LC 14 I Report No. 81-125A RP3C,4—t"= 8‘ ‘*- 1259 N0 105%: 0 F 3 .3 LEBRA}nr Washi1*::;;-ton «...’.ra,.~.~'..~..«.~—.;.+~,. TE? F835? «JR COMMISSION: BRIEF BACKGROUND AND LEGAL OVERVIEW . I’-"‘ «»'‘.‘‘l‘‘. '3', Y_»( W’ V3 u ) ;-_. pp-Q‘ ‘,". ;. . ‘ ‘ ' _ n CR‘. ‘,1 f I.‘ . -. 4- . ...‘ " ,: . . _ V.-. . _ .,v ~\.N':_¢' E {Q T‘ " « E »::""":"='V§_, Ie.’.Ci‘f 17 1989 J‘, V r ' ~, :1 gun} b * ‘ ‘ -_ . A ~.; g. - ‘ M» V. J.-.“-5 Q3 ?? ‘: a . Janice E. .'*.;..a»..5'r&.u:'U-.33 P1400 Legislative Attorney American Law Division May 19, 1981 HD 2753 CONGRESSIONAL RESEARCH SERVICE THE LIBRARY orcomcngss The Congressional Research Service works exclusively for the Congress, conducting research, analyzing legislation, and providing information at the request of committees, Mem- bers, and their staffs. The Service makes such research available, without parti- san bias, in many forms including studies, reports, compila- tions, digests, and background briefings. Upon request, CRS assists committees in analyzing legislative proposals and issues, and in assessing the possible effects of these proposals and their alternatives. The Service’s senior specialists and subject analysts are also available for personal consultations in their respective fields of expertise. ABSTRACT The Federal Trade Commission (FTC) was a particularly visible and contro- versial agency during the 96th Congress, and, with its authorization up for renewal in 1982, has continued to be the subject of much discussion during the opening months of the 97th Congress. To provide a context for the pre- sent debates concerning the proper role of the FTC, the following pages set out, briefly, the background of the Commission, its powers, and the inter- pretations given by the courts over the years to its antitrust and consumer protection authority. There are also sections that (1) indicate the statutes enforced or administered by the FTC, and (2) list and describe some of the Commission's functions. CONTENTS ABSTRACT noooooooooooooco00ooooooooooooooooooooooooooo0O0O0000000°°5°'°° iii INTRODUCTION Oooooooooooooooooooooooo0000ooooooooooooooooooooooo00000000 1 BACKGROUND AND ESTABLISHMENT ooooooooooooooooooooooooooooooooooooooooooo 2 SUBSEQUENT HISTORY ..................................................... Interpretation of Commission's Antitrust Authority ................ Addition of Commission's Consumer Protection Authority ............ Some Commentary About the FTC and FTC Activities .....;............ 1 Magnuson-Moss Warranty--Federal Trade Commission C Improvement Act ................................................... 14 II--'\O\l\l RECENT CONTROVERSIES SURROUNDING FTC ACTIVITIES ........................ 16 "Federal Trade Commission Improvements Act of 1980" ............... 17 Recent Proposals to Abolish the Commission's Antitrust ’ Authority/Activities .............................................. 21 OMB Proposals ................................................ 22 Congressional Proposals ...................................... 23 SOME FUNCTIONS OF THE FEDERAL TRADE COMMISSION ......................... 26 Investigations .................................................... 26 Adjudication ...................................................... 27 Administrative ............................................... 27 Judicial ..................................................... 29 Rulemaking ........................................................ 31 Collection of Information ......................................... 34 Other Functions ................................................... 36 CONCLUSION 000000000000000000000000to0000000oooooooooooooooooooooooooooo 37 APPENDIX A: Organization Chart of the Federal Trade Commission ........ 38 APPENDIX B: Some Statutes Enforced or Administered by the Federal Trade COmm1SSiOD 0ooooooooooooooooooooooooooooooooo 39 THE FEDERAL TRADE COMMISSION: BRIEF BACKGROUND AND LEGAL OVERVIEW INTRODUCTION The Federal Trade Comission (FTC), which was a particularly visible and controversial agency during the 96th Congress, and has continued to be the subject of much discussion during the opening months of the 97th Congress, has drawn criticism for doing no more, say many Commission supporters, than it was created to do. The "Federal Trade Commission Improvements Act of 1980" (P.L. 96-252), which was enacted ostensibly to curb the use of some of the Commission's powers and authorities--alleged to have been wrongly expanded or arrogated by the independent Commission charged with enforcing some of the Federal antitrust laws, its own enabling statute, and many consumer protection statutes--has been characterized both as the "peace treaty in the Waf'betW€€D Congress and the FTC;£/and as a signal to the Commission of Congressional dis- pleasure with its activist ways. There is concern presently that the Commission is expanding its antitrust en- forcement activities beyond those envisioned by the 63rd Congress in creating the FTC, as, for example, in its attempt to render a "shared monopoly" violative Of Section 5 of the Federal Trade Commission Act (15 U.S.C. §45)S and that many Of the Commission's activities in the consumer protection area have been too vigorous. 1/ J. Sims, "FTC Act Strengthens Agency Powers," Legal Times of Washing- ton, July 14, 1980, p. 15. 2/ A "shared monopoly" is said to exist when two or more firms, together, enjoyfa market monopoly. Cf. Rubin, "The Concept of Shared Monopoly" (Con- gressional Research Service, February 5, 1981), for a fuller explanation of the term and the Commission's current attempts to legitimize the concept. CRS-2 Recent Congressional enactments and proposals directed at the perceived problem of an overzealous Federal Trade Commission will be addressed below. BACKGROUND AND ESTABLISHMENT The Federal Trade Commission, created in 1914 by the Federal Trade Commission Act, 15 U.S.C. §§ 41-58, (63rd Congress, Public No. 203), is one of two antitrust enforcement agencies -- the other being the Antitrust Division of the Department of Justice. It was created largely in response to the growing feeling that the Department of Justice was not adequately prepared to deal with "the enormous business combinations then operating, that the Attorney General's office had sometimes played favorites in its policies of antitrust prosecution, and that the courts themselves were not . _3_/ rendering wholehearted aid to a rigorous enforcement of the law." As the successor to the Bureau of Corporations, which had been set up within the Department of Comerce as a factfinding and investigatory organi-, zation capable of rendering expert assistance in studying corporate activity and business practices which might be amenable to challenge as violations of the Sherman Act (15 U.S.C. §§ 1-7), the Commission was specifically endowed with investigatory and factfinding authority; debates preceding the passage of the Federal Trade Commission Act do not indicate Congressional hesitation on that point. There was some concern, however, that the creation of an agency whose mandate involved the antitrust laws would undermine the traditional role of the Attorney General and the Department of Justice with respect to the enforcement of antitrust laws: 3/ Cushman, The Independent gggulatory Comissions (New York, 1941, 1972), P0 CRS-3 Mr. COVINGTON: ... On the other hand, everyone recognizes that it would be a mistake to divide the authority of enforcement of the antitrust acts between any other body and the Department of Justice. The Attorney General should be left in full control, as the chief law officer of the Government, of the disposition of cases arising under the Sherman law. 51 Cong. Rec. 14926 Proponents of a trade commission sought to emphasize that the new agency would 1101: 2 Mr. CUMINS: ... What we propose to do here is not to arrest the enforcement of the antitrust law, not to weaken its remedies, not to allow any criminal under its provisions to escape, but to add to the Department of Justice an investigating tribunal of high character, of great experience well equipped to bring to the attention of the Attorney General those instances which may have escaped the inquiries carried on in that department, and thus secure through the Department of Justice a more efficient enforce- ment of that law. 51 Cong. Rec. 11529 A catalyst to the creation of a trade commission as an administrative agency was probably a pair of Supreme Court decisions which signalled the intent of the Court to approach antitrust cases on an individual basis, defining the prohibitions of the Sherman Act in the context of specific situations, and to hold unlawful restraints of trade deemed "unreasonable." Almost simultaneously with the Court's announcement, in Standard 011 v. 4/ 5/ United States and United States v. American Tobacco Co.,_ of the "Rule of Reason,’ serious discussion began in Congress about the need to create an agency that could give some stability to the antitrust law by defining, in advance of challenges to behavior, the kinds of conduct that would be violative of the antitrust law. It was felt that such definition was more of a legislative task, to be accomplished by an agency delegated that task by Congress, than a judicial one, to be accomplished by the courts. 3/ 221 U.S. 1 (1911). _5_/ 221 U.S. 106 (1911). CRS-4 There were strong pro and con sentiments expressed in the Senate con- cerning the independent, regulatory character of a trade commission: Mr. MORGAN: ... Whatever we do in regulating business should be removed as far as possible from political influence. It will be far safer to place this power in the hands of a great independent commission that will go on while adminis- trations may change. That is one reason why I believe in having all these matters placed, so far as they can be, in the hands of a commission, taking these business matters out of politics. 51 Cong. Rec. 8857 Mr. NEWLANDS: The first question is: Shall an interstate trade commission of some kind be organized? I imagine that there can hardly be any difference of opinion on the point that there should be an administrative tribunal of high charac- ter, nonpartisan, or, rather, bipartisan, and independent of any department of the Government. I assume also that there should be a commission rather than one executive official, because there are powers of judgment and powers of discretion to be exercised. The organization should be quasi-judicial in character. We want traditions; ... we want a body of administrative law built up. This can not be well done by the single occupant of an office, subject to constant changes in its incumbency and subject to higher executive authority. Such work must be done by a board or commission of dignity, permanence, and ability, independent of executive authority except in its selection, and independent in character. 