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question of whether respondents are covered under $8 5 and 6 of the FTC Act (15 U.S.C. $$ 45, 46) is not an appropriate question for this court to determine. This question, it is asserted, is one that is properly resolved in a proceeding before the Commission, not the district court, as it is independent of, and has nothing to do with, this court's ruling on the FTC's investigative powers. Further, the FTC asserts that its investigation of the advertising practices of respondent is not related to its function as a carrier. Rather, it is contended that the FTC's authority to investigate is clearly limited to matters peripheral to Morgan's function as a carrier. Accordingly, the FTC says that jurisdiction of the matter herein (advertising) is not properly within the regulatory activity of the ICC, as respondent would have the court believe. In this regard, the FTC maintains that its investigation will in no way interfere with the effective regulatory activity of the ICC. Finally, in support of its position, the FTC asserts that respondent is unable to show that the subpoena duces tecum issued in this case is either oppressive or burdensome. It is submitted, therefore, for the reasons stated above, that the FTC is entitled to the relief sought herein by an order of this court.
In their answer, respondents say that they have refused to respond to the FTC subpoenas in this matter because the FTC lacks statutory authority to investigate and regulate common carriers; that the subpoenas herein are oppressive, burdensome and irrelevant; and that the instant subpoenas are without the scope of the FTC's lawful authority.
Respondents contend, first of all, that the FTC has no authority to investigate the alleged violations herein because common carriers are subject to the jurisdiction of the ICC under the Interstate Commerce Act. Accordingly, it is asserted that the purported investigation herein is both unauthorized and illegal. In this regard, respondents argue that it is clear under the Federal Trade Commission Act that common carriers are exempted, and instead are subject to "the Act which regulates commerce", i.e., the Interstate Commerce Act. 15 U.S.C. $$ 45(a)(6) and 46(a). It is asserted that no court has ever held that the FTC has authority to investigate or regulate common carriers. Since Morgan is a common carrier “subject to the Act to regulate commerce," and all its business operations have been as a common carrier, it is argued that the FTC lacks authority to proceed here. This is evident, argue respondents, in light of the clear intent of Congress to vest the regulation of common carriers in the ICC. Further, respondents maintain that the Interstate Commerce Act vests broad powers in the ICC, including the regulation of trade practices of common carriers. The ICC has in fact, say respondents, exercised its authority with reference to “unfair or destructive and competitive practices,"
including the advertising practices of common carriers. Finally, respondents contend that the question of whether this investigation is within the FTC's authority (the coverage issue) is a proper question for this court to determine at this time. For the above reasons, therefore, respondents argue that this court should deny the FTC's petition for an order enforcing the subpoenas in question.
After oral argument on the issues which pend herein, respondents filed a supplemental memorandum in which it is argued that certain amendments to the Code of Federal Regulations have been proposed wherein the Interstate Commerce Commission has indicated its willingness to assume jurisdiction over the advertising practices of common carriers. 49 C.F.R. 1056. The FTC's response, however, contends that the proposed amendment merely indicates that the ICC's activities regarding the advertising practices of common carriers is only ancillary; and that respondents still have failed to demonstrate that the practices which the FTC seeks to investigate here are, in fact, regulated by the ICC. Petitioner again emphasizes its position that the question of coverage is not a defense to the enforcement of the subpoenas herein and should not be litigated in this subpoena enforcement action. Respondents thereupon realleged their proposition that this court should not be prevented from acting in this proceeding where the FTC seeks to engage in an unlawful and illegal investigation, and where the Federal Trade Commission Act is explicit in exempting common carriers subject to the Interstate Commerce Act.
The court has examined the record in this cause with the utmost diligence and has grappled with the difficult questions herein presented. As a result of this court's exhaustive examination and analysis of the positions as expressed by the parties in oral argument and written memoranda, as well as the applicable law, the court concludes, for the following reasons, that the FTC's subpoena duces tecum and subpoena ad testificandum, which would require respondents to testify and produce certain documentary evidence, ought to be enforced.
Initially, the court would state that throughout these entire proceedings, it has been deeply concerned with the possibility –if the FTC subpoenas herein were enforced— that respondents would be the object of not one, but two administrative investigations promulgated by two separate administrative agencies. This result which, in the opinion of this court, was within the realm of possibilities, caused the court serious difficulty in arriving at a viable solution in this case. The court found itself in a position wherein it was asked to impinge upon the administrative sphere by making a determination as to which agency, the FTC or ICC, was the proper overseer of respondents' activities in regard to advertising. On the one hand, the court was
confronted with the proposition advanced by respondents that the Federal Trade Commission Act is clear that common carriers are exempt from its strictures in favor of coverage under the Interstate Commerce Act. On the other hand, the court had to consider its position in regard to the administrative process and the command that courts respect and not interfere with that process except under the most limited and exceptional circumstances. The court, therefore, admittedly found itself in a most precarious position.
