FTC Chair Not Gunning For Media

Calls journalism future ‘critical’; is against broadcaster tax
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Jon Leibowitz, chairman of the Federal Trade Commission, is hoping Congress will grant him new powers to combat unfair and deceptive practices. If those powers come, Leibowitz promises that the FTC will use the authority judiciously, adding that the commission would even consider exempting media companies from being targets of aiding and abetting authority—a prospect that has troubled advertisers.

And while he believes that the FTC’s inquiry into the future of journalism is critical, he does not favor taxing broadcasters or handing out antitrust exemptions.

In a discussion with B&C Washington Bureau Chief John Eggerton, Leibowitz covers these topics and more, including self-regulatory efforts on food marketing. An edited transcript follows.

You had a workshop on the future of journalism last week. Will that be your last one?

It’s probably the last one. We think this is a critically important initiative at the commission because news is changing so rapidly and it is so vital to democracy.

You said when you launched the workshops that the goal was to understand the issue better before recommending changes to current law. What have you learned?
We have learned it is a very complicated area, and that people from all parts of the political spectrum, from newspaper reporters to TV producers to bloggers, all seem very willing to contribute, because I think there is a bedrock agreement among every stakeholder we have talked to that the future of news is critically important.

Some people have had some pretty good ideas, and some have had ideas that are probably not such good ones. One other thing we have learned is that anything we write, even if it is a compendium of other people’s ideas or proposals that have come to us through our first two workshops, is very volatile and people will write about them because folks are passionate about this.

OK, let’s go through a few of the proposals in that compendium. Tell us whether or not you could support them. Antitrust exemptions?
I think the commission would have concerns about endorsing any sort of antitrust exemption. I certainly would. I am glad to see that that initial proponents of that idea have appeared to back off.

A tax on broadcast spectrum?
From my perspective, a really bad idea-a nonstarter.

What about a tax on advertising?

I think any approach involving taxes is a really bad idea. We are always willing to listen to folks, but I can’t imagine the commission supporting any policy that would involve taxing one or another industry to subsidize news. That’s a bad idea.

Once you have collected all this input, what do you plan to do with it?
We're going to sit down among the commissioners and staff and try to think through what we want to say in our report, which we hope to put out later in the year. It is more important that we get it right than that we get it out quickly.

How will that dovetail with the FCC. Are you talking to them?
We are talking. We have our initiative and they have theirs and both of them, hopefully, will shed light on the news industry and how it's changing, whether government has a role and if so what it might be.

We are aware of what each other is doing. I talk to [FCC Chairman] Julius [Genachowski] I would say every couple of weeks at least on a variety of issues. This is something we're both excited about.

How important is food marketing, and how is the industry doing on its self-regulatory efforts?

I think food advertising is a very important issue at this agency.  It is an important issue for American consumers. There is a real obesity crisis in America. We are very supportive of self-regulation. We have seen some meaningful steps by companies, though they certainly have more to do.

There are three areas where we are involved as an agency. One is that when we see unfair or deceptive advertising, we bring a case, and we brought a case last week [against Kellogg]. We have also been very involved in pushing for most robust self-regulatory efforts. Several years ago, under then Chairman Majoris, we subpoenaed 44 food marketing and fast food companies to find out how they were marketing to kids and how much they were spending.

We used that process to push the industry into stronger self-regulatory commitments. And now, following up on that, we are going back into the field shortly to see if they are honoring those commitments. I am hoping they are, and hoping they make some commitments beyond the ones that they made.

We will have the next report finished probably sometime next year.

The third area is working with the administration and Congress. And I think that the commission is very supportive of the Michelle Obama inter-agency initiative. It can be really helpful. She has the ability to put together various parts of government and stakeholders like food marketing companies and consumer groups and scientist and doctors who are about this in a way that no single agency can.

We are also working on a joint interagency report back to Congress because the Appropriations Committee asked us to take a look at this.

What expanded power s would the FTC get through the financial services bill and why do you ned them?
It would only give us a modest expansion of our authority in four areas.  One is expanded civil penalty authority, so that when we are going after people engaged in fraud, we can not only get disgorgement of profits, but we can fine them if a court agrees. There will be a real deterrent effect. And by the way, Caspar Weinberger supported this authority when he was chairman back in the early 1970's.

The second would be easier rulemaking. We are under a sort of medieval form of rulemaking called the Magnusson-Moss Act, and it can take eight to 10 years to make a rule. People who don't like the rule can call for time-outs, independent referees. Even when Congress put this sort of regulatory albatross around us in the mid-1970's, according to the people who were involved in this area, it didn't mean to put such breaks on our rulemaking authority. We believe that with some relief from the act, we can be a more effective agency. The third thing is aiding and abetting authority. So, if we want to go after a fraudulent payment processor who is helping someone rip off consumers, we can do it more easily.

Curiously, we have this authority for aiding and abetting in the telemarketing sales rule, but not outside of that, which is peculiar.

The fourth is independent litigating authority. Now, if there are violations of the Children's Online Privacy Protection Act or the Do-Not-Call list, and there is ongoing harm, we don't have that option. Either we go to court and stop the ongoing harm, or send it over to the Justice Department to have them bring the case for us because they have fining authority, and wait two months while people's privacy is still being undermined by the continuing violation.

We believe the expansions are pretty modest and they have bipartisan support at the commission. That authority is in the House version of the legislation, not the Senate. It is also supported by President Obama.

Some in the advertising community are still concerned aiding and abetting could be used to go after advertising.
They should not be worried about it. I have talked to the commissioners.  We have talked to the staff.  It is not what we intend to do. It is not where we want to go. We want to go after hardcore fraud.  

If [the ad industry] had a proposal to be exempted as media companies, newspapers, folks who are essentially conduits, we would really like to see that proposal.

Our notion here with aiding and abetting, we want to do things that [media companies] would be supportive of, that your readers would be supportive of.  If they are interested in some sort of thoughtful carve-out, we would be interested in looking at it -- and not just us, but more importantly, the members of the conference committee [which is reconciling the House and Senate versions of the bill].

If you got more streamlined rulemaking authority, what rule would you like to implement?
I think we would sit down as a commission and think through where the appropriate areas for a rulemaking would be. And I want to say: Not every problem can be solved by a rule for a law. You really want to let the marketplace try to solve problems itself.  Industries can move much faster when they recognize they need to change or improve their behavior than you can by doing any sort of rulemaking.

So, you do not have an itchy rulemaking trigger finger.
No.  If we are fortunate enough to get this rulemaking authority, we will take a deep breath. We don't have any rulemakings that we are planning already. We really only want to use this in appropriate circumstances, which will be few rather than many.

E-mail comments to jeggerton@nbmedia.com and follow him on Twitter: @eggerton

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