Case Name: KATHARINE GIBBS SCHOOL (INCORPORATED), et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent
Court: United States Court of Appeals for the Second Circuit
Jurisdiction: United States
Decision Date: 1979-12-12
Citations: 612 F.2d 658
Docket Number: Nos. 1123, 1124, 1126 to 1130, 1135, 1137 to 1139, 1141 and 1310, Dockets 78-4204, 78- 4206, 78-4209, 78-4210, 78-4214, 78-4215, 79-4007, 79-4017, 79-4039, 79-4046, 79- 4057, 79-4064 and 79-4073
Parties: KATHARINE GIBBS SCHOOL (INCORPORATED), et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.
Judges: 
Reporter: Federal Reporter 2d Series
Volume: 612
Pages: 658–683

Head Matter:
KATHARINE GIBBS SCHOOL (INCORPORATED), et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.
Nos. 1123, 1124, 1126 to 1130, 1135, 1137 to 1139, 1141 and 1310, Dockets 78-4204, 78- 4206, 78-4209, 78-4210, 78-4214, 78-4215, 79-4007, 79-4017, 79-4039, 79-4046, 79- 4057, 79-4064 and 79-4073.
United States Court of Appeals, Second Circuit.
Argued June 11, 1979.
Decided Dec. 12, 1979.
Rehearing En Banc Denied March 17, 1980.
Abe Fortas, James M. Johnstone, Washington, D. C., Steven J. Olson, St. Paul, Minn., Lewis M. Popper, Washington, D. C., for petitioners.
Gerald P. Norton, Washington, D. C., for respondent; General Counsel, F.T.C., Washington, D. C., on brief.
Linden & Deutsch, New York City, on brief, for petitioners Katharine Gibbs School (Incorporated) and Katharine Gibbs School-Huntington, Inc.
Rogin, Nassau, Caplan, Lassman & Hir-tle, Hartford, Conn., on brief, for petitioner Computer Processing Institute.
William H. Cusick, McGraw-Hill, Inc., New York City, on brief, for petitioner McGraw-Hill, Inc.
Rogers & Wells, New York City, on brief, for petitioner Berkeley School of Westches-ter, Inc.
Mataraso & Macaffer, Albany, N. Y., on brief, for petitioner Albany Business College, Inc.
Fortas & Koven, Washington, D. C., on brief, for petitioner National Home Study Council.
Wald, Harkrader & Ross, Sachs, Green-baum & Taylor, Washington, D. C., on brief, for petitioner Association of Independent Colleges and Schools.
Kirkland & Ellis, Bernard H. Ehrlich, Washington, D. C., on brief, for petitioners National Association of Trade and Technical Schools and National Association of Cosmetology Schools.
Dechert, Price & Rhoades, Philadelphia, Pa., on brief, for petitioner National Association of Cosmetology Schools.
Oppenheimer, Wolff, Foster, Sheppard & Donnelly, St. Paul, Minn., on brief, for petitioner Control Data Corporation.
Baker & Hostetler, Washington, D. C., on brief, for petitioner Cleveland Institute of Electronics, Inc.
Before VAN GRAAFEILAND and NEWMAN, Circuit Judges, and BONSAL, District Judge.
Honorable Jon O. Newman was a United States District Judge for the District of Connecticut, sitting by designation at time of oral argument.
Honorable Dudley B. Bonsai, United States District. Judge, Southern District of New York, sitting by designation.

Opinion:
VAN GRAAFEILAND, Circuit Judge:
Twelve petitions have been filed with this Court seeking review of a Trade Regulation Rule issued by the Federal Trade Commission on December 18, 1978, entitled "Proprietary Vocational and Home Study Schools." See 16 C.F.R. § 438. The Rule's broadly stated purpose, as set forth in the Commission's Statement of Basis and Purpose, is "to alleviate currently abusive practices against vocational and home study school students and prospective students." Although the Rule does not define "abusive practices", the Commission's Statement of Basis and Purpose shows that the Commission's concern was with unfair and deceptive advertising, sales, and enrollment practices engaged in by some of the schools. See 43 Fed.Reg. at 60802.
The more than 7,000 proprietary vocational schools that will be covered by the Rule on its January 1, 1980, effective date are no strangers to regulation. Almost every State has legislation aimed at eliminating some or all of the abuses that trouble the Commission. The United States Veterans Administration and Office of Education have also been active in this area. In 1972, the Commission itself issued a set of guidelines for private vocational and home study schools, see 16 C.F.R. § 254, and has since instituted proceedings against several schools under section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45.