51 Cong. Rec. 11092 Mr. BORAH: I do not believe you can take a commission and separate it from the rest of the world so that it will not feel the influence and the power that affect other men. I have no criticism for the Interstate Commerce Commission, but that ques- tion has not been tested yet to the full, not by any means. can not judge an institution of that kind except in the sweep of years, and I, as one, am not willing to take the currency question, the industrial business of the country, and the transportation business, and place all of those things entirely away from the electorate, entirely away from the recall of the people, with a bureau which is answerable in no respect to the people. In the end it will result in their moving to a very large extent in another groove. I am not willing that the most tremendous affairs of government shall be wholly separated from the recall which the people have at stated periods with ref- erence to the election of their officers. You 51 Cong. Rec. 11235 The less-than-enthusiastic Support of some members of Congress for an independent interstate trade commission, as evidenced by Senator Borah's CRS-5 remarks, although not indicative of the feelings of a majority of the 63rd Con- gress, was not terribly different from that evidenced by some of the feelings expressed during the 96th and 97th Congresses. There is practically no criticism of the Federal Trade Commission currently being voiced that was not predicted 6/ during the debates on its creation{— the earlier Congress listened to the mis- givings, however, and chose to create a trade commission in spite of them. The collective judgment of the 63rd Congress seemed to favor creation of an independent organization capable of preventing the growth of monopoly situa- tions, of stopping in their incipiency the types of business behavior likely to become Sherman Act violations, i.e., the type of full-fledged antitrust violations liable to prosecution by the Department of Justice: _ Mr. STEVENS of New Hampshire: ... this trade commission bill [H.R. 5613] will do three things. ... Last, and to my mind the most important, one, it will give this commission the power of preventing in their inception and in their beginning some of these unfair processes in competition which have been the chief sources of monopoly. ... In the enforcement of the Sherman antitrust law it has been disclosed in practically every case which the Government has brought against the big combinations ... that the chief means of destroying competi- tion by big combinations was by the use of methods which were distinctly unfair and oppressive. Those combinations can Q] The following remarks are typical of those heard in the 63rd Congress from opponents of an independent, regulatory agency: Mr. REED: "Why, Mr. President, think of saying in this land of the free --- that five men can sit down in a room and say: ‘We think: Mr‘ J9n€Sa that what you are doing with your property is not fair. We have no rule to guide us. We have no law to blaze the way. Nobody has told us what is unfair. Con- gress has enacted no statute; the courts have registered no precedents; but we do not think your method of doing business is fair; anyhow it does not meet with our approval, and therefore you shall not do it.‘ Will anyone pretend that such a decree is due process of law?" (51 Cong. Rec. 1113) Mr. WORKS: "... So we have in this one small commission an inquisitional body with power to force information of every phase of a company's business, a legislative body to determine and declare what is unfair competition, and a court to try and convict the company for a violation of the law it has created and enjoin it from carrying on its business in the way it has been doing." (51 Cong. Rec. 12277) (continued) CRS-6 be dealt with by the Federal courts in the enforcement of the Sherman antitrust law. They can be dissolved.... What we wish to do above everything else is to prevent the growth of monopoly at the beginning. ... 51 Cong. Rec. 14941 (Emphasis added) In creating the Federal Trade Commission, Congress appeared willing, even anxious, to endow the new entity with the legislative and quasi-judicial powers that would enable it to function as a strong ally of the Department of Justice, an effective antitrust enforcement agency, and a champion of business certainty -- none of which was believed (by most members of Congress) possible without a trade commission, given the tendency of the Department to be erratic in its choice of cases to be prosecuted and of the courts to define the prohibitions of the antitrust law in the context of individual challenges to it. At the same time, there was an uncomfortable feeling, on the part of some members, that the new trade commission would somehow intrude on Congressional prerogatives. That feeling, which was submerged throughout most of the Commission's history, has recently re-emerged. (continued) During the debate in the 96th Congress on H.R. 2313, the bill which became the "Federal Trade Commission Improvements Act of 1980," comments such as the following were made: Mr. FRENZEL: "It is bad enough to be counterproductive and therefore highly inflationary, but the FTC compounds its sins by generally ignoring the intent of the laws, and writing its own laws whenever the whimsey strikes it. It indicts by press release. Due process is a phrase foreign to it. It invents its own extra-legal criteria for harassment. It engages in witch- hunts, demanding information which costs consumers dearly, for cases it never intends to complete. ... In short, the FTC has made itself into a virulent political and economic pestilence, insulated from the people and their representatives and accountable to no influence except its own caprice." (125 Cong. Rec. HlO757, H10758, daily ed. November 14, 1979) Mr. COUGHLIN: We need to protect American business from overbroad investi- gative subpoenas demanding the production of great quantities of information and documents with no requirement that these demands be relevant to some sus- pected violation. Over the years, the courts have expanded the Commission's authority to engage in fishing expeditions, holding that it can use its power to compel the production of information just to satisfy its ‘official curiosity.'" (125 Cong. Rec. Hl9750, daily ed. November 14, 1979) CRS-7 SUBSEQUENT HISTORY Interpretation of Commission's Antitrust Authority Section 5 of the FTC Act prohibits "unfair methods of competition," but does not define the term: Unfair methods of competition in or affecting commerce ... are hereby declared unlawful. 15 U.S.C. § 45(a)(1) In its early years the Commission -- undoubtedly in reliance on Congress‘ ex- pressed desire for the agency to define antitrust-violative behavior in advance of judicial challenges to activities believed, e.g., by business, to be lawful -- had asserted its right to determine the practices included within the phrase "unfair methods of competition, but the Supreme Court had ruled against the Comission. It said, for example, in 1920, in the first Section 5 case to come before it, that It is for the courts, not the commission, ultimately to determine as a matter of law what [the words ‘unfair methods of competition'] include. Federal Trade Commission v. Gratz, 253 U.S. 421, 427 (1920) By characterizing the definition of "unfair methods of competition" as a matter of law the courts ensured the reservation of the definitional duty (at least on review) to themselves. In so doing, they initially undermined 7 at least one raison d'etre of the Federal Trade Commission. Nevertheless, and despite the fact that the Gratz case was not specif- ically overruled, the ways in which the courts have defined "unfair methods of competition" have steadily increased the ability of the Commission to proceed _Z/ See, Cushman, id., pp. 201-204. CRS-8 3/ against what it believes to be such unfair methodsf_ From 1920 until the present, there has been progressive expansion of the scope of Section 5, with the Supreme Court allowing the Commission to prosecute any conduct which would be violative of either the Sherman or Clayton Acts or which would, if not chal- lenged, likely proceed to antitrust violation stage. "[T]he Commission has jurisdiction to declare that conduct tending to restrain trade is an unfair method of competition [under Section 5 of the Federal Trade Commissign Act] even though the self-same conduct may also violate the Sherman Act."_! As the introductory material indicates, the Commission was established, inter alia, in order to create an agency capable of dealing with incipient anti- trust violations, and in 1953, that fact was judicially endorsed. Speaking for a Court which found, in any event, that the respondent had engaged in conduct which "falls within the prohibitions of the Sherman Act and is therefore an §/ "Thus, the question we have for decision is whether the Federal Trade Commission can declare it to be an unfair practice for Brown.... We hold ' that the Commission has power to find, on the record here, such an anticompet- itive practice unfair, subject of course to judicial review. In holding that the Federal Trade Commission lacked the power to declare Brown's program to be unfair the Court of Appeals was much influenced by and quoted at length from this Court's opinion in Federal Trade Comm'n v. Gratz .... That case, decided shortly after the Federal Trade Commission Act was passed, construed the Act over a strong dissent by Mr. Justice Brandeis as giving the Commission very little power to declare any trade practice unfair. Later cases of the Court, however, have rejected the Gratz view and it is now well recog- nized in line with the dissent of Mr. Justice Brandeis in Gratz that the Commis- sion has broad powers to declare trade practices unfair. This broad power of the Commission is particularly well established with regard to trade practices which conflict with the basic policies of the Sherman and Clayton Acts even though such practices may not actually violate these laws." Federal Trade Comission v. Brown Shoe Co., jnc., 384 U.S. 316, 320, 321 (1966). _9__/ Federal Trade Commission v. Cement Institute, 333 U.S. 683, 693 (1948); see also, Balfour Co. v. Federal Trade Comission, 452 F.2d 1 442 F.2d 1 (7th Cir. 1971), in which the court of appeals stated that violations of the policies of Section 2 of the Sherman Act -- even if not violations of Section 2 itself -- could be prosecuted under Section 5; and Federal Trade Commission v. Sperry & Hutchinson Co., 405 U.S. 223 (1972), in which the Supreme Court indicated that for a practice to be "unfair" it need violate neither the letter nor the spirit of the antitrust laws. CRS-9 ‘unfair method of competition,‘ within the meaning of § 5(a) of the Federal Trade Commission Act," Mr. Justice Douglas also said: The ‘unfair methods of competition,‘ which are condemned by § 5(a) of the Act, are not confined to those that were illegal at common law or that were condemned by the Sherman Act. ... Congress advisedly left the concept flexible to be defined with particularity by the myriad of cases from the files of business. ... It is also clear that the Federal Trade Commis-' sion Act was designed to supplement and bolster the Sherman Act and the Clayton Act ... to stop in their incipiency acts and practices which, when full blown, would violate those Acts ... as well as to condemn as ‘unfair methods of compe- tition‘ existing violations of them._1Q/ Addition of Commission's Consumer Protection Authority As enacted in 1914, the Federal Trade Commission Act proscribed only "unfair methods of competition," but the scope of § 5 prohibitions was broad- ened by Congress in 1938 in the Wheeler-Lea Amendment (52 Stat. 111), Which added the phrase "unfair or deceptive acts or practices." That