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From Antitrust Law Daily, May 1, 2018

FTC soundboard opinion letter not reviewable final agency action

A 2016 FTC staff opinion letter was not a final agency action, because it did not constitute the consummation of the FTC’s decisionmaking process by its own terms or under FTC regulations, according to the U.S. Court of Appeals in Washington, D.C. The 2016 letter stated the staff opinion that soundboard technology used by the Soundboard Association (SBA) trade group members was subject to FTC regulation of robocalls and rescinded a 2009 staff opinion letter that concluded the opposite. SBA argued that the 2016 letter violated the Administrative Procedure Act as a rule issued with no notice or comment. But the court found that because the letter itself stated that it did not bind the Commission and under FTC regulations staff advice is not binding, the letter was not final agency action. The majority also stressed its disagreement with the dissent’s position that when determining whether an agency action is final, the potential impact on the regulated industry may be a controlling factor (Soundboard Association v. FTC, April 27, 2018, Wilkins, R.).

Background. SBA is a trade association for companies that manufacture or use soundboard telemarketing technology, which allows marketers to play prerecorded audio clips to customers over the phone rather than using a live agent’s voice. In 2016, the FTC issued an informal opinion letter stating it was the FTC’s opinion that telemarketing technology used by SBA’s members was subject to the FTC’s regulation of robocalls, and it announced the rescission of a 2009 FTC staff letter that had reached the opposite conclusion. SBA filed suit to enjoin rescission of the 2009 letter, arguing that the 2016 letter violated the APA because it was a legislative rule issued without notice or comment and because the robocall regulation unconstitutionally restricts speech on the basis of content. The FTC argued that the 2016 letter was not reviewable final agency action. The district court found that the 2016 letter was final reviewable agency action, but granted summary judgment for the FTC on the basis that the 2016 letter was an interpretive rule not subject to notice and comment and that the interpretation stated in the letter survived constitutional scrutiny. SBA appealed.

Final agency action. The court rejected SBA’s argument that the investigative efforts by the FTC as part of the 2016 letter rendered the letter the consummation of agency decisionmaking. The letter was informal and was the ruling of a single subordinate official, not a commissioner or the full Commission. It explicitly stated that it represented the views of "staff" and that its views did not bind the Commission. FTC regulations expressly delineated between advice from staff and advice from the Commission, and provided that only an opinion from the Commission was the consummation of the decisionmaking process, because staff opinions did not bind the Commission.

While in some cases, decisions by a subordinate official may constitute final agency action, that was not the case for the 2016 letter because the letter was not binding on Commission staff in the field or on third parties, and SBA was not trapped without recourse due to an indefinite postponement of agency action. SBA could have sought an opinion from the Commission and had not done so. And there had been no enforcement action against a soundboard user (which would require the Commission itself to decide whether the staff opinion in the 2016 letter was a correct interpretation). Because SBA was not out of regulatory review options or subject to enforcement action, the letter was not final agency action and SBA’s case should be dismissed for failure to state a cause of action under the APA.

The majority also responded to several points made by the dissent. The dissent argued that the Commission had delegated its advice function such that the staff spoke directly for the Commission, but the majority found that the Commission had merely authorized staff to give advice; this authorization did not transform the staff advice into Commission opinion. The dissent also argued that companies may have relied on the 2009 letter. But, the majority stated, the letter’s own terms and FTC regulations prevent SBA members from relying on the 2009 letter. And even if the 2009 letter had been binding on the Commission, it would not cover the soundboard use in practice since 2009, because the 2009 opinion letter relied on a fact statement that soundboard operators would only be fielding one call at a time, whereas in reality, agents are fielding multiple calls at a time. Had the soundboard users corrected that factual misrepresentations after receipt of the 2009 letter, seven years might not have passed before the FTC rescinded the 2009 letter. Ultimately, the majority rejected the dissent’s position that the potential impact on the regulated industry controls whether an agency’s action is "final."

The majority also held that because SBA pleaded its free-speech claims as APA claims only, not standalone First Amendment claims, the free-speech claims should be dismissed for lack of final agency action.

Dissent. Judge Millett dissented, arguing that the question of finality had to be determined by looking not just at whether the agency’s decisionmaking process has consummated, but also at whether rights or obligations have been determined by the action. When agency staff issue advisory opinions, she wrote, it is at the Commission’s direction, because the Commission has determined that the question does not require a Commission decision. Because staff members are authorized to speak for the Commission, they are essentially deputized to speak for the Commission. In addition, nothing in the regulations provides that decisions delegated to staff are non-final. And while the Commission could review a staff decision, it rarely does so. In other words, staff opinions function as the Commission’s final answer on the issue, and the fact that the Commission could change its mind in the future does not mean that the staff opinion is not final action. In addition, given the impact on the regulated industry, the staff opinion letter constitutes final agency action.\

The case is No. 17-5093.

Attorneys: Karen Donnelly (Copilevitz & Canter LLC) for Soundboard Association. Matthew M. Hoffman for the FTC.

Companies: Soundboard Assn.

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