Procedures for Submission of Rules Under the Horseracing Integrity and Safety Act

AGENCY:

Federal Trade Commission.

ACTION:

Final rule.

SUMMARY:

The Federal Trade Commission (“FTC” or “Commission”) is issuing rules pursuant to the Horseracing Integrity and Safety Act (“Act”) to provide procedures for the Horseracing Integrity and Safety Authority (“Authority”) to submit its proposed rules and proposed rule modifications to the Commission for review.

DATES:

These rule revisions are effective on October 5, 2021.

FOR FURTHER INFORMATION CONTACT:

Austin King (202-326-3166), Associate General Counsel for Rulemaking, Office of the General Counsel, Federal Trade Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION:

The Horseracing Integrity & Safety Act, enacted on December 27, 2020, directs the Federal Trade Commission to oversee the activities of a private, self-regulatory organization called the Horseracing Integrity and Safety Authority.

Section 4(a) of the Act, 15 U.S.C. 3053(a), requires the Authority to submit to the Commission, in accordance with such rules as the Commission may prescribe under Section 553 of Title 5, United States Code, any proposed rule, or proposed modification to a rule, of the Authority relating to: (1) The bylaws of the Authority; (2) a list of permitted and prohibited medications, substances, and methods, including allowable limits of permitted medications, substances, and methods; (3) laboratory standards for accreditation and protocols; (4) standards for racing surface quality maintenance; (5) racetrack safety standards and protocols; (6) a program for injury and fatality data analysis; (7) a program of research and education on safety, performance, and anti-doping and medication control; (8) a description of safety, performance, and anti-doping and medication control rule violations applicable to covered horses and covered persons; (9) a schedule of civil sanctions for violations; (10) a process or procedures for disciplinary hearings; and (11) a formula or methodology for determining the assessments described in 15 U.S.C. 3052(f).

Accordingly, the Commission is adding a new subpart S to part 1 of its Rules of Practice, to provide procedures for the Authority to file its proposed rules and proposed modifications to existing rules with the Commission for review.

I. Section 1.140—Definitions

Section 1.140 defines relevant terms used in the proposed regulations. Each definition is based on a corresponding definition contained in Section 2 of the Act, 15 U.S.C. 3051, except as otherwise noted below.

The definition of “HISA Guidance” derives from Section 5(g)(1) of the Act, 15 U.S.C. 3054(g)(1), which states the Authority may issue guidance that “sets forth an interpretation of an existing rule, standard, or procedure of the Authority” or a “policy or practice with respect to the administration or enforcement of such an existing rule, standard, or procedure” and “relates solely to the administration of the Authority; or any other matter, as specified by the Commission, by rule, consistent with the public interest and the purposes of this subsection [15 U.S.C. 3054(g)(1)].” The Commission is adopting this definition and adding that HISA Guidance does not have the force of law, to distinguish HISA Guidance from a proposed modification to a rule.

The Act does not contain definitions for “proposed rule” or “proposed modification.” However, because these terms are used frequently throughout the regulations, the Commission is defining them for clarity. “Proposed rule” is defined as any rule proposed by the Authority pursuant to the Act. “Proposed rule modification” or “modification” is defined as any proposed modification to a rule, proposed rule change, or any interpretation or statement of policy or practice relating to an existing rule of the Authority that is not HISA Guidance and would have the force of law if approved as a final rule. A proposed modification is distinguished from HISA Guidance in that a modification would have the force of law if approved and must therefore be approved by the Commission pursuant to Section 4(b)(2) of the Act, 15 U.S.C. 3053(b)(2). HISA Guidance need not be approved by the Commission but takes effect upon submission to the Commission pursuant to Section 5(g)(3) of the Act, 15 U.S.C. 3054(g)(3).

