Federal Trade Commission Chairman Michael Pertschuk withdrew yesterday from participation in the agency's controversial investigation of television advertising directed at children.

Calling the decision "perhaps the most difficult" he would make while on the FTC, Pertschuk said his involvement in the case was diverting attention from the merits of the inquiry.

On Dec. 28, a U.S. Court of Appeals ruled that Pertschuk could take part in the case, overturning a lower court ruling which ordered Pertschuk to remove himself from the probe in light of criticism he had made of children's television advertising.

But Pertschuk said that his withdrawal from the case after the appeals court upheld the FTC position could focus congressional attention on the inquiry, rather than on his statements.

"But my own prior statements, however appropriate the court had judged them, have given those urging Congress to terminate the rulemaking a diversionary issue, Pertschuk said.

"I am concerned that continuing controversy regarding may participation could become a focus of the debate instead of the far more important issue -- whether the proceeding itself should be allowed to continue," he continued.

When the Senate takes up an FTC funding bill next month, a proposal will be considered to sharply curtail the commission's powers in the inquiry.

In fact, the Senate Commerce Committee already has sent to the Senate an amendment to the funding bill that effectively would terminate the commission's rulemaking proceeding.

But both advocates of the investigation and its critics in industries said Pertschuk's withdrawal was a sound decision.

"I'm sorry that the rulemaking will not have the benefits of Mr. Pertschuk's thoughts," said Peggy Charren, head of Action for Children's Television, a consumer group that long has been critical of television advertising directed at the children's market.

"The fact is that there will be no more debate about a biased commission. If Congress continues to try to kill the investigation, it is clear that it is responding to pressure from broadcasting and sugar interest," Charren said. i

Harry Snyder, director of the West Coast office of Consumers Union which also has supported the FTC effort, said that as a practical matter, Pertschuk made the right decision.

"I respect Pertschuk very much and it was probably necessary," Snyder said. "The impact is going to be that the commission addresses an issue of major commission addresses an issue of major political importance without its most important member."

But Snyder also said that Pertschuk's withdrawal from the case represents the results of a "shameful overreaching of industry. It's shocking that Congress has been listening" to the industry.

Leonard Matthews, president of the American Association of Advertising Agencies, said the industry groups fighting Pertschuk's participation in the case would reasses their earlier view that they would take the recent appeals court decision to the Supreme Court.

Matthews, however, said he was "delighted to see Pertschuk take himself out of the case "because we thoroughly believe he has a prejudiced view."

Samuel Thurm, senior vice president of the Association of National Advertisers, said the Pertschuk move won't affect either the case against Pertschuk's involvement or the proceeding itself. "It doesn't have any relationship to the case," he said.

Nevertheless Pertschuk's withdrawal means that only three FTC members will consider the results of the inquiry, assuming the congressional efforts to wipe out the investigation fail.

Another FTC member, Robert Pitofsky, has withdrawn from the case because he represented parties involved in the proceeding before joining the commission. Commissioners Paul Rand Dixon, a Democrat, and David Clanton and Patricia Bailey both Republicans, remain available for commission votes on the inquiry.

In his letter withdrawing from any FTC deliberations on the proceeding, Pertschuk emphasized that he considered the issue in the inquiry "extremely close and troublesome.

"I remained committed to an open-minded reviewer of the rulemaking record before casting my vote," he said. "When some of the participants in the rulemaking sought my disqualification, I declined because I knew I could and would decide the issues involved fairly and objectively based on the record."

Pertschuk said the appeals court decision clarified the law and avoided the "danger of chilling discussion in agency rulemaking proceedings."

But Pertschuk also used his withdrawal statement as an opportunity to criticize congressional efforts to gut the children's advertising inquiry.