitrust violations or unfair trade practices. See Appeal of FTC Line of Business Report Litigation, 193 U.S. App. D.C. 300, 595 F.2d 685, 691 (D.C. Cir), cert. denied, 439 U.S. 958, 99 S. Ct. 362, 58 L. Ed. 2d 351 (1978).

 The FTC began developing the LB program in 1970. After extended consideration and revisions, an LB form was approved by the General Accounting Office. Subsequently, the FTC ordered 450 of the nation's largest domestic manufacturing concerns to file LB reports disclosing certain financial data for 1974. Motions to quash the FTC orders were filed by 150 companies. Appeal of FTC Line of Business Report Litigation, 595 F.2d at 692. The FTC sued successfully in the United States District Court for the District of Columbia to compel these corporations to file the LB data. In re FTC Line of Business Report Litigation, 432F. Supp. 291 (D.C. 1977), aff'd, 193 U.S. App. D.C. 300, 595 F.2d 685 (D.C. Cir.), cert. denied, 439 U.S. 958, 99 S. Ct. 362, 58 L. Ed. 2d 351 (1978). Plaintiffs have all filed the reports required by the FTC for 1974.

 The need to assure confidential treatment for individual company LB data led Congress to enact special riders to the legislation appropriating funds for the FTC for the fiscal years 1975 through 1977. The riders provided that:

 No part of these funds may be used to pay the salary of any employee, including Commissioners, of the Federal Trade Commission who --

 (1) uses the information provided in the line-of-business program for any purpose other than statistical purposes. Such information for carrying out specific law enforcement responsibilities of the Federal Trade Commission shall be obtained under existing practices and procedures or as changed by law; or

 (2) makes any publication whereby the line-of-business data furnished by a particular establishment or individual can be identified; or

 (3) permits anyone other than sworn officers and employees of the Federal Trade Commission to examine the line-of-business reports from individual firms.

 88 Stat. 1822 (1975); 89 Stat. 611 (1976); 90 Stat. 977 (1977) (emphasis added).

 The FTC promulgated rules identical of the riders, interpreting section 3 of the rider to prohibit disclosure of the LB reports from individual firms "to any person outside the FTC including Congress, parties in court proceedings, governmental agencies, and members of the public." 40 Fed. Reg. 21542 (1975), 41 Fed. Reg. 28041 (1976), 41 Fed. Reg. 31703 (1976).

 In February 1978, anticipating the availability of LB data for 1974, the FTC's Bureau of Economics formed a committee to develop research application procedures. William F. Long was appointed Chairman. From the beginning of the committee's deliberations, FTC officials assumed that "special employees" would be used to perform a substantial amount of research work with the LB data. FTC officials believed even then that using special employees to study LB data was permissible under the riders and confidentiality rules. Long Declaration P6.

 On October 16, 1979, because Congress had not enacted a special LB confidentiality rider to the FTC's 1978 fiscal appropriations legislation which would have applied to the 1977 data, the FTC published roposed confidentiality rules to govern 1977 LB reports. 44 Fed. Reg. 59552, 59554-55 (1979). The rules included the following statements: "No employee (including a special employee) shall be assigned to this [Division of Financial Statistics] unit unless he certifies that, during such assignment and after its termination for any reason, he will abide by the limitations in these rules." Id. at 59554. The FTC extended the deadline for compliance with the 1977 LB orders until 30 days following the issuance of final rules. In January 1980 the FTC began to allow access to ...


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