WASHINGTON / CATHERINE COLLINS : Metzenbaum Targets 3 Sacred Cows: Retailing, Insurance and Cable TV

Three of the nation’s largest industries--retailing, insurance and cable television--are atop Sen. Howard M. Metzenbaum’s ambitious consumer agenda.

“My goal is simple and straightforward: save consumers money by protecting them from price-fixing and price gouging,” the Ohio Democrat said on the Senate floor.

His Consumer Protection Against Price-Fixing Act (S. 429) is designed to end what is known as resale price maintenance, or vertical pricing. This is a practice in which suppliers refuse to sell goods to discount retailers at the behest of higher-priced retailers to restrict price competition.

“The damage caused by price-fixing may not be immediately obvious because consumers cannot know how low the price might have been in an open, competitive market,” Metzenbaum said. “A consumer also may be unaware that a particular product is not for sale at discount stores or is no longer offered at a discount price because the manufacturer has refused to continue to supply a discounter.”

Rep. Jack Brooks (D-Tex.), who sponsored similar legislation in the House (H.R. 1470) estimated at a hearing that such practices cost consumers $20 billion a year.

Kristen Rand, a lawyer for the Consumers Union, said the legislation would give discounters a legal basis for suing manufacturers or high-price retailers that try to drive them out of business. “But the ultimate ramification is that, without it, consumers are forced to pay higher prices,” she said.

Not unexpectedly, the bills face heavy opposition from the manufacturing and retail sectors.

Metzenbaum’s bill was reported out of the Senate Judiciary Committee on a 10-4 vote without a recommendation, and a full Senate vote is possible by June. The House bill awaits action in the Judiciary Committee, which Brooks chairs.

On another sacred-cow front, the insurance industry is exempted from antitrust laws by the 46-year-old McCarran-Ferguson Act. But Metzenbaum’s Insurance Competition Improvement Act (S. 430) would apply some antitrust regulation to the industry.

Without repealing the existing law, the bill would forbid four basic antitrust activities that are illegal in other industries. They are price-fixing, linking the sale of one product to the sale of another, market dividing and monopolizing.

The threat of the bill is forcing some members of the insurance industry to express a willingness to accept some changes. Smaller firms are more wary of federal regulation of their business, which is now regulated by the states. But some larger firms say they welcome the uniform standards that would come with some federal involvement.

The American Insurance Assn. does not support the bill but is willing to accept some changes in how the industry is regulated.

“Metzenbaum’s bill destroys the ability of the states to regulate the insurance industry. It is too extreme. It would treat us more harshly than any other industry,” said David Pratt, the association’s vice president. “You can’t have a (state) regulatory system and be subject to (federal) antitrust laws.”

Pratt said the industry needs to share information, to use standard forms so consumers can comparison shop, and to pool large risks.

Savings could be significant in such commodity lines as car and homeowner insurance. Robert Hunter, president of the nonprofit National Insurance Consumer Organization, said the legislation could cut consumer costs 5% to 10% in the first year.

Insiders say the legislation has a good chance at passage this year because of the support from some quarters in the insurance industry.

Metzenbaum’s third initiative is a two-bill package designed to protect cable-TV customers from the industry’s monopoly powers. The Competition in Cable Act (S. 431) would promote competition in the delivery of cable programming. The Cable Subscriber Protection Act (S. 432) would permit local regulation of rates in communities where there is only one distributor.

Linda Lipsen, an attorney with the Consumers Union, says: “Congress has the chance to do something greatly beneficial for consumers this year by enacting these bills into law. They are needed more than ever in these recessionary times, as consumers must stretch their dollars to make ends meet, yet they will cost the taxpayer nothing.”

Fuel Economy Bill Gaining Momentum

Sen. Richard Bryan’s automobile fuel economy legislation has cleared another hurdle. It passed the Senate Commerce Committee on a 14-5 vote, with some Republican support.

The Nevada Democrat’s bill (S. 279) calls for auto manufacturers to improve their average fuel economy by 20%, beginning with the 1996 model year, and 40% by 2001. The increased efficiency would be based on a corporate average fuel economy (CAFE) standard, which measures a manufacturer’s entire new-car fleet. It would result in a fleet requirement of 34.4 miles per gallon in 1996 and 40.2 m.p.g. five years later.

“We have seen the cost of energy dependence--war,” Bryan said. “I supported the President’s policy at every crucial step of the way, but we should not delude ourselves into thinking that wars are always concluded so fast or are so low in casualties. The Congress, the President and the auto industry can move forward and reduce our dependence on foreign oil.”

Manufacturers have decried the legislation, saying it would reduce the average fleet car to the size of a subcompact. Energy Secretary James D. Watkins, usually more circumspect, has called CAFE legislation the “National Highway Death Act.”

On the other side, Jessica Mathews, vice president of the World Resources Institute, wrote recently that the supposed relationship between safety and car size has not held up.

“New-car mileage doubled in the past 16 years,” she said, “while fatalities per mile dropped by a hefty 40%.”

And if safety is the issue, there is another bill out there addressing that concern.

Bryan and Senate colleagues John Danforth (R-Mo.), Slade Gorton (R-Wash.) and Brock Adams (D-Wash.) have introduced the Highway Fatality and Injury Reduction Act (S. 591), which would require driver- and passenger-side air bags in all passenger cars by the fall of 1995. A hearing was held on the bill recently in the Senate Commerce Committee and it is awaiting a committee vote.

The National Highway Traffic Safety Administration says that up to 12,000 lives would be saved yearly if all cars had both driver- and passenger-side air bags.