The FTC Gets Tough

As a guardian against unfair and deceptive marketing practices, the Federal Trade Commission has generally spoken softly and carried a small stick. In recent years, it has seemed to be insensitive to mounting consumer complaints and over lenient with offending companies. All this has suddenly changed. The five commissioners and 600 staff lawyers and economists at the FTC's shabby, gray-stone headquarters in Washington are moving with unprecedented speed and imagination.

The burst of activity began in January, soon after Caspar Weinberger succeeded Paul Rand Dixon as chairman. Weinberger revitalized the staff by getting rid of some mediocrities, and switched the commission's emphasis away from shielding businessmen against unfair competition to protecting consumers against deception.

When Weinberger was recently promoted to deputy director of the Office of Management and Budget, he was replaced by Miles Kirkpatrick, a 52-year-old Philadelphia lawyer. Kirkpatrick in 1969 headed an American Bar Association study group that severely criticized the FTC. Since he took over a month ago, the FTC has been proposing or issuing orders that, if they survive the inevitable challenges in court, will radically change many marketing practices.

Last week the commission came to the aid of credit-card users who complain that computers foul up their bills. It proposed new rules that will probably take effect early next year. Under them, if a customer writes in to a company to dispute a charge in his bill, the company cannot seek payment or interest charges until it investigates the item and fully explains it to the customer. Nor can one firm tell another firm that a customer is a bad credit risk without first informing him. In still another move last week, the FTC aimed to bring more clarity into automobile advertising. Among other things, the commission proposed that sellers be forbidden to mention the "manufacturer's suggested list price" in many ads, and instead indicate the lower amounts at which cars are usually sold.

Two weeks ago, the commission took its toughest and most controversial steps yet to curb false advertising. Until now, the FTC's cease-and-desist orders permitted false or deceptive promotions to continue until all arguments had been heard by commission staffers, a process that usually took years. In the end, the advertiser signed a consent agreement promising not to err again. Last year a group of George Washington University law students argued that the FTC should take a much harsher stand and force offending advertisers to confess in their ads that they had lied. In two proposed orders, the FTC did just that.

The commission directed Coca-Cola to stop advertising its Hi-C drink as particularly rich in vitamin C and "uniquely suitable" for children, because, said the FTC, it is neither a "sensible" nor economical source of nutrition. Also, the FTC ordered Standard Oil of California to quit promoting its Chevron F-310 as a nonpolluting gasoline, because, the commission contended, it contained only ordinary detergent used by many refiners. Unlike past FTC orders, these two require that any ad making such claims for either product during the next year must prominently include the FTC allegations. Officials at Coca-Cola and California Standard deny the charges and say that they will contest the orders in court. Most important, if the commission is upheld, both companies could be directed to run a series of ads admitting that their promotions were false. The precedent would be a powerful deterrent to deception in all advertising.

In recent months, the FTC has moved to combat other forms of deception. Some examples:

P:Charles Pfizer & Co. was charged by the commission with violations for promoting its "unburn" cream as being effective for blond sunbathers, although the company had made no scientific studies to justify its claim. The case, which is headed for court, is aimed at relieving the FTC of the need to prove that a claim is false and instead make the advertiser produce evidence that the claim is true.

P: McDonald's hamburger chain was accused of running fraudulent sweepstakes in which it advertised $500,000 in prizes but, because of the odds against winning, paid out only $13,000. The FTC has proposed an order that could force McDonald and all other contest advertisers to inform players fully and accurately of the odds against them.

P:Light-bulb manufacturers, under an FTC ruling due to take effect in January, must include on cartons sold in retail stores the life expectancy of their bulbs.

The effectiveness of all this expanded activity will greatly depend on whether Congress agrees next year to enlarge the FTC's budget beyond the meager $20.5 million authorized for fiscal 1970. If the commission continues its performance of recent months, an increasingly consumer-minded Congress might be persuaded to up the ante.

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