enactment, according to the United States Court of Appeals for the Third Circuit, permit- ted the Commission to "center its attention on the direct protection of the consumer" from such acts or practices, without regard to potential anti- competitive effectsfik/Wheeler-Lea was enacted subsequent to a period (roughly 1925-1933) in the nation of pro-business activity, and notzlong after the passage, in 1936, of the Robinson-Patman Price Discrimination Act:£- Even before the enactment of the Wheeler-Lea Amendment, however, the Court had emphatically endorsed the right of the Commission to proscribe certain _£Q/ Federal Trade Commission v. Motion Picture Advertising Service Co., Inc., 344 U.S. 392, 394-5 (1953) 11/ Pep Boys -- Manny, Moe & Jack, Inc. v. Federal Trade Commission, 122 F-2d 158, 161 (3d Cir. 1941), emphasis in original. _1_2_/ 15 U.S.C. §§ 13, 13a, 13b,‘ 21a; ch. 592, 49 Stat. 1525. CRS-10 13/ other "unfair" methods. Wheeler-Lea had been legislative confirmation, the Court noted in 1972, that Congress agreed with the Court's interpretation and S tatements: Neither the language nor the history of the [Federal Trade Commission] Act suggests that the Congress intended to confine the forbidden methods to fixed and unyielding categories. The common law afforded a definition of unfair competition, and, before the enactment of the Federal Trade Commission Act, the Sherman Act had laid its inhibition upon the combinations to restrain or monopolize interstate commerce which the courts had construed to include restraints upon competion in interstate commerce. It would not have been a difficult feat of draftsmanship to have restricted the operation of the Federal Trade Commission Act to those methods of competition which are forbidden at common law or which are likely to grow into violations of the Sherman Act, if that had been the purpose of the legislation. Federal Trade Commission v. R.F. Keppel & Bros., Inc., 291 U.S. 304, 310 (1934) quoted in Federal Trade Commission v. Sperry & Hutchinson Co., 405 U.S. 233, 243 (1972) The perspective of Keppel ... was legislatively confirmed when Congress adopted the 1938 Wheeler-Lea amendment .... The amendment ... made it clear that Congress, through § 5, charged the FTC with protecting consumers as well as competition. 405 U.S. at 244 legislative and judicial authorities alike convince us that the Federal Trade Commission does not arrograte excessive power to itself if, in measuring a practice against the elusive, but congressionally mandated standard of unfairness, it, like a court of equity, considers public values beyond simply those enshrined in the letter or encompassed in the spirit of antitrust laws. Id. The extent to which the Court, in Sperry & Hutchinson, freed the Commis- sion from the confines of the antitrust laws in its decisions to challenge l§/ Federal Trade Commission v. R.F. Keppel & Bros. Inc., 291 U.S. 304 (1934). CRS-11 "unfair" conduct (or, perhaps, merely restated what it believed to always have been the correct interpretation of the Commission's authority) has provided a basis for the Commission's own interpretation of its authority, and aided in some of the recent attempts to limit FTC authority. The Commission has frequently cited the Sperry & Hutchinson Court's interpretation of its Section 5 authority. For example, the summary of the FTC Staff Report on Advertising to Children notes that The most elaborate test stated by the Comission for determining unfairness -- and one cited approvingly by the Supreme Court in S & H ... [was] issued by the Commission in 1964. That test looks to three factors; first, whether the challenged practice, even if it has not been previously cons sidered unlawful, ‘offends public policy‘ in the sense of being ‘within at least the penumbra of some common-law, stat- utory, or other established concept of unfairness‘; second, [whether it is immoral, unethical, oppressive or unscrupulous’; and third, ‘whether it causes substantial injury to consumers (or competitors or other businessmen).' As the Court recog~ nized in S & H, it is not necessary for a practice to be offensive under each of the three parts of the test in order for it to be unfair. Indeed, there have been instances since [1964] where the Commission has found a practice to be unfair without specifically measuring it against any of the three parts._l§/ Some Commentary About the FTC and FTC Activities The Commission has regularly been the subject of examination and comment, both as to its structure and its activities. The 1969 "Report of the ABA [American Bar Association] Commission to Study the Federal Trade Commission" noted that "this is by no means the first study evaluating the structure and performance of the FTC. [The ABA Commission was established immediately after publication of the report, scathingly critical of the FTC, by "Nader's Raiders."] Since the establishment of the FTC in 1914, a succession of _£fl/ FTC Staff Report on Advertising to Children, February 1978, at pp. 31, 32. CRS-12 independent scholars and groups has expressed much the same themes in their criticisms of the Commission, including the absence of effective planning and failure to establish workable priorities, the consequent tendency to become involved in too many trivial cases, the delay and unnecessary secrecy 15/ in FTC operations, and the uneven quality of staff."_— The authors of the ABA "Report" continued: Gerard Henderson, an early critic of the FTC, noted that the agency too often became involved in trivial matters, and attrib- uted this deficiency to a lack of orderly planning. Almost forty years later, Carl Auerbach (a member of this Commission), in an exhaustive study of FTC organization and procedure, documented the same absence of priority. Auerbach proposed revisions in the FTC structure and procedures to improve the effectiveness of planning to establish priorities. Nonetheless, four of the five present FTC Comissioners ... in appearances before our Commission, asserted that control by the FTC of its own mission, goals and priorities continue to be a most per- plexing and largely unsolved problem. Closely associated with criticism concerning the absence of priorities is the charge that the FTC all too often has shown an unfortunate tendency to become involved in protracted litiga- tion or administrative proceedings concerning relatively trivial controversies. The Hoover Commission in 1949 described this problem in the following language: "As the years have progressed, the Commission has become immersed in a mltitude of petty problems ... the Commission has largely become a passive judicial agency, waiting for cases to come upon the docket, under routinized procedures, without active responsibilities for achieving statutory objectives." lgl ——_——.—....—. ._... _. ._.....¢-¢—: — _. 15/ ABA "Report," p. 9. Some other documents that discussed the FTC include: Auerbach, "The Federal Trade Commission: Internal Organization and Procedure," 48 Minn. L. Rev. 390 (1964); Bureau of the Budget, Federal Trade Commission Study 4 (1960); Senate Committee on the Judiciary (86th Cong., 2d Sess.) Report on Regulatory Agencies to the President-Elect (1960); E. Cox, R. Fellmeth and J. Schulz, "The Consumer and the Federal Trade Commission" (1969), the so-called Nader's Raiders‘ Report. lg] ABA "Report," note 6, at pp. 9-10 (footnotes omitted) CRS-13 Reports subsequent to the 1969 ABA "Report" were not substantially dif- ferent in tone, all of them emphasizing the fact that the Commission did not, and perhaps could not, actively enough pursue the activities that were its raison d'etre. The President's Advisory Council on Executive Organization (known as the "Ash Council" after its chairman, Roy L. Ash), for example, in 1971, observed that the FTC's "[p]re-occupation with minutiae has created a 17/ ‘jack of all trades -- master of none’ profile for the [Commission]." Until the proposals advanced by the Office of Management and Budget in 18/ early 1981, however, the 1971 Council was the only critic of the Commission that advocated removing the FTC's antitrust function. Indeed, the Ash Council would have eliminated the FTC. Expressing the concern that the Commission had 19/ become "burdened with an ill-mix of functions," the Council recommended: That the Federal Trade Commission be abolished and its consumer protection responsibilities vested in a new Federal Trade Practices Agency headed by a single administrator. That antitrust enforcement responsibilities of the FTC be transferred to a new Federal Antitrust Board. 20/ The 1971 "Report of the Section of Antitrust Law [of the ABA] to Study the Ash Council Report" disagreed strongly with the recommendation to abolish the Commission: In our opinion, the rule-making authority insofar as it exists should be left to the FTC .... ... We do not agree that a three-man antitrust board, including two economists, is either feasible or practicab1e.... The new Federal Antitrust Board could produce more enforcement machinery but less effective enforcement. Hence, we oppose the Ash Council's recommenda- tion to create a new Federal Antitrust Board. In sum, we believe the new 12/ Ash Council Report at p. 87. l§/ Discussed, infra, at pp. 22 and 23. _£2/ Ash Council Report at p. 87. _2_Q/ Id. CRS-14 and revitalized FTC has been unjustly criticized at the very time of its rehabilitation and reinvigoration. Rather than abolish the FTC, we would strengthen it so as to enable it to handle more effectively those problems related to consumer interests as well as antitrust enforcement. El] When the ABA Section of Antitrust Law studied the FTC recently, it concluded, after chronicling some of the problems and controversies surrounding the Commission during the past several years, that "while many of the criticisms and specific legislative proposals may have merit, others appear misguided." Moreover, some of the specific proposals now being considered in Congress may be addressing symptoms, rather than the underlying problem itself. With consideration being focused on individual and diverse legislative proposals, it has not been possible to analyze systematically and comprehensively all of these interre- lated issues so as to gain the necessary perspective from which basic reforms can flow. A.more useful approach would be for Congress to schedule hearings with specific focus on addressing the fundamental structure and procedural issues that give rise to the current concerns. Such Congressional hearings should reexamine the nature of the powers which have been delegated to the FTC by Congress, the manner in which the FTC has exercised those delegated powers, and the processes by which Congress and the courts review the exercise of these delegated powers. In the long run, such a considered approach will best serve the public interest. 33] 23/ Magnuson-Moss Warranty-Federal Trade Commission Improvement Act- 1974, the year in which the 93rd Congress passed the Magnuson-Moss Act, is a crucial year in the history of the Federal Trade Commission. It repre- sents both the recent high point in the Congressional attitude toward the agency, and the source of much of the current criticism of the Comission. .21] Reprinted at 507 Antitrust & Trade Regulation Report (ATRR) D-1, D-2 (4-6-71). 