II. Section 1.141—Required Submissions

The Act requires the Authority to submit proposed rules or proposed rule modifications on certain subjects to the Commission for approval. These subjects are set forth in Section 4(a) of the Act, 15 U.S.C. 3053(a), which states the Authority must submit to the Commission, in accordance with such rules as the Commission may prescribe under Section 553 of Title 5, any proposed rule, or proposed modification to a rule, of the Authority relating to: (1) The bylaws of the Authority; (2) a list of permitted and prohibited medications, substances, and methods, including allowable limits of permitted medications, substances, and methods; (3) laboratory standards for accreditation and protocols; (4) standards for racing surface quality maintenance; (5) racetrack safety standards and protocols; (6) a program for injury and fatality data analysis; (7) a program of research and education on safety, performance, and anti-doping and medication control; (8) a description of safety, performance, and anti-doping and medication control rule violations applicable to covered horses and covered persons; (9) a schedule of civil sanctions for violations; (10) a process or procedures for disciplinary hearings; and (11) a formula or methodology for determining assessments described in 15 U.S.C. 3052(f). The Commission is adopting this language in its regulations.

The Commission is also adding a provision that the Authority must submit “any other proposed rule or modification the Act requires the Authority to submit to the Commission for approval.” For instance, the Act requires the Authority to submit rules regarding modifications to baseline anti-doping standards (15 U.S.C. 3055(g)(3)(b)) and modifications to racetrack safety rules (15 U.S.C. 3056(c)(2)(B)(ii)). Section 5(c)(2) of the Act, 15 U.S.C. 3054(c)(2), requires the Authority to submit to the Commission for approval any rules and procedures under Section 5(c)(1)(A) of the Act, 15 U.S.C. 3054(c)(1)(A), authorizing access to offices, racetrack facilities, other places of business, books, records, and personal property of covered persons used in the care, treatment, training, and racing of covered horses; authorizing the issuance and enforcement of subpoenas and subpoenas duces tecum; and authorizing other investigatory powers of the nature and scope exercised by State racing commissions before the program effective date. Such proposed rules and modifications must also be submitted to the Commission for approval.

III. Section 1.142—Submission of Proposed Rule or Modification

The Act requires the Commission to evaluate the Authority's proposed rules and modifications to determine whether they are consistent with the Act and the applicable rules approved by the Commission. See 15 U.S.C. 3053(c)(2). To avoid delays in the rule review process, the Commission is requiring the Authority to submit the information necessary for it to evaluate the proposed rule or modification promptly and efficiently. Section 1.142 is designed to elicit the information the Commission needs to determine whether the proposed rule or modification is consistent with the Act and the rules and regulations issued thereunder.

A. Contents of Submission

For a submission to qualify as a proposed rule or proposed modification to a rule under Section 4(a) of the Act, 15 U.S.C. 3053(a), the Authority must submit a complete draft of the Federal Register document for its proposed or modified rule, which includes the text of the rule and a statement of the purpose of, and statutory basis for, the proposed rule or modification. The Commission's intention is to require the Authority to provide an explanation of its rules that will allow both the Commission and the public to understand the nature and purpose of its proposed rules or modifications—the reasons for adopting the proposed rule or modification; any problems the proposed rule or modification is intended to address and how the proposed rule or modification will resolve those problems; and how the proposed rule or modification will affect covered persons, covered horses, and covered horseraces.

The Commission is also requiring the Authority to explain the statutory basis for its proposed rules or modifications. To evaluate a proposed rule or modification, the Commission must be able to understand why the Authority believes its proposed rule or modification is consistent with the Act and the applicable rules approved by the Commission. Evaluation of a proposed rule or modification will also be aided by the Authority's description of any reasonable alternatives it considered and the reasons it selected the proposed rule or modification over the alternatives.

The Act does not give the Authority broad discretion in developing rules. It sets forth guardrails, in the form of baseline standards for anti-doping and medication control (15 U.S.C. 3055(g)(2)(A)), racetrack safety standards which the Authority must consider (15 U.S.C. 3056(a)(2)), guidelines for determining funding and calculating costs (15 U.S.C. 3052(f)(1)(C)(ii)), a specific formula for the assessment and collection of fees (15 U.S.C. 3052(f)(3)(C)), who must register with the Authority and the conditions of registration (15 U.S.C. 3054(d)), guidelines for establishing rule violations (15 U.S.C. 3057(a)(2)), requisite elements of the Authority's results management and disciplinary program (15 U.S.C. 3057(c)(2)), guidelines for establishing civil sanctions (15 U.S.C. 3057(d)(2)), and more. Accordingly, the Authority must explain why its proposed rule or modification is consistent with any standards in the Act and the rules approved by the Commission. Because the requisite considerations for anti-doping and racetrack safety are the most prescriptive, this section specifically addresses those standards and factors. The less prescriptive standards and factors must also be addressed, and the Commission provides for this in a less prescriptive rule, as discussed below.

