National Petroleum Refiners Ass'n v. Federal Trade
Commission 482 F.2d 672 (1973)
The FTC issued a rule saying that gas stations had to post octane
ratings for their gasoline on their pumps.
FTC believed that it had the
authority to issue the rule based on its Enabling Act (15 U.S.C.
§46(g)), which they claimed allowed
them to issue substantive rules of business conduct.
There are two methods that
an Administrative Agency can use to make a new law:
A rulemaking, where the
Agency announces a new draft law, takes comments from the public, and
then promulgates the final version as a rule.
An adjudication, there the Agency makes an internal decision,
then finds someone who is breaking this new law, and sues them for
A gasoline trade association
(the Refiners) did not like this rule and sued for an injunction, arguing
that the FTC did not have the
authority to make such rules under 15 U.S.C. §46(g).
The Trial Court found for the
Refiners. The FTC appealed.
The Trial Court found that
FTC did not have the statutory authority to make such a rule. It was
outside the scope of their Enabling Act.
The Appellate Court reversed.
The Appellate Court looked
at the plain language of §45
of the Enabling Act, and found that it specifies that the FTC is to accomplish
this goal by means of issuance of a complaint, a hearing, findings as to
the facts, and issuance of a cease and desist order.
That's an adjudication.
However, the Court found
that the plain language for that
section was not limiting, and so just because the Statute said that they could use adjudication, it didn't imply that was the
only thing FTC could do.
In fact, §46(g) explicitly said that the FTC "may make
rules and regulations for the purpose of carrying out the provisions of
sections 41 to 46 and 47 to 58 of this title."
There are two types of rules
that an Administrative Agency can make, substantive rules, which actually
have the force of a new law, and interpretive rules, which only are the
Agency's opinion on how to interpret the law. The Refiners unsuccessfully
argued that §46(g) only gave the
FTC the ability to make interpretive rules.
But again, the Court found
that the language was not limited.
The Court looked to how
other courts had interpreted the statutory construction of various
Administrative Agencies' Enabling Acts, and found that it is generally
In fact, case law shows
that the courts seem to prefer rulemaking to adjudication in the making
of new administrative law.
The Court looked to the
legislative history and found it to be ambiguous.
The Court found that the
specific intent was to have a "strong agency" to avoid
inefficiencies. Therefore, the Court felt they should look to the
over-arching intent of the authors and favor a broad interpretations.
The Court found that there
was a broad purpose to the Statute, so the Court felt they should
interpret that as giving broad authority.
"Our job is to make
the policies behind the enactment effective."
In this case, the Court
decided that although the specific intent is unclear, the general intent motivating the law's framers is clear.