FTC GUIDELINES FOR ADMIN-ISTRATIVE SETTLEMENT

01/01/2003

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The Fair Trade Commission (FTC), announced in early November 2002 that it would accept Microsoft's petition to negotiate an administra-tive settlement. This has attracted much atten-tion because it is the first time that the FTC, acting on behalf of consumers, has negotiated directly with a company for an administrative settlement.

An administrative settlement is a contractual agreement concluded between the FTC and an entity that it is investigating following a com-plaint. If the FTC is unable to confirm through its ex officio investigations the facts or legal re-lationships that would form the basis for an ad-ministrative disposition, then in order to effec-tively achieve its administrative purpose and resolve the dispute, it may enter into a settlement with the entity instead of making an administra-tive disposition. The legal basis for this is the Guidelines for the Conclusion of Administrative Settlement Agreements, which the FTC prom-ulgated on 9 October 2000. The main provisions of the guidelines are as follows:

Before embarking on administrative settlement negotiations, the FTC will consider the fol-lowing essential factors:

1.The legality and appropriateness of the FTC and the counterparty making mutual concessions.
2.The public interest.
3.Possible detriment to interested parties that may result from concluding a settlement agreement.

Before commencing negotiations, the FTC department handling the case should submit a report on the advisability of concluding a set-tlement agreement, and on the issues and scope of negotiations for such an agreement, for review by the commissioners meeting.

Offers or undertakings to be made by the FTC regarding a settlement agreement should be passed by resolution of the commissioners meeting.

In the process of negotiating a settlement agreement, the FTC may solicit the opinions of interested parties regarding the intended content of the settlement, or may require the counterparty to reach a civil settlement or agreement with interested parties. But the FTC is not bound by such opinions or by the content of such a civil settlement or agree-ment.

If the performance of a settlement agreement will jeopardize the rights of a third party, the agreement should not take effect without the written consent of such third party.

If necessary, during the process of negotiating a settlement agreement the FTC may with-draw or change any offer, or may suspend the settlement process and continue its investiga-tions.

A settlement agreement should be made in writing. Results of related negotiations ar-rived at during the drafting process should also be recorded in writing.

A settlement agreement should not be revoked on the grounds of error, except under any of the following circumstances:

1.Documents submitted by the counterparty as the basis for the settlement agreement are later discovered to have been falsified or altered, and the FTC would not have entered into the agreement had it been aware that they were so falsified or altered.

2.Matters regulated by the settlement were already the subject of an irrevocable court judgment, and this was unknown to the FTC or the counterparty at the time of the settlement.

3.The FTC was mistaken as to the capacity of the counterparty, or both parties were in error as to important issues.

4.The counterparty deliberately concealed or misrepresented important facts, such as to seriously harm the public interest.

If a counterparty breaches an administrative settlement agreement, except insofar as oth-erwise stipulated in the agreement, the FTC may rescind or terminate the agreement, and may continue its investigations. If the coun-terparty again petitions the FTC for an ad-ministrative settlement, the FTC may refuse such a petition.