Nevertheless, notwithstanding the above, this court is confident in the ruling which it propounds herein and finds that the position advanced by the FTC is the more persuasive one. In this regard, the court is convinced, based on a thorough review of the applicable law, that this court is not the forum in which to assert the issue of jurisdiction as a defense to a subpoena enforcement petition. The law is clear on the point that the subpoena enforcement issue is a question separate and distinct from the coverage question. Thus, the question of whether respondents are covered by the Federal Trade Commission Act or whether they come under the jurisdiction of the Interstate Commerce Commission in regard to advertising practices cannot and should not be litigated in this subpoena enforcement action. Securities and Exchange Commission v. Brigadoon Scotch Distributing Co., 480 F.2d 1047, 1053 (2d Cir. 1973). As the First Circuit Court of Appeals has stated in this regard:
•••[A]ppellants may not litigate questions having to do with the application and coverage of the federal securities laws before responding to subpoenas * [WJhether or not certain activities are subject to SEC regulation is not to be decided in a subpoena enforcement action. Rather the Commission “must be free without undue interference or delay to conduct an investigation which will adequately develop a factual basis for a determination as to whether particular activities come within the Commission's regulatory authority.” Securities and Exchange Commission v. Howatt, 525 F. 2d 226, 229-230 (1st. Cir. 1975), citing Brigadoon, supra. This court is of the view that the same principle is applicable to the case at bar.
Furthermore, this Circuit has recently stated, in the case of Federal Trade Commission v. Feldman, No. 75-1583 (7th Cir. Feb. 24, 1976), that:
The courts have been reluctant to interfere in the investigative stage of the administrative process. In Okla. Press Pub. Co. v. Walling, 327 U. S. 186, 214 (1946), the Supreme Court stated:
*** Congress has authorized (the agency], rather than the district courts in the first instance, to determine the question of coverage in the preliminary investigation of possibly existing violations; ... to exercise (the agency's] subpoena power for securing evidence upon that question and, in case of refusal to obey (the agency's] subpoena, to have the aid of the district court in enforcing it
In reference to the Oklahoma Press decision, the court, in FTC v. Gibson, 460 F. 2d 605, 608 (5th Cir. 1972), stated:
The rationale of the Oklahoma Press rule is that it allows enforcement of subpoenas where the evidence necessary to establish the interstate nature of the commerce involved is in the possession of the suspected violator can be secured only by a subpoena. Under this rule appellants may not litigate the jurisdictional issue as a defense in a subpoena enforcement proceeding.
Slip Op. at 6-7.
It is clear from the above, therefore, that this court should not hinder the FTC's efforts to develop the necessary factual background upon which to determine whether a violation exists. This goal is more efficiently accomplished if the FTC is allowed to conduct its investigation without any interruption that this court would bring about by allowing respondents to seek aid from this court at such an early stage. McKart v. United States, 395 U. S. 185, 193-194 (1965). Although the court recognizes the fact, as respondents have demonstrated, that there do appear to be certain situations where the ICC is inclined to assume jurisdiction over and control the advertising practices of common carriers, 49 C. F. R. 1056; Transportes Azteca Extension, Eastern States, 117 M. C. C. 645 (1972), the court in this case is compelled to adopt a hands-off policy and at least refrain from impeding the FTC in conducting its preliminary inquiry into whether or not the particular activities of respondents come within the scope of its regulatory authority.
For the foregoing reasons, therefore, the Federal Trade Commission's petition for the enforcement of its subpoenas must be granted.
WESTINGHOUSE ELECTRIC CORP. v. FEDERAL TRADE
COMMISSION, et al.*
Civ. A. No. C-1-75-418.
F.T.C. File No. 99–266.
(United States District Court, Southern District of Ohio,
Western Division, April 15, 1976) In action seeking declaratory and injunctive relief against F.T.C., court held that despite its jurisdictional authority to entertain preenforcement suit, venue was inappropriate, and rather than dismissing the case, justice would best be served by transferring it to the court entertaining the enforcement proceeding initiated by the F.T.C.
Smith H. Tyler, Jr., Cincinnati, Ohio, for plaintiff.
Robert Lewis and Jerry Kaminski, Washington, D.C., for defendants.
Before PORTER, District Judge.
On November 18, 1975 Westinghouse filed this suit, seeking to have the order requiring it to file Form EEM (Complaint doc. 1, Exhibit B & D) declared null and void and to have an injunction issued against the Federal Trade Commission (FTC) from enforcing it against them. On January 6, 1976, the Commission brought suit in United States District Court for the District of Columbia, seeking an order commanding plaintiff and three other companies who have not filed Form EEM to comply with the Commission's orders. On January 22, 1976, the FTC filed in this Court motions to dismiss, without prejudice, or in the alternative, to transfer this action to the District of Columbia, or to stay all proceedings pending completion of the enforcement action. On January 27, 1976 defendant Comptroller General filed a motion to dismiss with this Court. On January 14, 1976 Westinghouse sought an injunction in this Court seeking to stay the FTC from proceeding in the District of Columbia enforcement proceeding.
The main issue in this litigation is the legality of the Form “EEM” which is a part of a study by the FTC to gather information about the manufacturing and sale of large electrical equipment which is produced by some forty-four major electrical manufacturers including plaintiff Westinghouse. The FTC's purpose for obtaining this data is to use it to empirically test the effectiveness of so-called “conduct remedies," e.g., injunctions, imprisonment, fines and treble damages, on the companies' behavior before and after certain antitrust actions
• Not reported in Federal Reporter. Reported in Trade Reg. Rep. 160,871 at 68,815 (1976-1 Trade Cases).