The Commission decided, however, that all of the foregoing regulatory efforts were inadequate, and, in 1974, it published for comment and public hearing a proposed Trade Regulation Rule. The Commission proceeded originally under the rulemaking power granted it in section 6(g) of the Federal Trade Commission Act, 15 U.S.C. § 46(g), which in National Petroleum Refiners Association v. FTC, 482 F.2d 672, 157 U.S.App.D.C. 83 (D.C.Cir. 1973), cert. denied, 415 U.S. 951, 94 S.Ct. 1475, 39 L.Ed.2d 567 (1974), was held broad enough to permit the issuance of substantive as well as procedural rules. However, on January 4, 1975, in the midst of the Commission's hearings, Congress passed the Magnuson-Moss Warranty — Federal Trade Commission Improvement Act, Pub.L.No.93-637, 88 Stat. 2183, Title II of which prescribes with preciseness the Commission's authority to issue rules and general statements of policy and outlines the rulemaking procedures to be followed in connection therewith. See 15 U.S. C.A. § 57a (Supp.1979). Following enactment of this legislation, the Commission changed its hearing procedures to comply with the new statutory requirements. Our primary task on this appeal is to determine whether the Rule finally adopted was within the general powers of the Commission under the Federal Trade Commission Act as refined and limited by the specific provisions of section 57a and, if so, whether the Rule was supported by substantial evidence and was neither arbitrary nor capricious.
Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a), declares that "unfair or deceptive acts or practices in commerce" are unlawful, and section 6(g) empowers the Commission to make rules and regulations for the purpose of carrying out this provision. Section 57a(a)(l) redefines this grant of authority by providing that the Commission may prescribe:
(A) interpretive rules and general statements of policy with respect to unfair or deceptive acts or practices in or affecting commerce (within the meaning of section 45(a)(1) of this title), and
(B) rules which define with specificity acts or practices which are unfair or deceptive acts or practices in or affecting commerce (within the meaning of section 45(a)(1) of this title). Rules under this subparagraph may include requirements prescribed for the purpose of preventing such acts or practices.
The Magnuson-Moss Act also provides that, after any Commission rule takes effect, a violation thereof shall be an unfair or deceptive act under 15 U.S.C. § 45(a)(1) unless the Commission otherwise provides. 15 U.S.C. § 57a(d)(3). It empowers the Commission to commence a civil action for a violation of any rule, in which action the Commission may seek, among other remedies, rescission or reformation of contracts, the refund of money or the return of property, and money damages. 15 U.S.C. § 57b(b).
Petitioners contend, and we agree, that in order to comply with section 57a(a)(l)(B) the Commission must define with specificity in the Rule those acts or practices which are unfair or deceptive and may include requirements for preventing them. Petitioners contend further, and again we agree, that the challenged Rule does not comply with these statutory provisions. Instead of defining with specificity those acts or practices which it found to be unfair or deceptive, the Commission contented itself with treating violations of its "requirements prescribed for the purpose of preventing" unfair practices as themselves the unfair practices. We think that Congress expected more than this.
Requirements designed to prevent unfair practices are predicated upon the existence of unfair practices. These unfair practices, which are the statutorily required underpinning for the Commission's "requirements", should have been defined with specificity.
"Because the prohibitions of section 5 of the Act are quite broad, trade regulation rules are needed to define with specificity conduct that violates the statute and to establish requirements to prevent unlawful conduct." Conf.Rep.No.93-1408, Joint Explanatory Statement of the Committee of Conference, reprinted in [1974] U.S.Code Cong. & Ad.News, pp. 7702, 7755, 7763.
The statute requires that the Commission's Statement of Basis and Purpose, which must accompany a Rule, shall include statements as to the prevalence of the acts or practices treated by the Rule and the manner in which such acts or practices are unfair or deceptive. 15 U.S.C. § 57a(d)(l). These provisions would be meaningless if the only unfair acts or practices defined in the Rule were possible future violations of its remedial requirements.
We conclude that the Commission erred in failing to comply with the procedural requirements of section 57a(a)(lXB). We also find several substantive provisions of the Rule to be defective, and the combination of procedural and substantive errors requires that the Rule be set aside. We will remand the Rule to the Commission so that the Commission may comply with section 57a(a)(l)(B) and delete or amend those provisions which we find to be improper.
In the paragraphs that follow, we deal with petitioner's additional claims of error.
I
THE REFUND PROVISIONS
Instead of defining with specificity the advertising, sales, and enrollment practices it deemed unfair and deceptive and setting forth requirements for preventing them, the Commission decided to make it finan- dally unattractive for schools covered by the Rule to accept a student who, for any reason whatever, was unlikely to finish the course in which he or she had enrolled. The Commission did this by directing its attack against the tuition refund policies of the schools.
