directed against such regulations, affirmed its original policy choice. See National Automatic Laundry and Cleaning Council v. Shultz, 143 U.S. App. D.C. 274, 443 F.2d 689, 706 (D.C.Cir.1971). Thus, the cost to the industry in Congress' view did not outweigh the basic belief that consumers have a right to know the contents of alcoholic beverages. In short the broad thrust of Executive Order No. 12291 provides an insufficient basis for the defendants to disregard their statutory duties imposed by Section 205(e), reflecting Congressional policy which was reaffirmed as recently as 1979.
2. Review of the Department's Decision to Rescind Under the Administrative Procedure Act
Even if the rescission did not violate the Department's statutory mandate, plaintiffs argue that it violated the substantive requirements of the Administrative Procedure Act. They claim that defendants did not explain why they reversed their prior decision that the regulations were cost-beneficial and necessary to protect the health and welfare of consumers.
Defendants finalized the decision to rescind in the November 6, 1981 notice, 46 Fed.Reg. 55093 (1981). Supra, at page 1172. The notice contains a summary of the comments received after Treasury announced that it was proposing rescission,
and sets out four reasons for rescission: (1) the ingredient labeling regulations did not meet the criteria of E.O. 12291; (2) the regulations were not in keeping with United States' international commitments; (3) the costs to consumers and the industry were greater than the benefits which would be derived from the additional label information, and (4) existing label information is adequate. 46 Fed.Reg. 55094 (1981).
We have discussed the first basis for decision, conformance with E.O. 12291, supra. We now deal with the question of whether the other three proffered explanations constitute permissible reasons for change.
(a) The Claim of Adverse Effects on International Commitments
Defendants only reference to international trade in the final notice of rescission is the statement that ". . . the Department has concluded that the regulations were not in keeping with United States international commitments." 46 Fed.Reg. 55094 (1981). The Department provided no explanation in either the notice of the proposed rescission or in the notice of rescission itself of why it believed that the regulations would violate international commitments.
Defendants in their brief note certain comments submitted to BATF that related to the exporting and importing of alcoholic beverages. This does not suffice as a substitute for the required reasoned explanation by the agency. The agency must do more than point to comments that allege that the regulations will have disastrous effects if implemented. They must supply a reasoned explanation for the decision and why they were convinced by those comments rather than the comments expressing the opposite view. This is especially necessary in a case such as this where the conflicting view was adopted just one year earlier. See 45 Fed.Reg. 40540 (1980). From the initial announcement in the Federal Register,
it appears that Treasury had made a decision to rescind. Its later recital of comments and conclusions coincided with this prior decision. Without a more detailed justification for this sharp reversal, this, at least on the surface, represents a good example of arbitrary and capricious decision-making.
(b) The Claim That Costs to Consumers and the Industry Outweigh the Benefits
A third rationale for the decision to rescind was that ". . . ingredient labeling regulations would result in increased costs to consumers and burdens on industry which are not commensurate with the benefits which might flow from the additional label information." 46 Fed.Reg. 55094 (1981). Again, defendants were required to provide a reasoned explanation for their action and not simply state that they disagreed with the conclusions the Department reached the previous year.
It is possible that less of a showing is necessary if the previous decision had been without adequate explanation or was unreasonable on its face. To the contrary is true. The Department's initial decision to issue the regulations was the result of years of research and careful consideration, a fact evidenced by the June 13, 1980 notice, 45 Fed.Reg. 40583 (1980). It was predicated on an impressive factual record, which documented the range of costs to industry and the savings in health costs to consumers.
In addition to the monetary costs and benefits, the BDM study estimated that the number of people allergic to the ingredients in alcoholic beverages ranged anywhere from 475,000 to 1,700,000. The Department recognized that the precise level of harm to consumers could not be established, but stated its conclusion "that consumers who are allergic to certain ingredients generally should be able to find out, whether from the label or some other source, if those ingredients are used in alcoholic beverages so that they can avoid the possibility of adverse reactions if they so choose." 45 Fed.Reg. 40540 (1980). The agency thus realized that when directed to issue regulations related to the public health and consumer protection, it could not base its conclusions solely on monetary calculations, but that it must also recognize the intangible benefits flowing from such regulations. Based on the information that it had gathered, Treasury in 1980 decided that the advantages of ingredient labeling outweighed the costs. Even though it believed that regulations which required ingredients to be listed on the bottle were justified on a cost-benefit basis, BATF, in an effort to take into account some of the comments submitted by members of the industry, provided an alternative to ingredient labeling:
. . . to minimize the costs while still meeting basic policy objectives, producers, bottlers, or importers who elect to make ingredient lists available upon request, notify consumers of this availability, and who avoid implied statements about ingredients, will not be required to list ingredients on the label.
45 Fed.Reg. 40540 (1980).
Defendants did not consider this address lable option in either the notice proposing rescission of T.D. ATF-66 or in the final notice of rescission. When the Department issued the regulations in 1980, it structured an alternative in an effort to provide consumers with information at minimal cost. The Department now says that the regulations imposed too great a burden on the industry but makes no attempt to assess the marginal cost of the address label option. In our judgment, it acted in an arbitrary and capricious manner, especially in light of industry comments expressing the view that such an option would be an acceptable alternative to ingredient labeling. 45 Fed.Reg. 40583 (1980).
We are convinced that the existence of the address label option undermines the cost arguments advanced by defendants for two reasons. First, as defendants themselves noted, ". . . allergic consumers are presently furnished an address where they can write for information since present regulations require that an address appear on the bottle."
Opposition of Federal Defendants to Plaintiffs' Motion for Summary Judgment at 7. Secondly, industry members have indicated that they already respond to requests for ingredient information, so that a formal requirement that they must respond would theoretically only codify existing practice.