3}] "Report of the Section of Antitrust Law, American Bar Association, Concerning Federal Trade Commission Structures, Powers and Procedures." (Feb. 7, 1980), reprinted at 951, ATRR Special Supplement (2-14-80). Z§/ P.L. 93-637. CRS-15 As the preceding section indicates, the Commission had been criticized often and loudly throughout its existence for failing to live up to its potential as either an antitrust enforcement or consumer protection agency. With Magnuson- Moss, Congress again gave a clear indication of its belief that the FTC was a necessary agency, and at once expanded the scope of the Commission's juris- diction and underlined or created Commission powers. When he introduced the legislation, Senator Warren Magnuson said: Title II of this bill expressly confirms the existing authority of the Federal Trade Commission to promulgate trade regulation rules defining specific unfair deceptive practices, thus enabling the businessman to understand better what is expected of him. 119 Cong. Rec. 968 Rulemaking under Magnuson-Moss will be discussed, ggfgg, at P3893 32'343 the expansion of the Commission's authority to represent itself in judicial pro- ceedings will be discussed, infra, at pages 29 and 30. Magnuson-Moss also expanded the scope of the Commission's jurisdiction to enable it to reach commercial activities that affect interstate commerce in addition to those that occur_in interstate commerce. The original Federal Trade Commission Act prohibited unfair acts in (interstate) commerce, and the courts had been reluctant to expand that mandate, even though the definition of "commerce" and what constitutes "commerce" had been steadily broadened. In 1941, for example, the Supreme Court had stated expressly that the Commission was restricted to prosecution of unfair acts that occurred in commerce, absent 24/ a Congressional amendment to the Federal Trade Commission Act. Zflf Bunte Bros. v. Federal Trade Commission, 312 U.S. 349 (1941). CRS-16 RECENT CONTROVERSIES SURROUNDING FTC ACTIVITIES Proponents of FTC activism have asserted that the Commission is not a regulatory body as such, and does not, as do the agencies that oversee particu- lar industries (e.g., Interstate Comerce Commission, Maritime Commission), promulgate positive regulations for the conduct of business; but rather, acts to ensure the operation of a market economy free from the restraints imposed by anticompetitive practices. Further, they point out, Congress has, twice, gone on record as favoring activity by the Commission to define lawful marketplace behavior -- first, with the passage of legislation which created a trade commission, and second, in response to criticism of the Commission's ineffec- tiveness and lack of vigorous action, with the 1974 enactment of the Magnuson- Moss bill to underline Congressional expectations of a strong commission. Never- theless, the Commission has become a target for the anti-regulatory sentiment that exists in the current Congress. In addition, Congress has been approached by members of several industries which recently have been (or still are) the subjects of FTC activities (either rulemaking, adjudicative or investigatory). So long as the Commission challenged the activities or practices of individual firms there was little industry-wide sentiment. Faced with either the reality or the possibility of the promulgation of rules governing industry-wide conduct pursuant to the Magnuson-Moss Warranty--Federal Trade Commission Improvement Act rulemaking authority (15 U.S.C. § 57a), however, industry members have often combined forces to oppose regulation. Industry lobbying activities and the cautious regulatory proclivities of many legislators coalesced, and, combined with the sentiments of many legislators in the 96th Congress who believed in the worth of the FTC but CRS-17 felt also that the Commission had overreached its legitimate powers, to produce, after considerable attention to specified FTC activities, the 25/ "Federal Trade Commission Improvements Act of 1980" (P.L. 96-252). "Federal Trade Comission Improvements Act of 1980" The Congressional assault on the Federal Trade Commission is now over -- at least for the short run. Like most wars, it's hard to tell who won, but given the potential for damage and the congressional mood of a few months ago, a good case can be made that the FTC did very well. * * * ., _2__6./ The peace treaty in this war was the FTC Improvements Act of 1980. As will be apparent from the following material, however, even if the 1980 Act did not specifically limit FTC activity, its tenor is such that it has served as a rather clear signal to the Commission that caution and restraint are the better part of wisdom, if not survival. The provisions that apply to the Commission's rulemaking activities generally: Zéf The legislative history of P.L. 96-252 includes H. Repts. 96-181 and 96-917 (Conf. Report), and S. Rept. 96-184. Cf. also, Congressional Record daily eds. Nov. 14, 1979 (H 10746-10774) and Feb. 7, 1980 (S 1177-1242). "... this bill has several elements in it which make it more responsive to the sense of disquietude in the business community and very much more responsive to the pervasive sense in this Congress that we want to make regulatory agencies more responsive to our will ...." (Mr. Scheuer, H 107646); "... the FTC is such a mess that one hardly knows where to begin discussing its problems. It epito- mizes all the things that Americans find excessive, unnecessary, wasteful, duplicative, and repugnant about regulatory agencies. ... It is bad enough to be counterproductive and therefore highly inflationary, but the FTC compounds its sins by generally ignoring the intent of the laws, and writing its own laws whenever the whimsey strikes it." (Mr. Frenzel, H 10757). 22/ J. Sims. Id}, note 1. CRS-18 (1) Require that advance notice be given, in the Federal Register, of the FTC's intent to institute any rulemaking proceeding (Section 8); (2) Establish that the presiding officer at rulemaking proceed- ing is responsible to a "chief presiding officer" and not to "any other officer or employee of the Commission" (Section 9); 27/ (3) Prohibit any e§_parte_—contact between any member of the Commission or any officer or employee of the Commission or any consultant to the Commission, and any other party "con- cerning any rulemaking proceedings of the Commission" except that any such contacts be recorded, "made available to the public, and included in the rulemaking record"; and prohibit any comunication by "any officer, employee, or agent of the Commission with any investigative responsibility or other responsibility relating to any rulemaking proceeding within any operating bureau ... [of] any fact which is relevant to the merits or such proceeding and which is not on the rule- making record of such proceeding, unless such communication is made available to the public and is included in the rule- making record." (Section 12); (4) Mandate that the Commission prepare a semi-annual regulatory agenda, with the admonition that "[t]he Commission shall not propose or promulgate a rule which was not listed on a regu- latory agenda unless the Commission publishes with the rule an explanation of the reasons the rule was omitted from such agenda." (Section 15); (5) Reduce the total amount that the Commission may pay in any fiscal year to persons who intervene in rulemaking proceed- ings, establish maximums that may be paid to any one person in any particular rulemaking proceedings, and require that 25% of the amount appropriated for the purpose of such inter- venor compensation be given to persons (or their representa- tives) who would be regulated by the proposed rule involved (Section 10); and; (6) Provide for Congressional review of final FTC rules before they may take effect (Section 21). The so-called "legisla- tive veto" provisions of the Act constitute an attempt to limit Commission rulemaking power; the "legislative veto" prerogative has not yet been exercised, but it is probably safe to venture that if and when it is, the constitutionali- ty of the "legislative veto" will be challenged as a viola- tion of the doctrine of separation powers. for é%%ép1:;e., contact by one party in the absence of another, opposing party - ff a consumer representative meeting with a Commissioner or Commission sta member when an interested industry representative is not present. CRS-19 Substantive rules or FTC rulemaking proceedings that were (or are) affected by the provisions of the 1980 Act include those pertaining to: (1) (2) (3) Standards and certification, which may not become the sub- ject of any Trade Regulation Rule promulgated pursuant to the Commission's rule-making authority granted by the Magnuson-Moss--Federal Trade Commission Improvement Act (Section 7); the Commission has sought to promulgate a rule that would, in effect, prescribe standards for standard-makers, while members of the concerns that are involved in standard-setting have sought to be given the opportunity to draft, voluntarily, their own guidelines; Commercial advertising directed at children (so-called "kid- vid"), with the Commission being prohibited from using "unfairness" as a criterion for promulgating any "kid-vid" rule, and further prohibited from using any funds appropri- ated for fiscal years 1980, 1981, or 1982 to institute any new rulemaking which prohibits or otherwise regulates any ~commercial advertising on the basis of a determination by the Commission that such commerical advertising constitutes an unfair act or practice ..." (Section 11); }§/ and: The funeral industry, any rule pertaining to which must be limited to regulation of disclosure; and prevention of boy- cotts or tying practices, deception, or the provision of goods or services without prior approval of purchasers (S€C' tion 19). Certain adjudicative proceedings of the Commission provided the impetus for provisions that: (1) (2) Prohibit the Commission from expending funds appropriated for fiscal years 1980, 1981, or 1982 for the purpose of petitioning, pursuant to its authority under the Lanham Act (specfically, 15 U.S.C. § 1064) for the cancellation of a trademark on the ground that the mark has become "the common descriptive name of an article or substance" (Section l8);_29/ and, Prohibit the Commission from prosecuting any agricultural cooperative for alleged violation of Section 5 of the FTC Act if the activities of the cooperative are immunized from the reach of the antitrust laws by virtue of the Capper- Volstead Act (7 U.S.C. §§ 291, 292) (Section 20). §§/ 32/ Cf. note 55, and accompanying text, infra. Cf. note 63, and accompanying text, infra. CRS-20 In 1978, the Commission had invoked its Lanham Act authority to petition, in proceedings before the Trademark Trial and Appeal Board of the U.S. Patent and Trademark Office, for the cancellation of the trademark "Formica" on the ground that the word had become generally descriptive of the plastic laminate to which it was applied. The provision in the 1980 Act caused the FTC to with- draw its petition to cancel the "Formica" mark, and to reconsider future plans for similar oppositions. The substantial opposition to the FTC prosecution, under Section 5, of Sunkist Growers for alleged monopolistic practices and practices in restraint of trade in the domestic sale and distribution of fresh oranges and lemons and lemon juice,§9/ was reflected in Section 20. The Report of the Conference Committee that considered,the bill noted that Section 20(a) of the bill rati- fies "the spirit and intent of the Capper-Volstead Act ...."