February 7, 1980
Page 2362
Mr. MAGNUSON. I wanted to yield to the Senator from Maine as much time as he wishes.
The PRESIDING OFFICER. The Senator from Maine is recognized.
Mr. MUSKIE. Mr. President, I have listened off and on to the debate on this pending measure and have done what I could in the last day or two to develop an understanding of the basic issues involved and what the committee has tried to do, and the purpose of the various amendments that are being considered.
So, as all Senators must in dealing with serious legislation, I have formed some conclusions of my own — sometimes conclusions that conform with those of the committee bill, and other times not.
It was easy on the Simpson amendment to vote with Senator SIMPSON because his amendment reflected a longstanding conviction of mine with respect to that issue, divorced from the FTC legislation.
With respect to the amendments pending before us now, I would like to discuss them and make clear for the record my view about those amendments which are rather fundamental modifications of the FTC legislation.
The bill before us, Mr. President, contains language which changes the statutory authority of the Federal Trade Commission. In addition, it strikes at the heart of the Commission's mandate by a preemptive prohibition against a current Commission action. Both provisions undermine the very basis on which the Commission functions, and I might add the basis on which Congress has ordered the Commission to function.
I will address myself to each of these questions individually but, first, I want to make just one point: If Congress wants the Federal Trade Commission to be nothing more than a law enforcement agency, Congress can surely make that judgment and write such a bill. But Congress has done just the opposite. We have given the Commission a mandate, and a degree of independence to carry out its mandate, which goes far beyond mere law enforcement.
It is pointless to undermine that mandate piecemeal simply because the possible outcome of one or another Commission action may have questionable results.
The 1914 statute establishing the Trade Commission made it the most broadly-based investigatory and law enforcement agency of the Government. Succeeding Congresses have seen fit to strengthen that mandate and expand it.
In the 1974 Magnuson-Moss amendments to the Commission Act, the agency was given additional powers and, more importantly, additional independence.
The Federal Trade Commission is a unique congressional creation, and it properly serves a unique role.
Because the agency's mandate is broad — unfair or deceptive acts or practices in commerce and affecting commerce — its actions potentially impinge on every commercial transaction. Surely we knew that at the time and it is no mystery today. But this broad authority did not develop in a vacuum. The Congress voted the basic authority. And the Congress expanded its investigatory powers.
Congress saw a need to do so and Congress responded.
If today Congress believes the agency's existence is unjustified, the responsible step is to narrow its broad authority, reduce its independence — perhaps dismantle the agency.
If Congress truly feels that the results of so many Commission actions will be irrevocably harmful that pre-emptive prohibition is necessary, then Congress should straightforwardly declare its willingness to shoulder the regulatory and investigatory duties of the agency forthwith.
I do not believe Congress can or should do so.
Congress has neither the time, the staff, the expertise nor the processes to duplicate the carefully delineated rule-making of the Federal Trade Commission.
What committee of Congress could undertake the econometric studies of market conditions that the Commission is now undertaking? Studies, I might add, that throw serious doubt on the traditional assumptions of "shared monopolies." What committee of Congress can adequately review, for instance, the standards and certification processes on which so much Federal legislation is necessarily based? Or are we willing to propose a massive expansion of our corporate body to assume such a task?
Unless we honestly face these questions and resolve them, the provision in the bill that makes a negative judgment on the standards and certification proposal is totally unwarranted.
Let me briefly describe the nature of that much-maligned standards and certification procedure:
There are some 20,000 products made in this country for which quality controls are certified according to standards established by industry-related associations and laboratories. Because of the tremendous range of products involved, the standards-setting and certification procedures themselves affect each and every American to a very great degree. The Federal Trade Commission has been examining the question of whether these procedures are sufficiently open to producer and consumer interests. It has suggested ways to maximize input from both producers and consumers. It has also proposed permitting the appeal of any standard's fairness by interested or affected parties.
I believe that this is an area of legitimate concern to the FTC. And, further, I believe that agency is best able to evaluate the product standards-setting and certification process. It is certainly an area which demonstrates the difficulty Congress would have making the kind of very specific judgments we ask of the FTC.
For these reasons, I think it would be a mistake to exempt this specific trade practice, or any particular business for that matter, from Federal Trade Commission scrutiny.
If Congress is to substitute its judgment in specific areas for the FTC's, then it will have to rely on the expertise of the specific groups whose practices raise public policy questions.
It is my contention that Congress would be inviting every party of special interest to petition us for exceptions — exceptions to laws which we ourselves enacted.