Although the Commission concededly did not find that existing refund policies were either unfair or deceptive, see 43 Fed.Reg. at 60809, it directed that they be completely revised so as to make them financially more onerous for the schools. This the Rule accomplishes by requiring schools to make refunds on a strict pro rata basis, the percentage of the refund to be determined by matching the number of classes attended or lessons completed against the total of classes, hours, or lessons required to complete the course. See 16 C.F.R. § 438.4. Refunds on such a pro rata basis do not take into account those costs that are fixed at the time of enrollment, such as salaries for teachers and staff, classroom and boarding facilities, administration overhead, books, and supplies. The Rule does not require a student to return "records, tapes, slides, films, books or any other written course materials" as a condition of obtaining a refund. Id. § 438. l(u); see id. § 438.4. The cost of other equipment furnished a student must be prorated in the same manner as tuition, unless a separate equipment charge is made in the enrollment contract. Even if a separate charge is made, it will be refunded on a pro rata basis if the equipment is returned, regardless of its then condition or usability. Id. § 438.4(c)(2). Although the Commission did not fault existing refund policies, it provided, nonetheless, that any failure to comply with its newly prescribed refund regulations would constitute an unfair or deceptive act or practice in connection with the sale or promotion of a course. Id. § 438.0.
These regulations, the Commission says, are designed "to alter the incentive structure for obtaining vocational school enrollments." 43 Fed.Reg. at 60809. Elaborating on this subject in its brief, the Commission states that the schools "make little effort to screen candidates to determine if they possess the required verbal, reading or mechanical skills necessary for the courses of study" and that they sign up "unsuitable enrollees". The rationale of the Rule is said to be the "[creation of] structural disincentives to indiscriminate enrollment", which, translated into less dainty language, means "the creation of structural incentives for discriminate enrollment."
The Commission argues that this foray into the field of education is a "reasoned exercise of its legislative judgment" in an area "plainly within its expertise, i. e., unfair selling practices." Commission counsel describe this as an exercise of the Commission's "broad remedial discretion", subject to as little judicial review under the Magnuson-Moss Act as had been exercised prior thereto. We disagree.
When Congress provided that the Commission's rules must define unfair and deceptive acts with specificity, it clearly intended that the Commission's definition would be subject to judicial review. See S.Rep.No.93 — 1408, 93d Cong., 2d Sess. (1974), reprinted in [1974] U.S.Code Cong. & Admin.News, pp. 7702, 7755, 7766-67. And when Congress, after being informed that the Commission was "strongly opposed" to the substantial evidence standard of review, nonetheless incorporated that stan- dará in the statute, see section 57a(e)(3)(A), it obviously intended that a Commission rule not receive judicial approval "unless the Commission's action was supported by substantial evidence in the record taken as a whole." H.R.Rep.No.93-1107, 93d Cong., 2d Sess. (1974), reprinted in [1974] U.S.Code Cong. & Ad.News, pp. 7702, 7729.
Although courts normally give weight to an agency's interpretation of its own enabling legislation, the judiciary is the final authority on issues of statutory construction. Volkswagenwerk Aktiengesellschaft v. FMC, 390 U.S. 261, 272, 88 S.Ct. 929, 19 L.Ed.2d 1090 (1968). An agency interpretation must be granted deference only when it is consistent with the congressional purpose, Morton v. Ruiz, 415 U.S. 199, 237, 94 S.Ct. 1055, 39 L.Ed.2d 270 (1974), and when there are no "compelling indications that it is wrong." Espinoza v. Farah Manufacturing Co., 414 U.S. 86, 94-95, 94 S.Ct. 334, 339, 38 L.Ed.2d 287 (1973) (quoting Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 381, 89 S.Ct. 1794, 23 L.Ed.2d 371 (1969)).
Assuming, without deciding, that the Commission has the power to alter the schools' incentive structure for engaging in high pressure or deceptive sales and enrollment practices, its Rule was clearly not so limited in its scope. The Rule penalizes every vocational school for every student dropout, regardless of cause.
This Court is obligated to take a close look at what the Commission has done and to determine whether it has articulated a "rational connection between the facts found and the choice made." Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 246, 9 L.Ed.2d 207 (1962); Office of Communication of United Church of Christ v. FCC, 560 F.2d 529, 532 (2d Cir. 1977); Home Box Office, Inc. v. FCC, 567 F.2d 9, 35, 185 U.S.App.D.C. 142, 168 (D.C.Cir. 1977), cert. denied, 434 U.S. 829, 98 S.Ct. 111, 54 L.Ed.2d 89 (1977). We " have taken a close look, and we find no rational connection between the Commission's universally applicable refund requirements and the prevention of specifically described unfair and deceptive enrollment practices.