§l/ The Commission, for its part, maintained that its prosecution of Sunkist did not reflect prosecution of "proper" Capper-Volstead cooperative activity, but that Sunkist had "willfully maintained" its monopoly position, and that its activities were not those contemplated by the Capper-Volstead Act.§Z/ In addition, provisions of the "Federal Trade Commission Improvements Act of 1980": (1) Limit the FTC's investigatory power under § 6 of the FTC Act (15 U.S.C § 46) to exclude investigations of the business of insurance, except that the FTC may conduct studies and prepare reports relating to the business of insurance upon receipt of a request which is agreed to by a majority of the members of the House and Senate Commerce Committees (Section 5); (2) Provide for the confidentiality of information contained in Line of Business responses (Section 4) received pursuant §Q/ In re Sunkist Growers, Inc., Docket No. 9100. §;/ H. Rept. 96-917, p. 37. ,§g/ See 954 ATRR A-22 (3-6-80). CRS-21 to compulsory process (Section 14), or which is trade secret or privileged or confidential comercial or financial infor- mation (Section 3);_33/ and, (3) Alter current Commission procedures with respect to the issuance of subpoenas by requiring that subpoenas must be signed by a Commissioner (prior to the Act, subpoenas could be issued by staff members), require that demands for information concerning an alleged consumer protection violation be made through Civil Investigative Demands, ' and establish specific procedures for the issuance of Civil Investigative Demands (Section 13). It is probably fair to say that although the Act purports to substantially diminish the Commission's powers, its provisions do not, in sum, represent significant limitations: "Although some proceedings have been limited and more oversight is mandated, the FTC still retains the lion's share of its power and 34/ only its roar has been affected."_—Whether the implicit message of the 1981 Act -- that the FTC would do well to utilize many of its powers with restraint - is stronger than the explicit provisions and will return the agency to its pre-Magnuson-Moss "little old lady of Pennsylvania Avenue" image is an open question. Recent Proposals to Abolish the Commission's Antitrust Authority/Activities The early months of 1981 have seen the continuation of proposals concerning the FTC -- including those which would abolish in its entirety the Commission's antitrust authority (and, perhaps, depend on the Department of Justice's Antitrust Division to increase its enforcement activity) or limit the extent to which the Commission could exercise antitrust authority. 33/ The Commission's decisions concerning the disclosure of information characterized as "confidential" in the Act have been held to be nonreviewable as discretionary (see e.g., Milton Bradley Co. v. Federal Trade Commission, F.Supp. (D.D.C., October 2, 1980); JayMar Ruby, Inc. v. Federal Trade EBfim1ss1ofi:h__F.supp.__(D. N.Ind. Sept. 8, 1980) ' _3§/ "Effects of the Federal Trade Commission Improvements Act of 1980," 988 ATRR B-l, B-4 (11-6-80). CRS-22 OMB Proposals The Office of Management and Budget has, in the face of substantial Con- gressional criticism of and opposition to its initial proposal to eliminate the Bureau of Competition, the organizational unit within the FTC most concerned with antitrust enforcement, proposed a less drastic, but nevertheless troubling to the Commission and its supporters, reduction in the FTC budget. The current OMB proposals urge that the Commission's funding be reduced to the extent of forcing the FTC to generally make across-the-board cuts in its activities; and urge that the FTC's 10 regional offices be closed. According to the Director of OMB, David Stockman, "[t]he FTC ... over the past decade has adventured into unchartered waters, looking for new cases, new doctrines, and more influence. Such activities have increased public power at the expense of the private sector and consumer welfare. The FTC's proclivity for self-aggrandizement is evident in both of its major areas of responsibility, antitrust enforcement and consumer 22/ protection." When it faced the possibility of indirect elimination of its antitrust function, the Commission wrote to the OMB Director to question "whether the appropriations process is the proper mechanism for ending over 65 years of anti- trust law enforcement by the independent agency charged by Congress with that responsibility. The letter emphasized that the OMB "recommendations involve a highly significant policy determination concerning the government's enforcement 36 of the antitrust law.‘ géj Statement before House Government Operations Committee Subcommittee on Consumer and Monetary Affairs, March 16, 1981. _§§/ Letter dated February 14, 1981, reprinted in Legal Times in Washingf ton, February 23, 1981, p. 14. CRS-23 More recently, the Acting Chairman of the FTC, David Clanton, told the House Appropriations Subcommittee on Justice, State, the Judiciary and Related Agencies that the OMB recommendation that urges the closing of the Commission's regional offices would not be cost effective: "In our view, any short-run savings achieved by closing these 10 offices would be more than offset by the corresponding losses to the public, to business, especially small business, and to state and local officials served by these offices. gzj The directors of several of the regional offices have added that even if the investigations and litigation activities of those offices were continued by the Commission's headquarters office (a doubtful assumption, they say), there would be costs attributable to travel and document shipping, resulting in a 38 lesser degree of monetary saving than might be supposed- Congressional Proposals According to a recent article in the National Journal, "[a]lthough the FTC has been under attack by the business community and Congress for the past two years, most of the concern has focused on its consumer protection activities. In the 97th Congress, however, both the Senate Commerce, Science and Transportation and Judiciary Committees probably will review its antitrust efforts.“§2/ Some of the areas likely to receive some degree of legislative consideration involve the forum in which the Commission litigates, the extent of the FTC's authority to issue divestiture orders in any but merger situations §Z/ Testimony, March 12, 1981. Reported at 1006 ATRR A-5 (3-19-81). §§] "FTC Official Says Cuts Endanger Pending Cases" The Washington Post, March 13, 1981, p. D1. 22/ "Big is Back in Favor ... But Only If It Promotes Economic Effi- ciency," National Journal, 4-4-81, pp. 573, 574. See pp. 18-22, supra, for an overview of Congressional action embodied in the "Federal Trade Commission Improvements Act of 1980." ' CRS-24 found to be unlawful under Section 7 of the Clayton Act (15 U.S.C. § 18) and the scope of the Commission's innovative power to define certain practices. Although there were several measures introduced in the 96th Congress to require that the Commission file certain antitrust complaints and litigate them in the district courts of the United States, rather than before administrative law judges, there has not yet been any similar action in the 97th Congress. In the 96th Congress, for example, Senator Hatch introduced S. 1980, which would have required that the FTC adjudicate all antitrust actions (as distinct from consumer protection actions) in United States district courts; S. 1980 would have applied to price-discrimination challenges under the Robinson-Patman Act (15 U.S.C. § 13) as well as to challenges, under Section 5 of the FTC Act, to "unfair methods of competition". Senator Levin sponsored legislation to require that the Commission litigate in United States district courts any Section 5 ac- tion in which divestiture was sought as a possible remedy. His bill, S. 3248, does not yet have a successor in the 97th Congress. In addition, an attempt was made to amend the measure which became the "Federal Trade Commission Improvements Act of 1980" to require essentially what S. 3248 would have required; hearings on that issue were held by the Senate Commerce Committee£9/ and there was some agreement that further study was necessary prior to mandating any such change in FTC adjudication procedures. Another area of Congressional concern which did not materialize as legis- lation in the 96th Congress, but which is the subject of at least two measures introduced in the 97th Congress, is the Commission's long-standing attempt to extend conduct prohibited by the antitrust laws to "shared monopoly." There has .flQ/ "Federal Trade Comission - Divestiture," Hearings before the Subcom- mittee for Consumers of the Senate Committee on Commerce, Science and Transpor- tation (96th Congress, 1st Session), November 30, 1979. CRS-25 not yet been any resolution, even at the Commission level, of the "shared monopoly" case against three members of the ready-to-eat cereal industry - the so-called "Cereal Industry Case."£l/The Commission's utilization of that as- yet-judicially untested theory of antitrust liability has been the impetus for House and Senate legislation to prohibit the FTC from deciding any cases in which the existence of a "shared monopoly" Or reSP0ndentS' PaFt1C1Pat10n in it is at issue. H.R. 2509 and S. 682 are identical bills which would require that the FTC not issue any orders in "shared monopoly" cases until or unless Congress "expressly establishes that it is a violation of the antitrust laws for two or more unaffiliated persons ... to establish and maintain a concentrated market structure of a shared monopoly ... and specifically defines the elements of such a violation." Ironically, the Commission's attempt to extend the outer reaches of the antitrust law would seem to have been at least a partial appropriate answer to the charge made in 1969 in the "Report of the ABA Commission to Study the Federal Trade Commission" that "[i]f the measure Of the quality Of FTC performance in the antitrust area is whether the agency has broken new ground and made new law by resort to its unique administrativzzresources, it seems that the record is largely one of missed opportunity.“_—/Moreover, the "Cereal Industry" complaint was filed in 1972, two years before Congress re-endorsed the Commission in the 1974 Magnuson-Moss legislation. jg] In re Kellogg Co., Docket No. 8883. Cf. also note 2, supra. 