One of the most disturbing trends I have observed in my political career is the growing presence — and indeed pressure — of special interest groups of all kinds. It is a disturbing trend that I have seen distort the basic nature of the representative process.
I ask my colleagues, what does the precedent of terminating specific rule-making activities by the FTC — or any other agency for that matter — mean for us in Congress? It is an open invitation to special interest groups to petition us for exemption from Federal statutes.
I do not wish to be party to such an invitation. And I cannot help but believe that the American people do not endorse such a gesture on our part.
Public confidence in Government being what it is, I think we should be bending over backwards to avoid implications of special interest favoritism. If any more substantiation is needed to convince my colleagues that the proper function of Congress is to enact laws for all Americans, then this question should provide it.
We are simply not in the business of legislating for particular groups or interests and we must make that clear to our constituents.
For this reason, I urge my colleagues to consider their position on these issues affecting particular trade practices and to permit the Federal Trade Commission to carry out its mandate.
The proposal before us to retain the statutory authority of the Federal Trade Commission to regulate unfair and deceptive advertising practices warrants our support.
The 1914 statute of the Federal Trade Commission declared "unfair methods of competition" unlawful. In 1938, Congress strengthened that basic mandate in the Wheeler-Lea amendments to declare "unfair or deceptive acts or practices in commerce" illegal.
Yet the bill before us seeks to strike the word "unfair" from the criteria by which the Commission must judge advertising practices in an effort to stop one current Commission action.
This, Mr. President, is overkill.
I hold no brief for the contention that advertising directed at children should be banned. I am not at all persuaded that such a conclusion can be reached.
But I do not think we need to undermine the Commission's authority to fairly regulate advertising practices to assure a fair outcome on this issue.
A change in the basic statutory language that substitutes "false" for "unfair" as a criterion does far more than simply stop the so-called "kidvid" investigation. It goes to the heart of the congressional mandate which the Commission must carry out.
Under the existing language, the Commission must prove that an advertising practice is unfair and deceptive to be illegal. If we require a finding of "false and deceptive" instead, a major change has been effected, and one that does no service to responsible advertisers.
The concept of "deceptive" contains within itself both the elements of falsity and intent to mislead. The addition of the term "false" emphasizes the element of intent at the expense of the other meaning in the word. Thus, it seriously changes the entire basis on which the Commission must judge advertising.
This change does not restrict itself to the single question of whether, indeed, advertising directed at children is inherently misleading. It affects the basis on which any advertising claim can be made, whether that claim concerns the sale of land which is covered with water at high tide, or the sale of energy-saving gadgets that do not work.
The commission has not abused the present standard. There is no record of massive commission intervention in advertising based on the criterion of "unfairness." In fact, the conjunction of the terms is a protection against abuse, since all the elements of misrepresentation, falsity and motive must be present to meet the "unfair, and deceptive" test. With the substitution of the "false and deceptive" test, we have weakened the practical ability of the agency to make its case without adding an iota of protection for legitimate advertisers.
The change serves no valid purpose. To the extent that it makes the practical case more difficult to prove against determined swindlers, it does a great disservice to all responsible advertisers and businessmen.
As a practical matter, motive is most difficult and the most unsatisfactory element to prove in a court of law.
If the purveyor of a medigap insurance policy, for instance, represents his product as providing coverage for a certain illness, the current standard of "unfair and deceptive" permit the Commission to demonstrate that the coverage is duplicative and the advertisement is not complete enough to meet the standards of fair advertising. But if "false and deceptive" advertising must be demonstrated, the commission has the obligation of proving that the representation was willfully made in a manner intended to deceive.
Congress has already demonstrated its concern about the peddling of misleading insurance coverage to old people.
What public policy goal is served by taking away from this agency a rational and just legal test of unfairness in advertising?
There is no justification for undermining the statutory basis on which unfair advertising practices can be rectified, any more than there would be in an effort to eliminate the 1914 language on unfair methods of competition or the 1938 language on unfair or deceptive acts or practices in commerce.
I urge my colleagues to accept this amendment and retain in the basic authority of this agency its necessary ability to regulate unfair and deceptive advertising practices.
Mr. President, as the Senate deliberates on the future of the Federal Trade Commission, I think we would do well to step back for a moment and consider why this agency was created in the first place, and why it exists today.
