Federal Trade Commission Chairman Jon Leibowitz wants the Congress to expand the commission's power to combat "unfair and deceptive" trade practices.
In a letter this week to members of the House Energy & Commerce Committee, Leibowitz urged it to support the "expanded authority" given to the agency under the Consumer Financial Protection Act (H.R.3126), which the committee is marking up Thursday.
That act is a byproduct of the economic meltdown and the desire by the Obama administration to crack down on false and deceptive practices in the financial services sector.
The bill would give the FTC more streamlined rulemaking authority; establish aiding and abetting liability for unfair or deceptive practices; and give it civil penalty authority. Advertisers are concerned that could be used as a wide net for an activist agency to cast over its ad practices.
The aiding and abetting provision would extend that authority to all conduct, not just over telemarketing fraud, as is now the case according to Leibowitz. "The proposed amendment recognizes that effective law enforcement reaches not only direct participants engaged in unfair or deceptive practices, but also those who support or enable
them," Leibowtiz said in he letter.
Currently the bill does not give the FTC independent litigating authority over civil penalty actions--currently it has to notify Justice, which has 45 days to decide whether to bring a case on behalf of the FTC.
"In many cases, this means that the FTC must make a difficult choice: file a case quickly to stop ongoing harm but give up the possibility of civil penalties; or seek civil penalties but wait weeks for the DOJ to ramp up a case, allowing the misconduct to continue and more consumers to be harmed."
Also backing the changes, including adding the provision on civil litigating authority, are a host of consumer and public interest groups including the Center for Digital Democracy, Consumer Union, Free Press, Public Knowledge, and the COnsumer Federation of America, which see the changes as a way to proactively address such issues as online marketing, and food advertising to kids (Earlier this week, food and beverage companies issued a report on their self-regulatory efforts on food advertising and labeling, citing their compliance with limits on what kinds of foods can be marketed to whom.)
In a letter Wednesday to the committee chair and ranking member, the groups said: "Providing the FTC with the same APA rulemaking authority enjoyed by other federal agencies, it will enable the commission to engage in consumer protection activities in a timely manner."
The advertising industry has been fighting the expanded authority, saying the changes are actually removing "procedural safeguards" against an activist agency that could go after the media and ad agencies under the aiding and abetting provision and initiate rulemakings on issues like kids advertising, green marketing and online behavioral advertising, all without Congress having fully vetted the implications of the changes.
"These changes do not merely tinker at the margins of the Commission’s authority," Association of National Advertisers Executive VP Dan Jaffe wrote in his own letter to the committee this week. "Instead, they substantially impact critical aspects of the FTC’s functions and responsibilities. Nevertheless, there has been no systematic examination of the implications of these changes or an opportunity for thorough examination by the numerous constituencies directly affected by these proposals."
The bill was approved by voice vote Oct. 22 in the House Financial Service Committee.