II
THE DISCLOSURE PROVISIONS
The Commission's Rule contains a number of provisions dealing with job-placement statistics and graduation rates. See 16 C.F.R. § 438.3. These provisions require the making of certain disclosures and prohibit the making of other factually correct disclosures. Again, no unfair or deceptive acts or practices are defined with specificity, except as a violation of the disclosure requirements may be said to be such. Although, unlike the provisions for refunds, the disclosure provisions may properly be said to fall within the field of advertising, sales, and enrollment, petitioners contend that they too are invalid.
1. Job-Placement Statistics
Under the Commission's Rule, each student is given a fourteen day "cooling-off" period during which he may cancel his enrollment without any financial obligation to the school. After the school has accepted the student's enrollment contract it must mail to the student a notice aptly entitled "HOW TO CANCEL YOUR CONTRACT". If the school has made any prior reference to the availability of jobs or the ability of its graduates to find jobs, it must also enclose in the same envelope a form entitled "How Our Students Are Doing." The information contained in this form must be based on the school's "actual knowledge" of its graduates' job experience, 16 C.F.R. § 438.3(c), which must be stated in the following manner:
"Since we made job placement or earnings claims in promoting this course, we have prepared our record in these areas for your review. As the Graduation Record pointed out, 50 students graduated from this course from _to__ We found that 38 or 76% of these 50 graduates got jobs in the field of_ within 4 months of their graduation." 16 C.F.R. § 438, Appendices A — C.
The form must then show the number of students and the "percent of total" in each of several salary brackets.
No other job-placement information maybe contained in the same envelope. The school may not show how many students could not be contacted or did not respond to its job placement inquiries. It may not disclose how many of them did not seek jobs within four months after graduation because of marriage, pregnancy, prior employment, self-employment, continued schooling, or other reasons. Proof in the record shows that adherence to the Commission's Rule would require one school to show a job placement rate of 5.8%, when in fact the true employment success rate of those who responded to the school's inquiry was 54%, or 80%, if those who became self-employed were included. Another school would have to show a placement figure of approximately 67%, although almost 100% of its graduates who sought employment obtained it. Nonetheless, each school must content itself with the anemic caveat quoted in the margin and the privilege of sending additional information in other mailings.
Obviously, statements so factually distorted do not disclose the schools' "record" in the area of job placement and earnings. It is unfair to both the school and the misguided student to require the school to say so without adequate explanatory comment. The failure to disclose material information may cause an advertisement to be false or deceptive even though it does not state false facts. Simeon Management Corp. v. FTC, 579 F.2d 1137, 1145 (9th Cir. 1978). Commission rules should be designed to eliminate deception, not to foster it by requiring the dissemination of a deceptively incomplete "record". See Friedman v. Rogers, 440 U.S. 1, 19-26, 99 S.Ct. 887, 59 L.Ed.2d 100 (1979) (Blackmun, J., concurring in part and dissenting in part). Because the Commission is attempting to exercise a power "inconsistent and at variance with the over-all purpose and design of the Act," Heater v. FTC, 503 F.2d 321, 323 (9th Cir. 1974); see § 5 U.S.C. § 706(2)(C); Papercraft Corp. v. FTC, 472 F.2d 927, 933 (7th Cir. 1973), or, alternatively, is exercising its assigned authority in an arbitrary and capricious manner, 5 U.S.C. § 706(2)(A); see National Nutritional Foods Ass'n. v. Mathews, 557 F.2d 325, 338 (2d Cir. 1977), that portion of its Rule dealing with job-placement disclosure cannot stand.
2. Graduation Statistics
On the disclosure form entitled "How Our Students Are Doing," the schools are also required to show the number and percentage of enrollees in past classes who graduated. 16 C.F.R. § 438.3(a). The schools are prohibited from enclosing any additional information with this communication. For example, they may not state why dropouts occurred, nor may they give comparative dropout statistics for the public schools. 16 C.F.R. § 438.3(e). They are permitted, however, to make the following statement:
"In evaluating these figures, you should know that students may drop out of a course for a variety of reasons. These range from dissatisfaction with the course to inability to do the work. Other students drop out of school for personal reasons." 16 C.F.R. § 438.3(a)(5).
The Commission did not find as a factual basis for this regulation that all, or even a substantial portion, of the schools misrepresented their graduation rates. 43 Fed.Reg. at 60805. On the contrary, it found that most schools do not disclose them. Id. However, the Commission found that the disclosure of graduation rate information is essential for a proper evaluation of claims concerning placement success. Id. It concluded that, on one occasion, this disclosure should be made without being buried in a mass of accompanying material.