No other agency of government, I daresay, can claim as its primary mission protection of the consuming public — the people who elect us — from false, deceptive and overreaching marketplace abuses. Nor does there exist any other part of Government with so great a statutory commitment to protection of the honest businessmen of this Nation from the unfair competitive tactics of less scrupulous and often more powerful business rivals.
The Federal Trade Commission was created in 1914, and charged with preventing unfair methods of competition. In 1938, this mandate was modified to include deceptive and unfair acts and practices. The statutory language was left deliberately broad, and subject to future definition by the Commission and the Federal courts, because after many, many months of careful deliberation, the Congresses of 1914 and 1938 realized that there was no real way to define in advance the many sorts of unfair practices that might arise to oppress consumers and disadvantage honest businesses.
In 1975 the Congress directed the FTC to address consumer abuses by making rules, where abuses are found to be widespread within an industry.
The combination of these three enactments frame the FTC's current mission: To preserve the processes of unrestrained competition in this country by enforcing the antitrust laws, and to protect consumers against unfair and deceptive business practices. These two functions, however, are really just part of one overriding goal, and that is to insure that our free enterprise capitalist system works as it is supposed to. Free enterprise assumes buyers who are not deceived, and know what they are buying. Free enterprise assumes sellers at liberty to compete with each other to satisfy consumers' search for the best possible product at the lowest possible price. The FTC exists to insure that these assumptions are met, and that our system works as it should, and as the public will insist.
To enable the Federal Trade Commission to meet these important responsibilities, its creators designed the Commission to be an expert economic agency, capable of studying in depth the endless variety of business practices before attacking those shown harmful to competition and the consuming public. Thus the FTC, although nominally a law enforcement agency, has always had one of the largest staffs of economists around, long before it become fashionable in this city to include economic analysis as an essential part of the regulatory process.
The Federal Trade Commission was also intended by Congress to be independent of the executive branch, so that it might administer the timeless policy of its organic statute with relatively greater continuity.
The Federal Trade Commission has used its independence and its expertise to serve the common weal. Long before the cause of "deregulation" became legion in the halls of Congress, the FTC recognized the baneful effects of public and private restraints on competition, and acted to stop them.
For example, the FTC used the rule-making authority that this Congress granted it back in 1975 to attack State and private restrictions that prevented the sellers of eyeglasses from advertising the price of their products to the poor and the elderly for who the ability to find the best buy is a necessity of economic life.
Similarly, the FTC has responded to skyrocketing medical costs, by taking action against arrangements that prevent doctors and dentists and many others from even making available to members of the public information about the costs of the services they have to offer — the linchpin of a free economy.
These and numerous other activities of the FTC, begun years ago, are truly in the spirit of the deregulation of business that supposedly underlies efforts to shackle this agency today. It is indeed ironic that in the name of deregulating and freeing businessmen to maximize the fruits of the competitive process, the Senate today considers legislation to hamstring one of the few agencies in government whose mission is precisely that.
The FTC is also unique in another respect. Most regulatory agencies are concerned with the activities of one or a few particular industries. Historically, these industries in turn have developed a symbiotic relationship with the agency, coming to depend upon it for protection from the rigors of competition, and defending its prerogatives in the Congress. The FTC has no such wealthy, powerful champion. Its only constituency is the consuming public, those people who do not make large campaign contributions or hire high priced lobbyists to represent their point of view. This makes the FTC an easy target for the arguments of those who would advance their special interests in the misguided name of "regulatory reform." And it also means that we must take care that in the name of curbing regulatory excesses we do not cripple or destroy an agency whose purpose is, if anything, as vital today as when it was created 66 years ago.
In this regard, the legislation and the amendments before us trouble me. They trouble me because they are riddled with special treatment for special interests, changes in laws, exemptions from laws, whose origin appears to be the complaint of one or a few interests that feel inconvenienced by the law's application. The legislation would also subject the FTC to certain cumbersome restrictions on the way it conducts its business that are so novel that Congress has thus far been unwilling to impose them on any other agency.
To me, regulatory reform does not mean over-regulating the regulators, and making them less efficient in doing their jobs. Nor, to me, does regulatory reform mean compromising the goals of consumer protection and antitrust to satisfy the complaints of a few special interests. The FTC is an arm of this Congress, delegated authority by us to protect consumers and preserve a competitive marketplace. It has exercised its authority with ability and vigor, and I do not think it wise to mutilate or cut off our arm simply because it has made a fist. To the extent that the legislation and amendments before us do just that, they deserve our most careful scrutiny, for I do not think this Congress would wish to see the noble aim of regulatory reform confused in the public mind with less worthy goals.