1. Anti-Doping and Medication Control Program Considerations

When proposing a rule or modification to the horseracing anti-doping and medication control program, the Authority must explain how it considered the factors in Section 6 of the Act, 15 U.S.C. 3055, including the unique characteristics of a breed of horse made subject to the Act by election of a State racing commission or breed governing organization for such horse pursuant to Section 5( l ) of the Act, 15 U.S.C. 3054( l ), as required by Section 6(a)(2) of the Act, 15 U.S.C. 3055(a)(2). The Authority must explain how it considered the factors in Section 6(b) of the Act, 15 U.S.C. 3055(b), namely that: (1) Covered horses should compete only when they are free from the influence of medications, other foreign substances, and methods that affect their performance; (2) covered horses that are injured or unsound should not train or participate in covered races, and the use of medications, other foreign substances, and treatment methods that mask or deaden pain in order to allow injured or unsound horses to train or race should be prohibited; (3) rules, standards, procedures, and protocols regulating medication and treatment methods for covered horses and covered races should be uniform and uniformly administered nationally; (4) to the extent consistent with chapter 57A of title 15, consideration should be given to international anti-doping and medication control standards of the International Federation of Horseracing Authorities and the Principles of Veterinary Medical Ethics of the American Veterinary Medical Association; (5) the administration of medications and treatment methods to covered horses should be based on an examination and diagnosis that identifies an issue requiring treatment for which the medication or method represents an appropriate component of treatment; (6) the amount of therapeutic medication a covered horse receives should be the minimum necessary to address the diagnosed health concerns identified during the examination and diagnostic process; and (7) the welfare of covered horses, the integrity of the sport, and the confidence of the betting public require full disclosure to regulatory authorities regarding the administration of medications and treatments to covered horses.

In addition, Section 6(g)(2)(A) of the Act, 15 U.S.C. 3055(g)(2)(A), provides that certain baseline anti-doping and medication control rules must constitute the initial rules of the horseracing anti-doping and medication control program and, except as exempted pursuant to Section 6(e) and (f) of the Act, 15 U.S.C. 3055(e) and (f), remain in effect at all times after the program effective date. Such baseline anti-doping and medication control rules include: (1) The lists of permitted and prohibited substances (including drugs, medications, and naturally occurring substances and synthetically occurring substances) in effect for the International Federation of Horseracing Authorities, including the International Federation of Horseracing Authorities International Screening Limits for urine, dated May 2019, and the International Federation of Horseracing Authorities International Screening Limits for plasma, dated May 2019; (2) the World Anti-Doping Agency International Standard for Laboratories (version 10.0), dated November 12, 2019; (3) the Association of Racing Commissioners International out-of-competition testing standards, Model Rules of Racing (version 9.2); and (4) the Association of Racing Commissioners International penalty and multiple medication violation rules, Model Rules of Racing (version 6.2). In the case of a conflict among the rules, Section 6(g)(2)(B) of the Act, 15 U.S.C. 3055(g)(2)(B), provides that the most stringent rule shall apply. Accordingly, the Commission is requiring the Authority to state whether a proposed rule adopts the baseline standards identified in Section 6(g)(2)(A) of the Act, 15 U.S.C. 3055(g)(2)(A). If there is a conflict in any baseline standards identified in Section 6(g)(2)(A) of the Act, 15 U.S.C. 3055(g)(2)(A), the Authority must identify the conflict and state whether the standard it adopted is the most stringent standard. Under Section 6(g)(3)(C) of the Act, 15 U.S.C. 3055(g)(3)(C), “[t]he Authority shall not approve any proposed modification that renders an anti-doping and medication control rule less stringent than the baseline anti-doping and medication control rules . . . without the approval of the anti-doping and medication control enforcement agency.” Thus, for a proposed rule modification, the Authority must explain whether the modification renders an anti-doping and medication control rule less stringent than the baseline anti-doping and medication control rules described in Section 6(g)(2)(A) of the Act, 15 U.S.C. 3055(g)(2)(A), and state whether the anti-doping and medication control enforcement agency has approved of the change.