Because regulations already require some address to be printed on all alcoholic beverage containers and because industry members contend that they presently respond to consumer requests, defendants are faced with the heavy burden of demonstrating that the costs of compliance with the regulations require their rescission. Not one sentence in the notice proposing rescission or in the rescission itself addresses the costs of the labeling option.
In sum, we are persuaded that Treasury has not met its burden of providing a reasoned explanation for its decision on the ground that the costs of the regulations outweigh the benefits.
(c) The Claim that Existing Label Information is Adequate
Defendants asserted in the notice of rescission that current "standards of identity" provide sufficient information to the consumers of alcoholic beverages, and that all the substances used in alcoholic beverages have received F.D.A. approval. Standards of identity, according to the Department, "generally identif[y] the basic agricultural ingredients and further, [set] forth parameters of production and alcoholic content." 46 Fed.Reg. 55094 (1981).
This argument, while having a certain superficial appeal, is not convincing in the factual context of this case. Defendants fail to explain why the Department is satisfied that the standards of identity and F.D.A. approval of ingredients sufficiently protect consumer interests, when just a year earlier, it made the determination that these measures did not provide "adequate information" as required by the statute.
On the other hand, plaintiffs advance several reasons to doubt defendants' conclusory statement that ingredient labeling "would not result in an appreciable benefit to consumers when compared to the existing label information requirements and standards of identity." 46 Fed.Reg. 55094 (1981). First, standards of identity exist only for wine and distilled spirits, not for beer or other malted beverages. Secondly, plaintiffs have supplied a list of the additives that alcoholic beverages may contain, which demonstrate that although the standards of identity are required to set forth the basic agricultural ingredients found in alcoholic beverages, they do not disclose "any of the hundreds of possible other foam enhancers, stabilizers, anti-oxidants, chill-proofing agents, preservatives, coloring agents, or artificial flavors which may be used in the beverages and which consumers need to know for health reasons." Plaintiffs' Amended Memorandum at 26, Pltfs' Ex. F.
Defendants' misplaced reliance on standards of identity and F.D.A. approval of ingredients as a way to protect consumers is illustrated by their approach to FD & C Yellow No. 5, a color additive used in alcoholic beverages, to which plaintiffs make specific reference. There is "mounting evidence of allergic-type reactions to FD & C Yellow No. 5," 44 Fed.Reg. 37212 (1979), but the use of the additive is not reflected in standards of identity and the Department would not now require that notice of its use in a product be disclosed on the container's label. This is a matter of particular concern since the F.D.A. recently amended its regulations and now allows the additive to be used only if the food manufacturers disclose the existence of the additive on the label. 44 Fed.Reg. 37212 (1979). For Treasury to contend that the new regulation was unnecessary because the ingredients had met F.D.A. approval is plainly misleading, since that approval was explicitly conditioned upon disclosure. The F.D.A. has recognized that certain substances are not universally safe, and that there is sufficient risk associated with their use to compel food manufacturers to disclose the presence of such additives in their products.
We are convinced that the Department of the Treasury has not adequately justified its decision to rescind the ingredient labeling regulations. We are cognizant of the deference which courts traditionally accord to the decisions of administrative agencies. If we were to approve this decision, however, we would be ignoring our obligations under the Administrative Procedure Act and acting as little more than a "rubber stamp." We are required to reject agency actions such as this which are ill-considered and superficially explained.
3. Review of Treasury's Actions Under the Procedural Requirements of the Administrative Procedure Act
In view of the disposition previously indicated it is not necessary to consider plaintiffs' procedural objections at any length. They deserve, however, more than passing reference. Basically, plaintiffs allege that they were denied a meaningful opportunity to be heard because defendants had succumbed to political pressure and had decided to rescind the rules even before comments were solicited. They also contend that a number of ex parte contacts occurred which should have been logged and disclosed in order to provide a complete record of the rulemaking. We do not think that these are valid objections to the agency's conduct.
It is important to note that this is not an adjudicative decision by the agency, nor is it a decision that can only be made after a formal rulemaking. As an example of informal rulemaking, our concern for undisclosed and unrecorded contacts in this context is less than in the other two more sensitive proceedings.
Considering the ex parte contacts allegation specifically, plaintiffs have failed to convince us that 5 U.S.C. § 553 (1976) requires that an agency disclose and log all contacts when it is engaging in informal rulemaking. The rule simply allows interested parties to submit material for the agency's consideration -- it does not require that the agency record all the information it receives. Plaintiffs cite Sierra Club v. Costle, 211 U.S. App. D.C. 336, 657 F.2d 298, 403 for the proposition that an agency must disclose all ex parte contacts. The case concerns the Clean Air Act Amendments, however, not the A.P.A., and it only held that the Environmental Protection Agency should use its discretion to determine when oral communications had been of central importance to the decision and should thus be recorded. Nothing in that case requires disclosure of all contacts in this case.
We are similarly convinced that no procedural flaws existed as a result of the congressional communications. We know that there are some instances in which the congressional interference with agency action has been so great as to taint the agency's decision, but in our view, letters and phone calls from congressmen urging rescission do not constitute this sort of interference. It can be plausibly argued that communications from congressmen on behalf of constituents are part of any congressman's duty of proper representation. Plaintiffs cite no case, and we know of none, in which an agency decision was invalidated because the agency had received letters from congressmen arguing for a certain outcome.
Because this Court finds that the Department of the Treasury has violated both its statutory mandate under the Federal Alcohol Administration Act and the Administrative Procedure Act, we hold invalid and set aside its decision to rescind the ingredient labeling regulations contained in T.D. ATF-66.
An order consistent with the foregoing has been entered this day.