Opinion ID: 410287
Heading Depth: 2
Heading Rank: 4

Heading: Sign Placement.

Text: 49 The second major element of the Commission's decision is that Wards was ordered to place signs in a prominent location in each department selling products covered by the rule. Wards argues that this requirement is inconsistent with any reasonable reading of the rule, which calls for signs in prominent locations in the store or department .... 16 C.F.R. Sec. 702.3(a)(1)(ii)(B). 50 On this issue, the agency's commentary in the Federal Register is unenlightening. We are told only that if the warranty binders are kept at a central location, then a prominent notice or series of notices must alert the prospective buyer's attention to the existence of the binders and the means for obtaining access to them. 40 Fed.Reg. at 60,184. We can find no basis for the Commission's conclusion that the rule requires a sign in each department. 51 The situation we face here is similar to one recently resolved by the Temporary Emergency Court of Appeals in Tenneco Oil Co. v. Federal Energy Administration, 613 F.2d 298 (Em.App., 1979). Tenneco involved the definition of oil produced and sold as it related to calculating a base period quantity for price regulation. Tenneco had produced oil at the relevant wells during the relevant period, but had sold only part of the production. The remainder was retained for the company's own use in steam generators. Id., at 299-300. 52 The FEA found that Tenneco had improperly priced its later oil sales because it had not counted the oil it used on site as produced and sold. The agency concluded that sold implies value received and that Tenneco received in-kind value through the consumption of its oil. Therefore, despite the fact that no change in title occurred, the oil used on site was produced and sold. See id. at 301. 53 The court noted that an agency interpretation of its own rule is normally entitled to great deference. 16 However, where the interpretation ignores the commonly understood meanings of the words in the rule, closer review is required. See id. at 302. The court concluded that [t]o hold that a 'sale' may occur simply in the receipt of value from property would be to rob from the term any legal or economic significance. Id. (citations omitted.) 54 The court acknowledged that a literal interpretation of ambiguous language may be avoided if such an interpretation would be contrary to the rule's purpose. However, the language of the regulations must reasonably bear the intended meaning. A court cannot put its imprimatur on a regulation that was intended but never enacted. Id. at 303 (citations omitted). The court found no help in the history of the regulation, as the contrary interpretations of that history offered by the parties were equally tenable. Id. 55 In concluding that it could not enforce the FEA's interpretation of produced and sold, the court noted that [i]f a better rule is required, the FEA is well equipped to make the necessary changes through its rule-making powers. Id. at 305. The court called the FEA's interpretation of the rule plainly inconsistent with its language and affirmed the district court's denial of enforcement. Id. 17 56 In the situation before us, we do not find any support for the Commission's decision that the rule's language, in the store or department, can be read to mean in each department. The Commission reasoned that unless signs, notifying the consumer of the availability of the warranty binders, are close to the warranted product, a consumer would be likely to forget that the warranties on different products are available for comparison. Although that reasoning may be entirely rational, the result is inconsistent with the rule. If a violation of a regulation subjects private parties to criminal or civil sanctions, a regulation cannot be construed to mean what an agency intended but did not adequately express. Diamond Roofing Co., Inc. v. Occupational Safety and Health Review Comm., 528 F.2d 645, 649 (5th Cir.1976). See Marshall v. Anaconda Co., 596 F.2d 370, 376 (9th Cir.1979) (application of Diamond language to an ambiguous regulation). 57 In addition, we also note that there was some confusion between the ALJ and the Commission on the propriety of signs affixed to cash registers in the appropriate departments. 18 The ALJ's order required Wards to utilize cash register signs, while the Commission rejected their use and intimated that they would not be recognized as in the department in future compliance surveys. 58 Part of the reason the Commission and the ALJ are unable to agree on this issue is that their argument is far afield from the plain meaning of the rule. We reiterate that [a regulated party] should not be held to standards, the application of which cannot be agreed upon by those charged with their enforcement. Lloyd C. Lockrem, Inc. v. United States, 609 F.2d 940, 944 (9th Cir.1979). 59 In short, the Commission's decision on the sign requirements of the pre-sale rule's binder option was an abuse of discretion. If the FTC wishes to amend the rule to require signs in each department, it may do so in a formal rule-making proceeding. Until such time as the rule is amended, however, the FTC may not hold retail sellers to any standard other than that stated in the rule. 60