Giving deference to the Commission's reasoning, we find this to be a proper requirement for preventing unfair and deceptive practices. There is a valid distinction between this requirement and the job-placement regulations that we have heretofore found to be invalid. Dropout figures are in the school's possession and can be accurately stated. Petitioners do not argue that the Commission cannot require this to be done, but contend instead that the Commission's ban against the inclusion of additional dropout information violates their First Amendment rights as enunciated in Linmark Associates, Inc. v. Township of Willingboro, 431 U.S. 85, 97 S.Ct. 1614, 52 L.Ed.2d 155 (1977). This is a strong argument that cannot be lightly brushed aside. See Cotherman v. FTC, 417 F.2d 587, 596 (5th Cir. 1969); Ultra-Violet Products, Inc. v. FTC, 143 F.2d 814, 816-17 (9th Cir. 1944); FTC v. Civil Service Training Bureau, Inc., 79 F.2d 113, 115 (6th Cir. 1935).
The Supreme Court has held, however, that commercial speech "[is] less likely than other forms of speech to be inhibited by proper regulation," Friedman v. Rogers, supra, 440 U.S. at 10, 99 S.Ct. at 894 and "regulatory commissions may prohibit businessmen from making statements which, though literally true, are potentially deceptive." Young v. American Mini Theatres, Inc., 427 U.S. 50, 68, 96 S.Ct. 2440, 2451, 49 L.Ed.2d 310 (1976); see id. at 68 n.31, 96 S.Ct. 2440. We believe that when the Commission prescribed its requirements for preventing unfair or deceptive acts or practices, the First Amendment permitted it reasonable latitude to avoid the emasculation of its preventive requirements that might result from their being buried in a mass of other material. We conclude that the Commission's modest, one-time ban on the furnishing of diluting factual information is reasonable and does not violate petitioners' First Amendment rights.
Ill
COOLING-OFF AND CONSTRUCTIVE CANCELLATION PROVISIONS
Petitioners' challenge to the cooling-off and constructive cancellation provisions of the Rule requires little discussion. The former permit a student to cancel his enrollment contract without any financial obligation within fourteen days after receipt of his "HOW TO CANCEL YOUR CONTRACT" form. 16 C.F.R. § 438.2(d). The latter provide that a student shall be deemed to have given constructive notice of his intention to withdraw if he fails to attend classes or submit lessons for prescribed periods. 16 C.F.R. § 438.1(n).
Petitioners do not challenge the concept of a cooling-off period, designed, as it is, to give the student breathing space in which to recognize and react to deceptive and unfair sales practices. Such cooling-off provisions are common in state school regulations and have been prescribed by the Commission itself in connection with ordinary door-to-door sales. See 16 C.F.R. § 429.1. Petitioners would prefer a reaffirmation procedure by which an enrollment contract would be automatically cancelled unless a student reaffirmed. Residential schools also urge that class attendance be considered a waiver of the cooling-off period. These were matters appropriately argued before and decided by the Commission.
The same is true of the provisions for constructive cancellation. The Presiding Officer found ample evidence of the propensity of some schools to create technical and procedural requirements that must be met before the school is required to make a refund, and stated that "[i]t was this kind of chicanery which involved us in this proceeding in the first place . . . ." The Commission's requirements were reasonably aimed at eliminating this abuse.
IV
THE PREEMPTION PROVISIONS
The preemption provisions of the Rule read in part as follows:
"This trade regulation rule preempts any provision of any state law, rule, or regulation which is inconsistent with or otherwise frustrates the purpose of the provi sions of this trade regulation rule, except where the Commission has exempted such a state or local law, rule or regulation. If, upon application of any appropriate state or local governmental agency, the Commission determines that the state statutory or regulatory provision affords greater protection to students than the comparable provision of the Commission's rule then the state requirement will be applicable to the extent specified in the Commission's determination on the exemption application." 16 C.F.R. § 438.9.
This provision highlights the failure of the Commission to define with specificity the acts or practices which are unfair or deceptive. The purpose of the Rule is stated in general terms to be the alleviation of abusive practices against vocational and home-study school students and prospective students. In the absence of a specification of the acts or practices which the Commission deems deceptive, the breadth of the preemption provision is such that it places in issue an indefinite variety of state laws and regulations governing the contractual relations between vocational schools and their students.