4_2/ P. 65. CRS-26 SOME FUNCTIONS OF THE FEDERAL TRADE COMMISSION The following brief list and discussion are not, and are not meant to be, exhaustive. Rather, they indicate the range of'activity engaged in by the Commission. Questions concerning any of the procedures contained here, or any other(s), may be the subject(s) of specific queries and responses. Investigations Section 6 of the FTC Act (15 U.S.C. § 46) authorizes the Commission to ... investigate from time to time the organization, business, conduct, practices, and management of any person, partnership, or corporation engaged in or whose business affects commerce .... As a practical matter, and since the Department of Justice is also authorized to enforce the antitrust laws, the investigatory power given to the Commission in Section 6 is potentially in conflict with that of the Department. It has been the practice of the two antitrust enforcement agencies, therefore, since at. least 1938, to maintain a clearance procedure concerning the institution of all investigations. Liaison personnel are located in the Commission's Bureau of Competition and the Antitrust Division's Office of Operations. The agencies have agreed to seek clearance from each other in the following instances: (1) where either proposes to investigate a possible violation of the law, and (2) where either receives a request for a statement of agency enforce- ment intentions (pursuant, e.g., to the Department's Business Review procedure 43/ or the FTC's Advisory Opinion procedure). Under the liaison agreement, _fi§/ The FTC's Advisory Opinion Procedure is discussed infra, at p. 36. CRS-27 neither agency may begin an antitrust-related investigation until clearance is granted by the other agency. There are two areas in which there is no Petential °Ver13P° First: the Federal Trade Commission has no authority to prosecute criminally, so all possible criminal violations are routinely referred to the Department of Justice (Antitrust Division). second, for a variety of reasons, the Antitrust Division has chosen not to enforce the Robinson-Patman price discrimination statute (15 U.S.C. § 13), and refers all Robinson-Patman matters to the Commission. Criter- ia for determining the disposition of all other investigetioes may include the relative "expertise" of the agencies in the industry in question. Or the respec- tive availability of agency personnel and monetary resources- Adjudication The Federal Trade Commission litigates in both the administrative agency and judicial forums. Until rather recently, the C°mm135i°n P°SSeS3ed little more than the authority to administratively adjudicate complaints it filed pur- suant to section 5 of the FTC Act or in which it challenged activities alleged to violate the other statutes it enforces; the majority 0f the C°mmi531°n'S litigation activity still occurs within the agency. altheugh its ineteased potential for appearing in judicial proceedings has not escaPed Criticism- Administrative Section 5 of the FTC Act, which authorizes the Commission to prevent the use of the unfair methods of competition or unfair or deceptive practices in or affecting commerce, also permits it to issue complaints to the parties engaging in the allegedly violative conduct, and to adjudicate those complaints: CRS-28 Whenever the Commission shall have reason to believe that any ... person, partnership, or corporation [under its jurisdic- tion] has been or is using any unfair method of competition or unfair or deceptive act or practice in or affecting commerce, and if it shall appear to the Commission that a proceeding by it in respect thereto would be to the interest of the public, it shall issue and serve upon such person ... a complaint stating the charges in that respect and containing a notice of a hear- ing .... The person ... so complained of shall have the right to appear at the place and time so fixed and show cause why an order should not be entered by the Commission requiring such person ... to cease and desist from the violation of the law so charged in the complaint. Any person ... may make an applica- tion, and upon good cause shown, may be allowed by the Commission to intervene and appear in such proceeding by counsel or in person. 44/ Adjudication within the Commission is before an Administrative Law Judge, who issues findings and recommends a decision. The full Commission reviews that recommendation, and may either dismiss the complaint or issue a cease and desist order. In other words, only decisions of the full Commission are con- sidered "final" and subject to review. When the Commission settles a matter (either prior to or during litigation) by means of a consent order, as opposed to the issuance of a cease and desist order, the consent order is deemed to be substantially similar to a consent decree issued by a court, and subject to very limited or narrow judicial 45/ review. 44/ 15 U.S.C. § 45(b). The Commission's decision to issue a complaint upon a "reason to believe" determination is not subject to review. Federal Trade Commission v. Standard Oil Co. of California, 449 U.S1__(l98O), 49 U.S.L.W. 4054. 45/ Martin Marietta Corp. v. Federal Trade Commission, 376 F.2d 430, 434 (7th Cir. 1967), cert. dén., 38 . . : y its consent to the order ... the petitioner waived its objections to the terms of the order. The petitioner may not challenge the Commission's refusal to modify the terms." CRS-29 Judicial In 1966, the Supreme Court noted that although "[t]here is no explicit statutory authority [for] the Commission to appear in judicial review pro- ceedings ... no one has ever contended it cannot appear in the courts or appeals to defend its orders."&§/Perhaps not, but the 93rd Congress, in the Magnuson-Moss Act, emphasized the Commission's ability to appear in certain judicial review proceedings by specifically authorizing it to appear "in its own name by any of its attorneys designated by it" for the purpose of ob- taining "judicial review of a rule prescribed4;y [it], or a cease and desist order issued under section 5 of" the FTC Act:_- The FTC was also authorized, in 1974, to represent itself in actions to enjoin the commission of acts or practices alleged to violate any provision of law it enforces, to obtain consumer redress for violation of any Trade Regulation Rule it promulgates or any final cease and desist order concerning an unfair or deceptive practice under Section 5, to enforce its subpoenas for the production of testimonial or documentary evidence, and to secure compliance with its mandate to investi- gate and report on certain violations of the antitrust laws. Thus, not only did Congress re-affirm, in 1974, its actions of the previous year, in which it extended the Commission some authority to seek preliminary injunctive relief 48/ and authorized it to enforce its subpoenas, it expanded those adjudicatory 46/ Federal Trade Commission v. Dean Foods, 384 U.S. 597, 607 (1966). 31/ 15 u.s.c. § 56(a)(2)(C). 48/ In P.L. 93-153, Congress amended 15 U.S.C. § 53 to allow the FTC to seek preliminary injunctive relief and to grant it subpoena power. Section 408(a) of P.L. 93-153 stated that "Congress hereby finds that the investi- gative and law enforcement responsibilities of the Federal Trade Commission have been restricted and hampered because of inadequate legal authority to enforce subpoenas and to seek preliminary injunctive relief to avoid unfair competitive practices." The Commission's exercise of its authorities, (continued) CRS-30 powers, and granted additional ones. In addition to the exclusive representa- tion authority enumerated above, the Commission may, with the concurrence of the Attorney General, or after the Attorney General has failed to act within 45 days of being notified of the Commission's intentions, commence, defend or intervene in any civil action involving the Federal Trade Commission Act; the Commission may also appear in the Supreme Court with the Attorney General's concurrence, or after his failure to act within 60 days. The Commission's exclusive authority to represent itself in certain judicial proceedings stands in obvious contrast to the judicial subserviance of other Government agencies and departments to the Department of Justice pursuant to 28 U.S.C. § 516, which provides that the conduct of litigation in which the United States, an agency or officer thereof is a party, or is interested ... is reserved to officers of the Department of Justice, under the direction of the Attorney General. In those instances in which final Commission orders are to be enforced through the imposition and collection of penalties, such enforcement is still directed to take place "in a civil action brought by the Attorney General of the United 49/ States. (continued) however, was somewhat restricted by the requirement that it not take court action until it notified the Attorney General of its intentions and gave him 10 days in which to "take the action proposed by the Commission." P.L. 93-153, Section 408(d). 49/ 15 U.S.C. § 45(1). United States v. Beatrice Foods Co., 493 F 2d 1259 (8th Cir. 1974), cert. gg§,, 420 U.S. 96I (1975), stated explicitly that the Commission is not required to give any notice of either a respondent's violation of an order or of the FTC's intent to file suit under the provision. CRS-31 Rulemaking The promulgation of industry-wide Trade Regulation Rules that have the force of law (and violations of which can, therefore, be prosecuted) has become a major source of dissatisfaction with the Federal Trade Commission, although as much of the foregoing material has indicated, the rulemaking capability of an administrative trade commission was a major reason for the creation of the FTC. Even before the Commission received specific Congressional sanction for its rulemaking function, in section 202 of the "Magnuson-Moss Warranty--Federal Trade Commission Improvement Act," there had been judicial approval of the Commission's promulgation, in 1970, of a Trade Re8U13t1°n Rule declaring that failure to post octane numbers on gasoline PUMPS at Service 3t3t1°nS Would be an unfair method of competition and a deceptive practice, constituting a violation of 15 U.S.C. § 45. In National Petroleum Refiners Association v. Federal Trade Commission, the United States District Court for the District of Columbia had ruled that the FTC's authority under Section 6(g) of the FTC Act (15 U.S.C. § 46(g)) was limitedsgo the issuance of internal rules of organization, practice and procedure,—— but the United States Court of Appeals for the District of Columbia reversed the lower court and upheld the Commission's authority to issue "substantive" Trade Regulation Rules defining "rules of business conduct" in order "to give greater specificity and 51/ clarity to the broad [unfairness] standard" of Section 5 of the FTC Act, and 52/ the Supreme Court refused to hear an appeal from the Court of Appeals decision;—_ leaving the appeals court decision to stand. §9/ 340 F. Supp. 1343 (1972). g1] 482 F. 2d 672, 673 (1973). §g/ 415 U.S. 951 (1974). CRS-32 When Congress gave its statutory endorsement to the judicial finding of FTC rulemaking authority in Magnuson-Moss, it added Section 18a (15 U.S.C. § 57a) to the FTC Act, and created a hybrid administrative-judicial rulemaking procedure. In pertinent part, Section 18a reads: Unfair or deceptive acts or practices rulemak- ing proceedings (a) Authority of Commission to prescribe rules and _ general statements of policy " (1) The Commission may prescribe- (A) interpretive rules and general state- ments of policy with respect to unfair or de- ceptive acts or practices in or affecting com- merce (within the meaning of section 45(a)(1) of this title), and (B) rules which define with specificity acts or practices which are unfair or deceptive acts or practices in or affecting commerce (within the meaning of section 45(a)(1) of this title). Rules under this subparagraph may include requirements prescribed for the purpose of preventing such acts or practices. In contrast to the informal