2. Racetrack Safety Program Considerations

Section 7 of the Act, 15 U.S.C. 3056, requires the Authority to consider certain factors when developing the racetrack safety program. Accordingly, when proposing a rule or modification to any rule regarding its racetrack safety program, the Authority must explain how the proposed rule or modification meets the requirements in Section 7(b) of the Act, 15 U.S.C. 3056(b), which provides that the horseracing safety program must include the following: (1) A set of training and racing safety standards and protocols taking into account regional differences and the character of differing racing facilities; (2) a uniform set of training and racing safety standards and protocols consistent with the humane treatment of covered horses, which may include lists of permitted and prohibited practices or methods (such as crop use); (3) a racing surface quality maintenance system that takes into account regional differences and the character of differing racing facilities (which may include requirements for track surface design and consistency and established standard operating procedures related to track surface, monitoring, and maintenance, such as standardized seasonal assessment, daily tracking, and measurement); (4) a uniform set of track safety standards and protocols, that may include rules governing oversight and movement of covered horses and human and equine injury reporting and prevention; (5) programs for injury and fatality data analysis, that may include pre- and post-training and race inspections, use of a veterinarian's list, and concussion protocols; (6) the undertaking of investigations at racetrack and non-racetrack facilities related to safety violations; (7) procedures for investigating, charging, and adjudicating violations and for the enforcement of civil sanctions for violations; (8) a schedule of civil sanctions for violations; (9) disciplinary hearings, which may include binding arbitration, civil sanctions, and research; (10) management of violation results; (11) programs relating to safety and performance research and education; and (12) an evaluation and accreditation program that ensures racetracks in the United States meet the standards described in the elements of the Horseracing Safety Program.

The Authority must also consider the safety standards in Section 7(a)(2) of the Act, 15 U.S.C. 3056(a)(2), which provide that in the development of the horseracing safety program for covered horses, covered persons, and covered horseraces, the Authority and the Commission must take into consideration existing safety standards, including the National Thoroughbred Racing Association Safety and Integrity Alliance Code of Standards, the International Federation of Horseracing Authority's International Agreement on Breeding, Racing, and Wagering, and the British Horseracing Authority's Equine Health and Welfare program. The Commission is therefore requiring the Authority to explain how it considered and whether it adopted any of the standards in Section 7(a)(2) of the Act,15 U.S.C. 3056(a)(2). If any horseracing safety standards in Section 7(a)(2) of the Act, 15 U.S.C. 3056(a)(2), were considered but not adopted or were modified, the Authority must explain why it decided not to adopt or why it decided to modify such standard.

3. Other Considerations

The Commission is incorporating the specific anti-doping and racetrack safety standards into this section because they are the most prescriptive and extensive, but this should not be read as an invitation to dispense with the less-prescriptive guardrails set forth in the Act. To the extent the Act requires the Authority to consider any factors or standards not specifically referenced in this section, the Authority must explain whether and how it considered those factors when proposing a rule or modification. For instance, when proposing a civil sanctions rule or modification pursuant to Section 8(d)(1) of the Act, 15 U.S.C. 3057(d)(1), the Authority must explain how the rule or modification meets the requirements of Section 8(d)(2) of the Act, 15 U.S.C. 3057(d)(2).

B. Supporting Documentation

The Commission is requiring the Authority to submit any pertinent factual information it relied on in developing its proposed rule or modification. More specifically, the Authority's submission to the Commission must include a copy of existing standards used as a reference for the development of a proposed rule or modification and any scientific data, studies, or analysis underlying the development of the proposed rule or modification. The Commission anticipates receiving, for instance, a copy of the lists of permitted and prohibited substances in effect for the International Federation of Horseracing Authorities, including the International Federation of Horseracing Authorities International Screening Limits for urine, dated May 2019, and any other rules and standards referenced in Section 6(g)(2)(A) of the Act, 15 U.S.C. 3055(g)(2)(A) when the Authority's baseline rules for anti-doping are submitted. For organizational purposes, supporting documentation must be attached as exhibits, and each exhibit must clearly identify the proposed rule or modification it supports.

C. Redline Document for Proposed Rule Modification

To enable the Commission to quickly and easily identify the substance of a proposed rule modification, the Commission is requiring the Authority to provide a redline document of the existing rule, marked with the proposed changes.