It has long since been firmly established that state statutes and regulations may be superseded by validly enacted regulations of federal agencies such as the FTC. See, e. g., Free v. Bland, 369 U.S. 663, 82 S.Ct. 1089, 8 L.Ed.2d 180 (1962); Spiegel, Inc. v. FTC, 540 F.2d 287, 293 (7th Cir. 1976); Royal Oil Corp. v. FTC, 262 F.2d 741, 743 (4th Cir. 1959); Chamber of Commerce v. FTC, 13 F.2d 673, 684 (8th Cir. 1926). However, before preemption shall be deemed to have occurred, there must be either a clear manifestation of such congressional intent or a conflicting inconsistency between state and federal regulations. Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142, 83 S.Ct. 1210, 10 L.Ed.2d 248 (1963); California v. Zook, 336 U.S. 725, 733, 69 S.Ct. 841, 93 L.Ed. 1005 (1949). This is particularly true where the field of regulation is one that has been traditionally occupied by the states. Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S.Ct. 1305, 51 L.Ed.2d 604 (1977).
In enacting the Magnuson-Moss Act, Congress did not intend that the Commission's regulations should "occupy the field" so as to preclude any state regulation whatever. The Magnuson-Moss Act contains no preemption provisions. Such indications of congressional intent as may be gleaned from the legislative history of the 1975 enactment and the predecessor bills considered by Congress show that the Commission's regulations were to have no more preemptive effect than that which flows inevitably from a repugnancy between the Commission's valid enactments and state regulations. If the Commission had defined with specificity the acts or practices it deemed unfair* or deceptive, questions of preemption could be answered with relatively little difficulty. An entirely different picture is presented when the Commis-' sion assumes the authority to decree preemption of any state law or regulation which "frustrates the purpose" of its Rule's inadequately spelled out provisions. One may well wonder, for example, what state regulations might be said to frustrate the purpose of the refund provisions, designed as they are to create structural disincentives to indiscriminate enrollment. The fact that the Rule permits state governmental agencies to come before the Commission seeking grace from preemption does not solve the problem of overbreadth.
Where an explicitly formulated federal statute or regulation is in conflict with state law, preemption of state law follows inevitably from the supremacy clause of the Constitution. Article VI, Clause 2; Free v. Bland, supra, 369 U.S. at 666-68, 82 S.Ct. 1089. There is no need for the Commission to so state. The preemption provisions of the Commission's Rule go beyond this. They are overboard, and their enactment was beyond the Commission's power.
We find no merit in the Commission's contention that the asserted illegality of the preemption provisions is not an issue ripe for review. The preemption provisions are in final form, and they have the force of law. Congress provided that not later than sixty days after a rule is promulgated any interested person may file a petition in the circuit court for judicial review of the rule. 15 U.S.C. § 57a(e)(l)(A). A "rule" under the Administrative Procedure Act includes "the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy . . ." 5 U.S.C. § 551(4).
This Court is given jurisdiction to review the Rule in accordance with chapter 7 of Title 5 and should hold it unlawful if it is not in accordance with. law, 5 U.S.C. § 706(2)(A), or is in excess of statutory jurisdiction or authority, 5 U.S.C. § 706(2)(C). These broadly remedial provisions should not be construed in such a manner as to deprive petitioners of their right of review "in the absence of clear and convincing evidence that Congress so intended." Rusk v. Cort, 369 U.S. 367, 379-80, 82 S.Ct. 787, 794, 7 L.Ed.2d 809 (1962).
The question presented by petitioners' challenge is purely a legal one, i. e., whether the Commission has been given the power to declare a blanket preemption of any state law, rule, or regulation that "frustrates the purpose" of its Rule. See Abbott Laboratories v. Gardner, 387 U.S. 136, 149, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967); Gardner v. Toilet Goods Association, Inc., 387 U.S. 167, 170, 87 S.Ct. 1526, 18 L.Ed.2d 704 (1967); Columbia Broadcasting System Inc. v. United States, 316 U.S. 407, 62 S.Ct. 1194, 86 L.Ed. 1563 (1942).
Petitioners are "interested persons" within the meaning of section 57a(e)(l)(A). They have an immediate and pressing need to know whether the Commission has validly preempted all state laws, rules, and regulations that "frustrate the purpose" of the Rule because their conduct in each of the fifty states must be governed accordingly. This need to conform, based on the desire to avoid unpleasant legal consequences, causes a serious and immediate impact justifying prompt review. Abbott Laboratories v. Gardner, supra, 387 U.S. at 152-54, 87 S.Ct. 1507; Columbia Broadcasting System, Inc. v. United States, supra, 316 U.S. at 418-25, 62 S.Ct. 1194.
Petitioners are already before this Court seeking review of other portions of the Rule. Enforcement of the Rule will not be further delayed by a thorough review of its provisions. Indeed, if petitioners are correct in their contentions as to the over-breadth of the preemption provisions, the efficient operation of the administrative process will be furthered by the disposition we now make.
