Open Season on the FTC

Regulation run amuck unleashes a congressional revolt

The usually somnolent annual congressional review of the Federal Trade Commission this year has resembled a West Waterford fox hunt, where packs of baying Irish hounds chase the hapless beast to ground. In both the House and Senate, committees have voted to reduce drastically the commission's powers. After the Senate Commerce Committee voted 15 to 0 last week to restrict the agency's authority and require it to submit to semiannual review, Missouri Republican John Danforth said: "If this doesn't stop them, I don't know what will."

Such congressional action reflects the public's new antiregulatory sentiment. The FTC has come to epitomize all the problems of Government regulation run amuck. This new notoriety represents a strange metamorphosis for a body that in 1969 an American Bar Association commission condemned for inactivity and Ralph Nader's Raiders ridiculed as "the little old lady on Pennsylvania Avenue." Established in 1914, the FTC for most of its history was a largely ineffective agency that rarely used its powers to curb deceptive advertising and to press antitrust cases. In 1975, however, Congress broadened the commission's mandate to investigate and regulate whole industries rather than just individual companies.

Using its new muscle, the agency became the nation's nanny. An FTC administrative judge challenged Pitching Star Vida Blue's pitches for drinking milk because blacks often have trouble digesting milk. The commission proposed a truth-in-menu rule that might mean, for example, that no restaurant could offer as Maryland crab any crustacean that had crawled into Delaware. The agency intensified a holy war against breakfast cereal companies; it has proposed breaking them up and banning ads for presweetened cereals from Saturday morning's TV cartoon shows. An FTC-proposed rule warned that such ads were enticing children to "surreptitiously" sneak cereals into Mom's shopping cart. Washington wags quipped that the FTC would soon ban peanut butter because it stuck to the roof of the mouth.

Suffering businessmen, using effective Washington lobbying, began to complain loudly. President William LaMothe of the Kellogg cereal company accused the commission of exhibiting "absence of fundamental fairness." Kentucky Senator Wendell Ford said that the agency had offended every businessman in his state. He noted that Louisville's Brown & Williamson Tobacco Corp., in answer to a subpoena, spent three years and $800,000 to ship the FTC 14,000 pounds of documents. Chicago-area Businessman Joseph Sugarman, the owner of a mail-order firm selling home computers and burglar alarms, took out half-page ads this month in papers around the country to cry: "The FTC is harassing small businesses, but I'm not going to sit back and take it!" He claims his company has been threatened with a $100,000 fine after three buzzards and a computer breakdown early this year had delayed deliveries beyond the 30-day limit permitted by FTC rules. The commission is investigating alleged delays over the past 2 1/2 years.

Commission Chairman Michael Pertschuk, who was appointed by Jimmy Carter in 1977, has become the lightning rod of criticism against the FTC. An ebullient, Yale-trained lawyer with a crusader's rapid-fire zeal, Pertschuk has further raised the ire of both congressional leaders and business. Senator Ford accuses him of turning the agency from law enforcement to social planning. Last year a federal judge banned Pertschuk from all involvement in the children's television case, concluding that he had become too biased against the cereal companies. Other critics charged that Pertschuk was an intemperate, excessive regulator. In the past few months the chairman has softened his voice, and he even appeared jokingly at a staff party with a black raincoat draped over his head. He answers the accusations against him by saying that they reflect the agency's new effectiveness and that "the rules are beginning to bite."

Congress, though, is determined to yank some of the FTC's teeth. The House Commerce Committee voted to give Congress a veto power over all commission regulations. This would be the first time that any federal regulator had been so controlled. By a lopsided 223 to 147 vote, the House two weeks ago recommended canceling commission plans to force undertakers to disclose their prices fully and in advance. Representative Bill Frenzel of Minnesota suggested that every FTC staff member and all five commissioners "should spend 20 years at hard labor filling in their own asinine forms." The Senate Commerce Committee voted last week to bar the agency's action to regulate television ads aimed at children, to halt an investigation of the insurance industry and to restrict the commission's subpoena powers.

These tough committee proposals are expected to win support in floor debates early in December. Reports TIME Congressional Correspondent Neil MacNeil:

"The old friends of consumer protection such as Ted Kennedy, Birch Bayh and George McGovern are largely in hiding or otherwise engaged running for election.

The reformers really mean to punish the FTC and severely limit its powers." In an attempt to stop such congressional action, top Carter Aide Stuart Eizenstat sent an urgent plea to Senator Ford, arguing that the Senate was about to "undermine the capacity of Government agencies to meet real public needs."

Some of the FTC's recent actions, such as permitting lawyers to advertise despite the American Bar Association's restrictions and forbidding companies like Levi Strauss or Florsheim from setting minimum retail prices on their products, have benefited consumers. But the agency's excesses endanger its important consumer protection work. Says Republican David A. Clanton, one of the five FTC commissioners: "The trouble with the pendulum swinging the other way is that you knock out all the good stuff as well as chastising us where we need to be chastised." But when the final votes are taken on the various committee measures, Congress's antiregulatory mood is sure to result in a less powerful and less controversial FTC.

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