The ongoing congressional attack on the Federal Trade Commission has left agency officials fearful about how tough they can be in future cases.
These fears surfaced this week in a series of interviews and confidential memos circulated among FTC staff members as the commission prepared to vote today on new standards for the used-car industry.
Commission officials are wondering whether the disclosure rule -- designed to answer thousands of complaints by used-car buyers -- will be the first victim of the agency's new cautiousness.
Just a few days before the commission originally was to meet to consider the used-car rule on Wednesday FTC Commissioner Robert Pitofsky circulated a stinging memo warning against the regulation which has been before the public in several forms since 1976.
In his memo, Pitofsky raised legal and procedural concerns about the rule which essentially forces used-car sellers to inform the buyer whether facets of the car's condition are "Ok," "not OK" or "not inspected."
"Given the signals we've already received from the Courts of Appeals about the rulemaking process, I wonder whether they're going to support the commission in that kind of experimental regulation," Pitofsky wrote.
"We didn't know this was coming," said one FTC official about the memo. "And in light of what's been going on on the Hill we don't really know why either."
Although most observers believe there are enough votes to get the proposal through the five-member commission, sources also worry about how the outside world will read a 3-to-2 commission vote on the controversial trade regulation rule.
But others, who refused to be quoted by name, claim that the Pitofsky thrust, echoed by at least one other commission member, is the beginning of a major downshift in commission aggressiveness.
Some officials were particularly stung by the memo and its repercussions because the work on the used-car rule had been considered a model cited regularly as an example of careful well-reasoned FTC work.
Pitofsky defends his position as outlined in the memo, which staff members say they received four days before the rule was to be voted on, as being consistent with the concerns he raised on the rule at an FTC meeting last fall.
"There may be a tendency to attribute that kind of review to timidity as a result of the fight on the Hill," Pitofsky said. "But to bring a rule in order to prove that the commission has not gone underground is very unsound.
"As far as being a test of commission virility or willingness to bring tough cases and rules, that's just not fair," Pitofsky said.
FTC member Paul Dixon, in a May 12 memo, said the FTC's optional-in-spection proposal is the "only remedy likely to stop the deception pervading the used-car market."
The optional-inspection program would permit dealers to use any reasonable procedure for an inspection of the cars they sell as long as car parts marked as "OK" meet standards specified in the commission rule.
Pitofsky said in his memo that he doubts whether the voluntary pre-sale inspection mechanism will give consumers information that would reduce abuse in the industry. He also said that the more "unscrupulous sellers" will check off "don't know" and "continue their shady practices."
"Putting aside questions of the advisability of the proposed rule, we would lack in the Court of Appeals a record adequate to support this rule," Pitofsky wrote.
But other commission officials point out that the chief agency officials who handled the investigation was awarded for putting together an extensive record supporting the issuing of the rule.
Commission officials also point out that the rule fits in with their desire to use the marketplace as a regulating mechanism, since the disclosures which consumers traditionally have obtained orally now would be available in writing, therefore making the claims subject to court reiview.
"The record indicates that the principal problem in seeking redress against used-car dealers is establishing that a particular representation of mechanical condition was made, not in proving that a particular defect existed at the time of sale," FTC staff members wrote in response to the Pitofsky memo.