V
COSMETOLOGY SCHOOLS
Of the 7,000 schools affected by the Commission's Rule, over 2,400 are schools of cosmetology. These are predominantly small, the majority of them having annual gross receipts of less than $100,000. They are licensed in all fifty states by cosmetology boards or similar regulatory agencies, which also license graduates and prescribe training requirements. The primary goal of cosmetology students is to secure a license, not necessarily a full-time job. Many graduates seek only part-time work, go into business for themselves, or leave or reenter the practice of their profession as their needs dictate.
Petitioner, National Association of Cosmetology Schools, asserts that there was little if any evidence introduced showing that cosmetology schools were guilty of the abuses that concern the Commission, and argues that those schools should have been completely exempted from the requirements of the Rule. The Commission does not seriously dispute petitioner's assertion, but answers petitioner's argument by pointing to the provisions of section 57a(g)(l), which permit the cosmetology schools to petition the Commission for exemption. The Commission cites a long line of cases in support of its contention that "an agency may adopt a rule shown to be appropriate for the generality of instances and leave the correction of injustices to applications by those concerned . . National Nutritional Foods Ass'n v. FDA, 504 F.2d 761, 784 (2d Cir. 1974), cert. denied, 420 U.S. 946, 95 S.Ct. 1326, 93 L.Ed.2d 424 (1975); see United States v. Allegheny-Ludlum Steel Corp., 406 U.S. 742, 749, 92 S.Ct. 1941, 32 L.Ed.2d 453 (1972); Permian Basin Area Rate Cases, 390 U.S. 747, 769, 88 S.Ct. 1344, 20 L.Ed.2d 312 (1968).
Because cosmetology schools and flight training schools, which are subject to regulation and licensing by the Federal Aviation Agency, together comprise about 5,000 of the 7,000 schools covered by the Rule, a reasonable argument may be made that the subject matter of the Commission's Rule is not applicable to the generality of the industry. The Presiding Officer recommended, for example, that the Commission should give careful consideration to granting exemptions to these two classes of schools. See Presiding Officer's Report 10-11..
In view of the escape clause provided these schools by the exemption provisions of section 57a(g)(l), the better procedure may be to follow the Presiding Officer's recommendation. If the cosmetology and flight training schools apply for exemption, they will be able to focus the Commission's attention upon their peculiar characteristics and practices which, they contend, entitle them to exemption, and a better and more complete record will be presented for judicial review. We cannot say that the Commission erred in deciding to follow that route.
VI
DEFINITION OF "COURSE"
The term "course" is defined in the Rule as a program which "purports to prepare or qualify individuals, or improve or upgrade the skills individuals need, for employment in any specific occupation, trade, or in job positions requiring mechanical, technical, business, trade, artistic, supervisory, clerical or other skills" but does not include "general self-improvement courses which do not purport to offer training necessary to obtain employment in a specific skill or trade." 16 C.F.R. § 438.1(c)(1), (2).
Petitioner, Control Data Corporation, has developed a new system of computerized instruction which utilizes programmed material and individualized interaction, including instruction and testing, between the student and the computer. The courses vary in length between two and sixty-four hours, and each student may pursue the course at his own pace. At the present time, over 750 courses are offered in 27 different areas. Only a few, however, are intended as preparation for entry-level employment.
Control Data contends that all of the proceedings before the Commission were in the context of protecting students who were preparing for entry-level employment and that, because the Rule includes courses designed to improve and upgrade skills, it goes beyond the scope of the Commission's inquiry and is therefore unsupported by substantial evidence. This, we think, is an unjustifiably narrow view of the record. General Issue No. 2, as designated by the Presiding Officer, was "for what purposes do students enroll in vocational and home-study schools?" See Presiding Officer's Report at 23. The Presiding Officer found that "if the student is already employed, he wants to prepare himself for a more prestigious position with better pay, perhaps in an 'up-and-coming field', or to acquire additional skills or knowledge that will improve his present working capability and/or prepare himself for pay increases, promotions and re-designations into higher-paying positions, or advancement into supervisory positions." Id. at 24-25 (footnote citations to record omitted). Although the thrust of the Commission's inquiry was in the area of preparation for entry-level employment, its overall review clearly was not so limited.
Control Data asserts, nonetheless, that the Commission's definition is so broad as to include most of the courses it teaches, including such courses as "Beginning Typing", "Trouble-shooting Fuel Systems", and "Identification of Grinding Wheels". It argues quite reasonably that the furnishing of graduation rates for two-hour courses and job-placement rates for courses such as "Beginning Typing" can hardly be what Congress had in mind when it authorized the Commission to prescribe requirements for the purpose of preventing unfair acts or practices.
