The U.S. Congress is considering changes to the jurisdictional mandate of the Federal Trade Commission, including in its ability to regulate advertising. These changes would transform a regulatory structure that has been in place 1970's, and has received very little scrutiny through the process of congressional hearings and debate.
H.R. 3126, the Consumer Financial Protection Agency Act, will create a new agency with jurisdiction over many financial services. The jurisdiction will extend to the advertising of products that currently reside with the FTC. While the FTC will seemingly lose some authority, its powers will be greatly expanded over those areas where jurisdiction remains. The legislation will remove many of the protections previously enacted by Congress to protect industry from the Federal Trade Commission over-stepping its boundaries. The bill is waiting to be considered by the full House of Representatives. Similar changes have been proposed and are likely to be considered in the Senate.
Over 30 years ago, the Congress enacted procedural safeguards for rulemaking and enforcement procedures undertaken by the Federal Trade Commission. The FTC safeguards requirements include:
- Giving the Justice Department 45 days notice before proceeding with an enforcement action or forego the imposition of fines for injunctive remedies.
- Finding if a type of consumer deception is prevalent and not just limited to one instance before proceeding with a rulemaking to address the deceptive activity.
- Requiring that a rule be supported by substantial evidence on the record as a whole and not just reviewable by a court on a determination that the agency was arbitrary or capricious.
- Requiring that the FTC must permit cross-examination of witnesses with any disputed issue regarding a material fact in a rulemaking
- Requiring that a statement as to the economic impact of a proposed rule be included in the record.
- The FTC may consider established public policies as evidence when deciding what act or practice may be unfair to consumers, but the policy consideration cannot be the primary basis for the finding of unfairness.
Collectively, these requirements are known as Magnusson-Moss rulemaking procedures after the then chairmen of the House and Senate Commerce Committees, Senator Warren Magnusson, D-Wash. and Representative John Moss, D-Calif. Magnusson and Moss were considered strong proponents of consumer protection.
Proponents of the changes argue that the FTC should be able to undertake rulemakings under more streamlined procedures enjoyed by most other federal agencies. However, other agencies have a narrow jurisdictional mandate (for example, financial markets for the Securities and Exchange Commission, food and pharmaceuticals for the Food and Drug Administration) and therefore an inherent expertise in the subject matter.
The American Advertising Federation to warn lawmakers as to the implications of changing a regulatory structure that has worked for many years on behalf of both consumers and businesses.
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