The Reagan administration has endorsed legislation to cut off funds for the Federal Trade Commission's antitrust case against the nation's three leading makers of ready-to-eat cereals: Kellogg Co., General Mills Inc. and General Foods Corp.
Following up on Reagan criticism of the case during the presidential campaign, the Office of Management and Budget has told Rep. Guy Vander Jagt (R-Mich.) that the administration supports an amendment in appropriations legislation which would cut off funds for the case and prohibit the FTC from issuing an initial decision in the nine-year-old suit until Congress reviews the antitrust issues raised by the matter.
In a letter this week to Vander Jagt, OMB Deputy Director Edwin L. Harper said the proposed legislation, expected to be considered by a House appropriations subcommittee on June 22, "is consistent with the position taken by the president."
Re-emphasizing the administration position, White House Chief of Staff James A. Baker III on June 10 wrote to Paul Arneson, a Washington lawyer lobbying Congress on behalf of the cereal industry, to affirm the administration's support for the appropriations bill amendment.
Bills curtailing action in the case have been introduced in both the House and Senate. The Senate bill, according to a May 8 Vander Jagt letter to OMB Director David Stockman, has 30 cosponsors and the House bill 89 cosponsors.
But those bills, referred to the Commerce committees of both houses have not been endorsed by the two panels' leaders. "Therefore, I suggest that a limitation on the use of FTC funds be attached to the [1982 fiscal year] appropriations bill prohibiting the FTC from issuing an initial decision on the merits" of the case, Vander Jagt wrote.
"This limitation will give Congress time to review the important policy issues involved and keep the FTC from establishing a precedent that could have serious adverse consequences for a large portion of U.S. industry," Vander Jagt wrote.
The industry has been conducting an aggressive lobbying campaign on Capitol Hill designed to convince members of Congress that the suit is based on a "shared monopoly" concept that is without precedent in antitrust law. The case, which is now before an FTC law judge, also has been clouded by the FTC's signing of a $72,000-a-year contract with an earlier law judge on the case, Harry Hinkes.
The cereal companies have charged that the Hinkes contract and the handling of it by commission staff members have tainted the proceeding.