Because we cannot predict what form the Commission's revision of its present Rule will take, we will not approve or disapprove the existing definition. It is to be hoped, however, that the Commission will recognize the legitimate merits of complaints such as those of Control Data and will make appropriate modifications in either its requirements, its definition, or both, so as to relieve those schools of expenditures not reasonably related to or required for the prevention of unfair acts and practices.
VII
PETITIONERS' REMAINING CONTENTIONS
Petitioners' complaints of ex parte communications between the Commission and an allegedly biased staff do not disclose a lack of due process and are more properly addressed to Congress. See Vermont Yankee Nuclear Power Corp. v. National Resources Defense Council, Inc., 435 U.S. 519, 539-49, 98 S.Ct. 1197, 55 L.Ed.2d 460 (1978); Hoffman-LaRoche, Inc. v. Kleindienst, 478 F.2d 1, 12-13 (3d Cir. 1973).
The alleged inadequacy of the Commission's Statement of Basis and Purpose is not subject to judicial review by this Court. See 15 U.S.C. § 57a(e)(5)(C).
CONCLUSION
For the reasons above stated, we conclude that the Rule, as presently formulated, is unlawful and must be set aside. The matter is remanded to the Commission for further proceedings not inconsistent with this opinion. See NLRB v. Food Store Employees Union, 417 U.S. 1, 9-11, 94 S.Ct. 2074, 40 L.Ed.2d 612 (1974).
. Petitioners are Katharine Gibbs School (Incorporated), Computer Processing Institute, The Berkeley School of Westchester, Inc., Albany Business College, Inc., Katharine Gibbs School-Huntington, Inc., McGraw-Hill, Inc., National Home Study Council, Association of Independent Colleges and Schools, National Association of Trade and Technical Schools, National Association of Cosmetology Schools, Control Data Corporation and Cleveland Institute of Electronics, Inc.
Amicus briefs have been filed by the Council on Post-secondary Accreditation, Accredited Proprietary and Occupational Schools of Connecticut, and National Association of State Administrators and Supervisors of Private Schools.
. The Statement of Basis and Purpose is reprinted at 43 Fed.Reg. 60795-60817.
. The Commission's Rule provides simply that it is an unfair or deceptive act or practice for any school to fail to comply with the requirements of the Rule. 16 C.F.R. § 438.0.
. Statements in the Commission's brief that its decision is "to apply the Rule at this time only to the predominant category of proprietary schools, but not the smaller category of public or non-profit schools" and that it is dealing with "the most pressing problems first," indicate that the Commission may not intend to limit the exercise of its claimed expertise to the proprietary education sector.
At the present time, however, in response to petitioners' contentions that they are being denied equal protection of the laws, the Commission distinguishes the policies and practices of the public, nonprofit schools from those of the proprietary schools.
. See Letter from Commission to Chairman of House Committee on Interstate and Foreign Commerce, reprinted in [1974] U.S.Code Cong. & Ad.News, pp. 7702, 7735-40.
. 16 C.F.R. § 438.3(b)(4) provides:
A school may, at its option, include the following statement on the Disclosure Form in the manner shown in Appendices A-C:
In evaluating our record, remember not all of our students took this course to get a job in the field of [school to insert area of training]. Also, we were unable to reach some of our graduates to see if they got jobs. So, our placement percentage might be understated.
. For a discussion of the legislative history, see P. Verkuil, Preemption of State Law by the Federal Trade Commission, 1976 Duke L.J. 225, 234 — 40.
. The cosmetology schools have already requested an exemption, and the Commission has commenced a proceeding pursuant to 5 U.S.C. § 553 to determine whether the exemption should be granted. In the Commission's Invitation to Comment, 44 Fed.Reg. 40929-32 (July 13, 1979), the Commission stated that, based on the evidence then before it, it was "unable to make the finding required for an exemption at this time." Id. at 40929. Is also stated that the absence of any evidence that cosmetology schools have engaged in the practices that the Rule is designed to prevent "cannot be disposi-tive in determining whether an exemption from the Rule is appropriate." Id. at 40931. In accepting the Commission's argument that the exemption provisions furnish adequate protection for the cosmetology schools, we do not necessarily adopt the Commission's above-quoted interpretation of those provisions.
. The Rule excludes from its application any course whose total contract price is less than one hundred dollars "provided that the student has not enrolled in any other course with that school during the calendar year and that the school does not offer any other 'course' as defined by this paragraph, for one hundred dollars ($100) or more." 16 C.F.R. § 438.-1(c)(4).
This exclusion is so limited in scope as to have little practical effect. The Commission's suggestion that any school may petition for the exemption of any of its courses under section 57a(g) is equally impractical in view of the statutory requirement that rulemaking procedure must be followed on each petition for exemption. See 5 U.S.C. § 553.