rulemaking procedures the Commission was re- quired to follow, pursuant to the Administrative Procedure Act (specifically, 5 U.S.C. § 553), in order to promulgate Trade Regulation Rules under section 6(g) of the FTC Act, the procedures mandated by the statutory rulemaking authority of Magnuson-Moss require that the FTC "proceed in accordance with section 553 ... and shall also (1) publish a notice of proposed rulemaking stating with particularity the reason for the proposed rule ...," (2) a11ow for public comment on the proposed rule, (3) hold an informal hearing at which interested persons may present their positions on the proposed rule, and at which, if the Commission determines that there are "disputed issues of material fact," interested persons are to be afforded the right of cross-examination, and (4) publish a final rule with a statement of its basis and purposes 22/ ‘§§/ The Commission did not support the enactment, fearing that the mandated procedures would impinge on its ability to "maintain th e flexibility (continued) CRS-33 As noted in the section that discusses the Commission's authority to rePr€S€nt itself in judicial proceedings, the FTC has been given the authority 9 iSti .. . n ec on 18b of the FTC Act (45 U.S.C. § 57b), to bring c1v11 actlons for violations of its Trade Regulation Rules: §57b. Civil actions for violations of rules and cease and desist orders respecting unfair or deceptive acts or practices (a) Suits by Commission against persons, partner- ships, or corporations; jurisdiction; relief for dis- honest or fraudulent acts (1) If any person, partnership. or corporation violates any rule under this subchapter respect- ing unfair or deceptive acts or practices (other than an interpretive rule, or a rule violation of which the Commission has provided is not an unfair or deceptive act or practice in violation of section 45(a) of this title), then the Commis- sion may commence a civil action against-such person. partnership, or corporation for relief under subsection (b) of this section in a United States district court or in any court of compe- tent jurisdiction of a State. (2) If any person, partnership, or corporation engages in any unfair or deceptive act or prac- tice (within the meaning of section 45(a)(1) of this title) with respect to which the Commis- sion has issued a final cease and desist order which is applicable to such person, partnership, or corporation, then the Commission may com- mence a civil action against such person, part- nership, or corporation in a United States dis- trict court or in any court of competent juris- diction of a State. If the Commission satisfies the court that the act or practice to which the cease and desist order relates is one which a reasonable man would have known under the circumstances was dishonest or fraudulent, the court may grant relief under subsection (b) of this section. R ecently, the FTC has begun to indicate that it is fully aware of the lt .. _ 3 est (P0St Magnuson Moss) signals being sent by Congress. In addition to 54/ th 1 - - ——- e 980 Act's prohibitions or cautions concerning certain rulemakings, n ' H " . we re 80138 easy Or we're backing off’ signals are emerging from the (continued) neces t d f ' - presented in rulemzfiizg grg::gg?ngs?%rl{e:Bgredgsgdtigtilyzgo E3;4rE:l§§ieS 3 e Chairman of the Ho C ' in H. Rept. 93_l1O§se ommittee on Interstate and Foreign Commerce, included 54/ The provisions of the "Feder 1 Tr d m—— Commission Im 1980 that pertain to rulemakin a a e provements Act Of g are set out, supra, at pages 17 and 18 CRS-34 Comission itself. Recently, for example, FTC staff has recommended that controversial proceedings surrounding attempts to limit television advertising directed at children be dropped.§2/And the Commission has voted, unanimously, to end its attempts to promulgate a Trade Regulation Rule concerning physician participation in the operation of Blue Shield health insurance plans.2é/Other Trade Regulation Rules directed at practices in the business community concern- ing, e.g., used cars, hearing aids, funerals, eyeglasses, and home insulation, are scheduled to continue, albeit frequently in a somewhat different form than orginally proposed. Collection of Information The FTC presently directs at least two information-gathering programs designed to collect economic information from businesses. The Line of Business program, especially, has been the subject of much litigation challenging the Commission's authority to require the submission of income and profit data on a detailed product-line basis. Prior to 1975, and the passage of P.L. 93-153, the FTC, as did all independent regulatory agencies, had to secure the approval of the Office of Managgment and Budget before it could request economic data from 10 or more firms:-‘ The 1975 provisions concerning the collection of economic information by independent regulatory agencies provided that while the Comptroller General was to administer the information-gathering activities of the agencies, "the independent regulatory agency shall make the final determination 55/ "Staff Urges FTC to End Children's TV Ad Probe," The Washington Post, ApriI_§, 1981, p. E3; FTC News Summary 27-81, April 10, 1981. égj "FTC Drops Plan to Bar Doctors from Key Roles in Blue Shield," Washington Star, April 24, 1981, p. B-5; "FTC Opts for Case-by-Case Enforcement Over Rule to Cover Health Insurance Plans," 1012 ATRR A-3 (4-30-81). E1] Cf. 44 U.S.C. § 3509, the applicable section of the Federal Reports Act. CRS-35 as to the necessity of the information in carrying out its statutory responsi- 58/ '—_ The currently applicable bilities and whether to collect such information.’ provisions, 44 U.S.C. §§ 3507, 3508, however, give increased visibility to the decisions of the Director of OMB concerning an agency's information-collection activities. The Director is to make public his decisions, although an indepen- dent regulatory agency may override any disapproval by a majority vote of its 33/ members. When the Line of Business program was challenged on the ground that compliance with it constituted undue inconvenience, the courts found that argument unpersuasive, and refused to enjoin the Commission from seeking the information.§9/ The validity of the Commission's other, far-reaching data collection program, the Corporate Patterns Report program, was upheld in the same litigation. Section 4 of the "Federal Trade Commission Improvements Act of 1980" requires that all information submitted pursuant to the requirements gf/the Line of Business program be treated confidentially by the Commission;-_- Section 3 of the Act requires that the FTC "establish a plan designed to substantially reduce burdens imposed upon small businesses as a result of requirements established by the Commission ... relating to the filing of quarterly financial reports." §§/ Section 409(d) of P.L. 93-153. 22] Cf. P.L. 96-511, "Paperwork Reduction Act of 1980." 60/ A. O. Smith Corp. v. Federal Trade Commission, 530 F. 2d 515 (3rd Cir. l976)?_Deering Milliken, Inc. v. Federal Trade Commission, 595 F. 2d 685 (D.C. Cir. 1978), cert. den. 439 U.S. 958 (1978). Q1] Cf. note 30, and accompanying text, supra. CRS-36 In the 96th Congress, H.R. 5543 would have prohibited the Commission from requiring the production of information by deleting that authority from Section 46(a) of the FTC Act and deleting Section 46(b), which presently requires persons subject to regulation by the FTC to file information requested by the agency. Other Functions The Commission will, under certain circumstances specified in its own Commission Rules, issue Advisory Opinions for the purpose of indicating its views "with respect to a course of action which the requesting party proposes to pursue." To the extent possible, the FTC will, in an Advisory Opinion, also indicate its likely course of enforcement action. Generally, the Commis- sion will not issue an Advisory Opinion with respect to conduct or a course or action undertaken prior to the request. The statute which confirms the Commission's authority to issue Trade Regu- lation Rules which have the force of law also authorizes the Commission to prescribe "interpretative rules and general statements of policy with respect to unfair or deceptive acts or practices," but states that such interpretative 62 rules shall not be the basis for an FTC enforcment actionf__ The interpreta- tive rules, or guides, were formerly released by the FTC as Industry Trade Practice Conference Rules. 93/ Cf. 15 u.s.c. §§ 57a(a)(1) and (2), S7b(a)(l). CRS-37 CONCLUSION The Federal Trade Commission is a relatively small Federal agency, but its activities during the past several years have engendered controversies whose intensities belie both the agency's size and the attention paid to it over the years by Congress and the public. On the one hand, consumers and industry are frequently directly affected by FTC actions/activities. On the other, Congress, which was aware of some potential problems when it created the agency, has been particularly sensitive to criticisms of the Commission. The result has been a history characterized by periods of enthusiasm for the FTC and its potential role, interspersed with bursts of varying degrees of dissatisfaction with the Commission. Congressional disapproval of some of the Commission's actions, expressed to some extent in the "Federal Trade Commission Improvement Act of 1980," is indicative of the current "down" period in FTC history. It remains to be seen whether it will be followed by an era in which the Federal Trade Commission is again considered an essential participant in commercial affairs, or one in which the Federal Trade Commission -- mindful of the present concern with the cost of regulatory agency actions to the business community and to consumers, as well as continuing Congressional concern with its course -- enists only as a bystander. CRS-38 APPENDIX A FEDERAL TRADE COMMISSION COMMISSIONER COMMISSIONER cNAumAN COMMISSIONER coMMtsstoN£n I I OFFICE or I 1 Puouc INFORMATION EXECUTIVE DIRECTOR OFFICE OF ADMINIS- OFFICE OF OFFICE OF OFFICE OF mmv; uw yoczs GEMRAL COUNSEL me secamav POLICY PLANNING 0 local Counsel 0 intomiation O Logislotion and 0 Records Congressional Liaison 0 Services 0 Litigation and Environmental Policy 0 Iluicmoking oerurv EXECUYIVE DIRECTOR BUREAU or COMPETITION Bum" 0‘ ECONOMICS consumes PROTECTION WW” °' 0 Administrative services a compliance ; : 0 Advertising Practices 0 Consumer Protection 0 M9" and Finance 0 Evaluation . , a compamce. 0 Economic Evidence 0 Information Systems 0 | . 0 Credit Practices 0 Financial Statistics 0 Uhrorv a Planning 3 .0 Enfrov ondk:°¢K=' o IndustryAnaIysis 0 Personnel : '. F°o':°‘md"'°D'w' ‘ ' : O Mmfius : t a Product R ' " . I 0 Professional Services | I n i‘ I O Atianta 0 Chicago 0 Dallas 0 Las Angola: 0 San Francisco 0 Boston 0 Clavoiand 0 Denver 0 Now York U 500'"! CRS-39 APPENDIX B Some Statutes Enforced or Administered by the Federal Trade Commission The Commission has responsibility, under the following statutes for enforcement or administrative activities: ' The Federal Trade Commission Act (38 Stat. 717 ,as amended; . 15 U.S.C. 41-58).