D. Timing of Submission

Section 4(c)(1) of the Act, 15 U.S.C. 3053(c)(1) provides for a 60-day timeframe between the Commission's publication of the Authority's proposed rule or modification in the Federal Register for public comment and the date the Commission must approve or disapprove the Authority's proposed rule or modification. To ensure it has sufficient time for review, the Commission is requiring the Authority to provide the information it needs to evaluate the Authority's proposed rule or modification at least 90 days in advance of the date the Authority proposes having its proposed rule or modification published in the Federal Register for public comment. This will give the Commission additional time to evaluate the Authority's proposed rule or modification. It should be noted this 90-day timeframe serves as a minimum, not a maximum, timeframe. The Secretary may shorten the timeframe if the Authority demonstrates that a shorter timeframe is necessary to meet statutory deadlines.

E. Conclusory Statements and Failure To Provide Requisite Analysis

The Authority must provide an adequate basis for the Commission's review of its rules. The Commission seeks to understand the Authority's analysis of the information it relied on to determine whether a proposed rule or modification was warranted and if so, what provisions the rule should contain. To this end, the information required under this section must be sufficiently detailed and contain sufficient analysis to support a Commission finding that a proposed rule or modification satisfies the statutory requirements. A mere assertion or conclusory statement that a proposed rule or modification is consistent with the requirements of the Act, for instance, is insufficient. If the Authority fails to describe and justify the proposed rule or modification in the manner described in this section, or fails to submit the information required by this section, the Commission may not have sufficient information to make an affirmative finding that the proposed rule or modification is consistent with the Act and the applicable rules approved by the Commission.

F. Public Comments

Section 4(d)(2) of the Act, 15 U.S.C. 3053(d)(2), provides the “Commission shall publish in the Federal Register any [ ] proposed rule, standard, or procedure and provide an opportunity for public comment.” However, the Act gives the Commission only a total of 60 days after publication to approve or disapprove a proposed rule or modification once it has been published in the Federal Register . Given that the Commission and the Authority will need time to review comments, the Act functionally provides for a much more limited comment period of approximately 30 days or less. To ensure the public has an adequate opportunity to review and understand the Authority's rules, ask questions, and provide comments, the Commission is encouraging the Authority to make its proposed rules publicly available and solicit public comments in advance of providing any submissions to the Commission. To avoid delays in Commission approval of its rules, the Authority should not wait until its proposed rule is published in the Federal Register to solicit its own public comments.

In a March 21, 2021 letter to the Acting Chairwoman, Rebecca Kelly Slaughter, the Act's sponsors stated “[t]he relationship between the [Commission] and the Authority is closely modeled on the enduring and effective relationship between the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA), a private self-regulatory organization.” As part of its own rulemaking process, the FINRA Board of Governors may authorize the publication of its own Regulatory Notice soliciting comments on a rule proposal prior to its submission to the SEC. If FINRA decides to issue a Regulatory Notice soliciting public comment on a proposal, the comment period typically is open for one to two months. All comments become part of FINRA's “official record” of the rule proposal, and since December 1, 2003, FINRA has posted all comment letters on its website. Depending on the comments received in response to the Regulatory Notice and any changes made to the proposal, FINRA staff will either return to the FINRA Board with a revised proposal or will file the rule proposal with the SEC for notice and comment. Soliciting comments, as FINRA does, in advance of submitting any proposed rules or modifications to the Commission would benefit both the Authority, the regulated community, and the Commission. It would provide transparency and enable the Authority to resolve any issues with its rules prior to their submission to the Commission.

If public comments are solicited, the Commission is requiring the Authority to attach, as an exhibit to its submission under § 1.142, a copy of the comments. The Commission encourages the Authority to make such comments publicly available on its own website. In addition, the Authority's draft Federal Register document must include a summary of the substance of all comments received and the Authority's written response to all significant issues raised in such comments. This advance resolution of comments will greatly facilitate the process of review of any proposed rules or modifications the Authority submits to the Commission.

IV. Section 1.143—Submissions to the Secretary

This section provides guidance for the Authority when submitting documents to the Secretary of the Commission.

