New Director Putting Vigor Back Into FTC
A lot of people who thought the Federal Trade Commission was dead, and quite a few who wished it was, are interested in the possibility that it may be coming back. After a decade of relative inactivity, even hostility toward the consumer, the agency has a new chairwoman, Janet D. Steiger, who promises “a program that provides strong national consumer protection” and is asking Congress to fund it.
Most people are even more interested in what kind of FTC is coming back. Some wonder how much activity it can manage, diminished as it is now in size and stature. Some wonder what activities it will deem appropriate to its original mandate to prevent “unfair methods of competition . . . and unfair or deceptive acts or practices in commerce.”
These are valid questions. The FTC has a yo-yo history--a decade on, two decades off. Roused from sleep in the ‘70s by the public criticism of Ralph Nader’s Raiders, the agency struck out all over the marketplace, challenging children’s TV advertising, funeral practices, cereals, used car sales, insurance. It regulated warranties; it got authority to make rules covering whole industries.
Many businesses and their congressmen thought the FTC overenthusiastic, not just interpreting law but making new law. There were efforts to bar the agency from regulating some of the industries under attack, an attempt to impose legislative veto over its actions and holds put on the agency’s funding.
During the ‘80s and the Reagan Administration, the agency’s budget was cut by a third and its staff by half. The agency filed many fewer consumer protection actions, almost ceased all scrutiny of consumer advertising and used its antitrust authority to block very few of the thousands of corporate mergers. Deceptive advertising (even national) and mergers (even interstate) were largely left to the states, particularly the attorneys general who took up the slack alone or in concert, filing similar actions in the courts of several states.
Since Steiger’s appointment in August, 1989, however, she has served constant warning of her interest in health claims (weight-loss programs, food labeling), environmental claims, telemarketing, 900 numbers, advertising to both children and the elderly. She has spoken of mending fences with state regulators, who have despaired of FTC activities, and of mending the FTC’s public image as “a vigorous law-enforcement agency.”
There are even the kind of number counts that indicate new dedication at an enforcement agency. It has been estimated that the FTC filed as many consumer protection complaints in Steiger’s first two years as in all four years previous, and Steiger said that in 1990, it opened 37% more preliminary investigations in consumer protection and 47% more “full-phase” investigations than in the year before.
More important to consumers is a change in approach.
The Reagan FTC saved its consumer protection for what it called “hard-core” as opposed to “soft-core” frauds--a distinction that seemed to turn on both the degree of blatant criminality and the amount of money involved. This meant that the FTC spent a lot of time on shady outfits selling nonexistent gems or worthless investments for thousands of dollars, sometimes by phone, to unusually gullible victims who could have practiced more self-protection.
Left untouched were the kind of subtle, small-sum deceptions that come up in the advertising claims for mass-market goods--children’s toys, packaged foods, health products--many sold in great volume by national companies. Unfortunately, even careful, reasonable consumers need some outside protection when confronted by health, ingredient or environmental claims. They need help, Steiger told a consumer group last year, because they “cannot themselves judge whether such products will deliver the promised benefits.”
These were the investigations left to the states, and many pursued them, establishing stringent advertising rules in their own states. But businesses that advertise and sell nationwide need nationwide rules, not 50 variations. Indeed, says Steiger, “a national advertising policy,” under the aegis of the FTC.
The result is the FTC is challenging ads again. It may join with state attorneys general, as in the recent action against Mazola corn oil for claiming it could reduce cholesterol. It may also work alone, as in the action against Galoob Toys and its ad agency for misrepresenting the operation of certain toys in children’s TV ads.
“If you’re really serious that advertising is an important factor in competition, you have to challenge the deceptive and encourage the truthful,” says Barry Cutler, director of the FTC’s consumer protection bureau in Washington. “If an ad turns kids and parents off to advertising, there’s public injury.”
Soft-core perhaps, but we can relate to it.
