Opinion ID: 613928
Heading Depth: 3
Heading Rank: 2

Heading: Courts should defer to the FTC on issues of Mechanism compliance

Text: Even if courts had authority under the MMWA to address Mechanism compliance with federal regulations, courts should defer to the FTC under the primary jurisdiction doctrine. The primary jurisdiction doctrine prescribes deference to an administrative agency where (1) the issue is not within the conventional experiences of judges, (2) the issue involves technical or policy considerations within the agency's particular field of expertise, (3) the issue is particularly within the agency's discretion, or (4) there exists a substantial danger of inconsistent rulings. Brown v. MCI WorldCom Network Servs., Inc., 277 F.3d 1166, 1172-73 (9th Cir.2002) (citations omitted); accord Nat'l Commc'ns Ass'n, Inc. v. AT&T Co., 46 F.3d 220, 222-23 (2d Cir.1995). The issue of Mechanism compliance falls within each of these categories. First, Mechanism compliance involves technical [and] policy considerations within the [FTC]'s field of expertise, which considerations fall outside the conventional experience of judges. The FTC has exclusive authority to promulgate minimum standards for Mechanisms, see § 2310(a)(2), and it alone monitors IDSM compliance nationally, see id. § 2310(a)(4). Thus, the FTC is in a unique position to determine the national implications of compliance orders determining, among other things, how strict compliance must be with certain provisions and whether the substantial compliance doctrine applies to the overall operation of the Mechanism. For example, the FTC declined to establish a national prior approval certification program in part because it might exert a chilling effect on competition and on experimentation by Mechanisms, warrantors, and state governments in setting up and administering these programs. 64 Fed. Reg. at 19,708. This was a policy judgment informed by the FTC's expertise as the national overseer of Mechanism operations. The FTC processes data from annual audits submitted by every Mechanism in the country to evaluate Mechanisms' overall performance in a broad range of categories. See 16 C.F.R. § 703.7. Because a court (utilizing the narrow facts in a single case) cannot evaluate the many policy considerations hanging in the balance of a compliance order, the FTC is better suited to decide compliance issues under the national Mechanism regulatory regime. Second, Mechanism compliance is particularly within the agency's discretion. Congress gave the FTC substantial leeway in reviewing Mechanism compliance and taking appropriate remedial action against non-compliant Mechanisms. See § 2310(a)(4). The FTC is in the best position to determine whether strict compliance with some provisions in Rule 703 (e.g., the four-year record keeping requirement, 16 C.F.R. § 703.6(f)) may be less important than strict compliance with other provisions (e.g., the requirement that manufacturers act in good faith in deciding whether to accept the outcome proposed by a Mechanism arbitrator, id. § 703.5(j)). Similarly, the FTC can better assess when the volume of a Mechanism's irregularities rise to the level of non-compliance such that consumers need not exhaust the Mechanism before filing suit. The FTC has also expressed its desire to encourage competition and experimentation by warrantors in setting up and administering Mechanisms, and would be loathe to take regulatory action likely to exert a chilling effect on this process. 64 Fed.Reg. at 19,708. Strict enforcement by a court of any particular regulation could have the same chilling effect on warrantors' Mechanism experimentation or even warrantors' willingness to create Mechanisms. Thus, Mechanism compliance falls particularly within the [FTC's] discretion, because the FTC is in the best position to balance consumers' needs with Congress's desire to encourage fair and expeditious settlement of consumer disputes. See § 2310(a)(1). Finally, there [is] a substantial danger of inconsistent rulings that could compromise Congressional objectives underlying the MMWA. If warrantors must prove a Mechanism's compliance to trial courts anytime a consumer brings a claim under the MMWA, inconsistent rulings are virtually inevitable. Courts would create a national patchwork of Mechanism compliance decisions that companies would have to monitor and adapt to to ensure their own Mechanisms are deemed compliant when they assert § 2310(a)(3) exhaustion as a jurisdictional bar. This would raise the cost of compliance for warrantors and likely discourage companies from using Mechanisms to resolve consumer complaints. The FTC, by contrast, operates as the national clearinghouse for compliance standards. If all compliance decisions are rendered by the same agency, the standards will be more consistent and easy to identify. Congress explicitly declared its policy to encourage warrantors to establish procedures whereby consumer disputes are fairly and expeditiously settled through informal dispute settlement Mechanisms. § 2310(a)(1). Because creating an inconsistent regulatory patchwork through the courts could compromise this policy, the FTC should remain the primary judge of a Mechanism's compliance with federal regulations. In sum, given the statutory framework establishing the FTC as the principal authority on Mechanism compliance, the FTC is best suited to address challenges to Mechanism compliance in the first instance. Therefore, the FTC's compliance decisions deserve judicial deference under the primary jurisdiction doctrine. Maronyan's challenge to Toyota's Mechanism compliance status should have been directed to the FTC rather than the courts. See § 2310(a)(3). Because Maronyan has not demonstrated that the FTC regards Toyota's CDSP Mechanism as non-compliant with Rule 703 or applicable provisions of the MMWA, she must exhaust her warranty claims through Toyota's Mechanism before filing suit. Her failure to do so deprives the federal courts of jurisdiction over her claims arising under the MMWA.