—Under this act, the Commission is charged with (a) the prevention of unfair metliods _9f_ competition in commerce and . unfair or deceptive acts or practices in commerce; (b) the_conduct of investigations relating to (1) alleged violations of the Antitrust Acts, ( 2) the manner in which decrees in Antitrust suits brought by the United States have been carried out, and (3) the organization, busi- ncss. conduct, practices and management of corporations engaged in commerce (with certain statutorycxemptioiis) and their relation to other enterprises; (c) the making of reports and recommendations to the Congress with respect to legislation; and (d) prescribing (1) interpretative rules and general statements of policy with respect to unfair or deceptive acts or practices; and (2) trade regulation ru_les defining with specificity acts or practices which are unfair or deceptive including requirements for the purpose of preventing such acts or practices. . . Ola?/ton Act ( 38 Stat. 730, as amended; 15 U.S.C. 12-_27).— Under section 3. 7 and 8 of this act. the Commission is charged with the duty of preventing and eliminating unlawful tying contracts, cor- porate mergers and acquisitions and interlocking directorates. Under the Clayton Act. as amended by the Robinson—Patinan Act, the Com- mission is charged with the prevention of certain specified practices, that is. unlawful price and related discriminations. - lilgport Trade Act (Webb-Pomerene Act) (40 Stat. 516, ‘ as amended; 15 U.S.C. 61-65). - The Commission is respon- sible for receiving and filing articles of association or incorporation of "associations" organized under the Export Trade Act; investigating their operations which may adversely affect competition within the United States; making recommendations to the associations for readjustments deemed necessary therein; and where considered appropriate, making recommendations to the- Attorney General for penal action. Ammm’ment to Packers and Stock;/ards Act (42 Stat. 159, as , amended; 7 U.S.C. 181-229).-—The provisions of this amendment ex- tend the (‘ommission’s. jurisdiction to cover certain matters previ- ously subject to the exclusive jurisdiction of the Secretary of Agricul- ture. ‘ . The amendment, in effect, grants the Commission jurisdiction over the activities of packers not related to livestock. meats, meat products, and the like. The Commission is granted additional power and juris- diction over all transactions in commerce in margarine and oleo- margine and over retail sales of meat and related Drodllcts. Other matters involving meat and related products are made subject to the Commission’s jurisdiction where the Secretary requests the Com- mission to investigate and report or where, under certain circum- stances. action .hv the Commission is necessarv to exercise effectively its power or jurisdiction with respect to retail sales of meat and re- lated products. CRS-40 Wool Products Labeling Act (54 Stat. 1128, as amended; 15 U.S.C. 68-68j).—Uii(ler this statute the manufacture for introduction into commerce, or the introduction, sale, transportation or distribii- tion, in commerce. or the importation into the United States of mis- branded wool products. is uiilaivful, and constitutes an unfair inetlmd of competition and an unfair and deceptive act and practice under the Federal Trade Commission Act. The Commission is autlioi-ized to make inspections, analyses, tests and examinations of all wool products sub- ject to the act and to make such rules and regulations as may be nec- essary and proper for the administration andenforcement of the act. In addition, the Commission is also empowered under the statute to prevent the movement of misbranded wool products in commerce by injunction and to proceed by libel action in certain cases for condemna- tion of such products. 1 Lanham Trade-mark Act (60 Stat. 427, as amended; 15 U.S.C. 1051-1127).——-Under this statute it is the duty of the Commission to make applications for the cancellation of_registered trad_e-marks under certain specified conditions. The Commission, as applicant, must se- cure the proper evidence on Wlllch. the application for cancellation is ~ based, prepare the application, stating the groundsrelied upon. be 1'61)- reseiited at the hearing before a Patent Office examiner for‘ the purpose of presenting such evidence and otherwise prosecute the matter to 0» conclusion. / For Products Labeling Act (65 Stat. 17 5. as amended: 15 U .S.C , 69—69j).—Tlie Commission is charged with_tlie administration and enforcement of this consumer legislation which requires the labeling of fur articles of wearing apparel, as well as truthful invoicing and advertising of furs and fur products to'shoyv. among other things, the true English name of the animal from Wl11.cl1.il1(‘.. fur was taken and whether the fur is dyed or used. The Commission is also charged with issuing a Fur Product Name Guide and is authorized _and_direct.ed to cause compliance inspections, analyses, tests and examinations to be made of furs and fur products subject to the act and _t0 DI‘9SCI‘1l3G {"195 and regulations governing the manner and form of d1s_cl0S1T12"1'€fll111“’d information under the act. In addition to administrative enforcement, injunctive and condemnation proceediTl2‘S_ are film Pmvlded f2’- 7'e;y_-H7!’ Fiber P7-mfucts fdentififazitzom Am‘. ( T2'.Qi.‘1l’.: 1,317. as amended :15 U.S.C. 70—70k.—This additional “tr_uth-in—f:1hr1cS leew- lation takes iin where the Wool. Products Labeling Act leaves off. It became. effective March 3. 1960. and'cove‘r,s the broad fieldof manda- torv eontient disclosiire in labeling, invmcme find arlvertisinrz of tex- tile fiber products. Under its terms.‘mishra.iidino' as well as false and deceptive invoicing and advertising of textile fiber Pr°d‘l°lS .19 unlawful. Tlie'Comniission is authorized, under the act, to make inspections, analyses, tests. and examinations of all textile fiber products subject to the statute, and further, to make such rules and regulations as may be necessary and proper for administration and enforcement of the act. In addition, the Commission is directed to establish generic names for those niaii—made fibers which have not as yet attained one. Its enforcement is to be carried out tlirougli admiiiistrative pro- cedures provided for_under the Federal. Trade Comniissioii Act, to- gether with injunction and criminal proceedings in the U.S. District ourts. 93/ Section 18 of the "Federal Trade Commission Improvements Act of 1980" prohibits, for fiscal years 1980, 1981 and 1982, the use of Commission funds for purposes of petitioning, under the Lanham Act, to have any trademark cancelled "on the ground that such mark has become the common descriptive name of an article or substance." CRS-41 Federal Cfiigarettc LaI2e,Zing ancl-Ad£vcrt2i.'sz'7ig Atctidf 1.966 (79 Stat. 282, as amended; 15 U.S.C. 131-39).—-This act became effective on January 1, 1966, and was amended by the Public Health Cigarette Smoking Act of 1969, which took eifect on January 1, 1970. Both acts required the Comm1ss1_on to submit annual reports to the Congress con- cerning (a) the eflect1v_eness of cigarette labeling, (b) current prac- tices and methods of cigarette advertising and promotion, and (C) recommendations for legislation. ‘ ' The 1969 act provided that 7 months after enactment -cigarette packages manufactured, imported or packaged, must bear the state- ment “\Varning: The Surgeon General I-Ias Determined that Clgarette Smoking is Dangerous to Your Health.” - '_ , F air Pac/caging and Labeling Act (80 Stat. 1296; 15 U._S.C. 145,1—61).—-This Act requires the Commission to issue regulations having the force of laW_ respecting net contents disclosures, identity of commodity, and name and place of business of manufacturer, packer or distributor; and the act authorizes additional _regulations when necessary toprevent consumer deception or facilitate val_ue compari- sons in respect to declaration of ingredients, slack fill of packages, use of “cents-off” or lower price labeling, and characterizationof package sizes. The act became_efi’ective July 1, 1967, and gives the Commission responsibility for consumer commodities other than food, drugs, thera- peutic devices, and cosmetics. Violations of regulations issued under the Act will-be treated as violationslof section’ 5 of the Federal Trade ComInissio'n,_Act. ‘_ , ,. .’ . i ..' ,; y, A, . . . Truth in L'ei2,dz'ng 'Act'.( 82 St.'a.t-'5, 146, ‘as ‘amended; 15.‘U.S.C. § 1601 ct ,seq.).——This ,act,.‘(title I of the ‘Consumer Credit.Protection. Act.) delegates to the Commission,'efl'ective July 1, 1969, enforcement responsibility as to business generally,for ‘compliance with this new consumer credit disclosure statute. The act requires all consumer credi- tors to ‘make detailed.written disclosures concerning.al_l charges and related ‘aspects .of theltransaction, including disclosure of. finance charges expressed as ‘a’ simple annual. percentage rate, before con- sumat_ion of the saleor. loan. and before the account is opened and on every periodic statement in the.case of open-end or revolving creditors. The act also contains specified requirements for any -advertisement containing a credit representation, and it includes a 3 day right of. rescission in. any transaction involving a security i-nterest~(except first mortgage) in the consumer’s residence.» g . _ . ' . _ The Truth in Lending Ac-t was amended on October 26, 51970. to. prohibit the issuance of unsolicited credit cards. .Thc act was further amended by the Fair Credit Billing Act which, effective October 28, 1975, provides for prompt written acknowledgements of consumer bill- ing com laints and reinvestigation of billing errors by creditors send-. ing periodic billing statements. The amendment prohibits such creditors from taking action which adversely affects the consumer’s credit standing until the reinvestigation is made, prohibits creditors from reporting to third part.ies that disputed amounts are past due until the reinvestigation has been completed and requires that reports to third parties indicate that the amount is disputed when that is the case. The Fair Credit Billing Act further requires the creditors to mail periodic statements at least 14 days before the due date, to promptly post. payments to the debtor’s account, and refund overpayments or credit. them to the debtors account. Finally, the act requires sellers to promptly notify credit card issuers of the return of goods or services purchased on such accounts and limits the application of the holder- in-due-course doctrine in credit card transactions. The Truth in Lend- ing Act provides that a violation of the act or any implementing regu- lation shall be deemed a violation of the Federal Trade Commission Act. irrespective of Whether the violator is engaged in commerce or ipoets any other jurisdictional test in the Federal‘ Trade Commission 1 Cl. CRS-42 Fair Credit [z’cportin_q Act (84 Stat. 1128; 15 U.S.C. §lGR1 ct seq.).-——The Fair Credit Reporting Act. effective April 25. 1971, represents the first Federal regulation of the consumer reporting in- «lustry. ‘Its basic purpose is to insure that consumer reporti..g companies such as credit bureaus exercise their responsibilities in pro- viding information to credit. grantors. insurers, employers and others in a manner that is fair and equitable to the consumer, with regard to r-onfi(lentialit_v, accuracy. and the proper use of such information. l':