All rule submissions made pursuant to § 1.142 and 15 U.S.C. 3053(a), rate increases which must be reported to the Commission under 15 U.S.C. 3052(f)(1)(C)(iv), or HISA Guidance which must be submitted to the Commission under 15 U.S.C. 3054(g)(2), must be emailed to the Secretary of the Commission at electronicfilings@ftc.gov. The subject line of the email must state: “HISA Rule Submission,” “HISA Rate Increase Submission,” or “HISA Guidance Submission” as applicable. This will enable the Secretary to easily identify submissions from the Authority and route them to the appropriate office.

To facilitate Commission review, documents must be organized and sent in a format that will facilitate the submission of documents to the Office of the Federal Register. Except for supporting documentation submitted pursuant to § 1.142(b) (existing standards used as a reference for the development of the proposed rule or modification, and scientific data, studies, or analysis underlying the development of the proposed rule or modification) and copies of public comments submitted pursuant to § 1.142(f), all documents submitted to the Secretary must be in a word processing format. This will enable the Commission to more easily make modifications to Federal Register documents, provide feedback on rule text, and draft orders. For organizational purposes, the Commission is requiring submissions with more than one attachment to contain a table of contents in the body of the email with a brief description of each item. The Authority must also provide the contact information for a person on the staff of the Authority responsible for responding to questions from the Commission. To facilitate submissions to the Office of the Federal Register, the Commission is requiring that the Authority's draft Federal Register documents follow the relevant format and editorial requirements for regulatory documents in the Office of Federal Register 's Document Drafting Handbook, 1 CFR parts 18, 21, and 22. Specifically, draft Federal Register documents must contain proper preamble captions and content; state the purpose of, and basis for, the proposed rule or modification; set forth regulatory text, headings, and authority citations; use correct numbering, structure, and amendatory language; and conform to style and formatting established by the Office of the Federal Register and Government Publishing Office (see, specifically, section 2.17 (proposed rules) of the Office of the Federal Register's Document Drafting Handbook).

If a document filed with the Secretary contains confidential information, the Secretary must be so informed, and a request for confidential treatment must be submitted in accordance with 16 CFR 4.9. Filings submitted electronically on or before 5:30 p.m. Eastern Time, on a business day, will be deemed filed on that business day, and all filings submitted after 5:30 p.m. Eastern Time, will be deemed filed on the next business day. This section also provides the Secretary of the Commission may reject a document for filing that fails to comply with the Commission's rules for filing in this section or § 1.142. Finally, if the conditions in this section and § 1.142 have been satisfied, the Commission will publish the proposed rules or modifications in the Federal Register for public comment.

V. Section 1.144—Approval or Disapproval of Proposed Rules or Modifications

Section 4(c)(1) of the Act, 15 U.S.C. 3053(c)(1) provides, “Not later than 60 days after the date on which a proposed rule or modification is published in the Federal Register , the Commission shall approve or disapprove the proposed rule or modification.” In addition, Section 4(c)(2) of the Act, 15 U.S.C. 3053(c)(2), provides “[t]he Commission shall approve a proposed rule or modification if the Commission finds that the proposed rule or modification is consistent with [ ] this chapter; and [ ] applicable rules approved by the Commission.” Accordingly, § 1.144 provides the Commission will approve or disapprove a proposed rule or modification by issuing an order within 60 days of the date the proposed rule or modification was published in the Federal Register for public comment. The Commission will approve a proposed rule or modification if it finds such proposed rule or modification is consistent with the Act and the applicable rules approved by the Commission. Further, a proposed rule or modification will not take effect unless it has been approved by the Commission.

Because these rule revisions relate solely to agency procedure and practice, publication for notice and comment is not required under the Administrative Procedure Act. 5 U.S.C. 553(b).

List of Subjects in 16 CFR Part 1

• Administrative practice and procedure

For the reasons set forth in the preamble, the Federal Trade Commission amends title 16, chapter I, subchapter A of the Code of Federal Regulations as follows:

PART 1—GENERAL PROCEDURES

1. The authority citation for part 1 continues to read as follows:

Authority: 15 U.S.C. 46; 15 U.S.C. 57a; 5 U.S.C. 552; 5 U.S.C. 601 note.

2. Add subpart S to read as follows:

Subpart S—Procedures for Submissions Under the Horseracing Integrity and Safety Act

Authority: 15 U.S.C. 3053.