The Federal Trade Commission yesterday endorsed legislation which would allow consumers to band together in lawsuits to obtain refunds or other damages from companies that violate commission orders and rules.
Although the agency has been given the authority to collect money for consumers under the Magnuson-Moss Act - it has not used the authority yet - FTC chairman Michael Pertschuk told the Senate Commerce Consumers Subcommittee yesterday "there is no way" the commission will be able to file an action against everyone who violates the agency's rules and orders.
"Private suits could permit the commission to focus its resources on other problem areas where individual injury does not provide an adequate incentive to seek relief," he said.
The commission also urged that Congress give it clear authority to challenge "unfair and deceptive practices" of nonprofit organizations, such as schools, hospitals and charities.
Although the commission has challenged some activities of nonprofit corporations in the past, recent court interpretations have now made it more difficult for the agency to reach anticompetitive or deceptive practices of any nonprofit corporations, charitable or not, Pertschuk said.
He noted that an FTC complaint against a hospital association and a "community" blood bank, charged with trying to hamper the operations of commercial blood banks, had been thrown out by the courts on the grounds that the FTC lacked jurisdiction over nonprofit groups organized for charitable purposes.
"The result has naturally been to discourage [these] commission activities . . . even though it is increasinly clear that even 'charitable' organizations have been responsible for very substantial fraud and other conduct that violates the FTC Act," he said.
"Where anticompetitive or deceptive behavior is involved, there is no convincing reason to draw a strict distinction based on whether the particular organization is organized for the economic benefit of its members or for charitable purposes, the harm to the public is the same . . ."