Federal Trade Commission Chairman James C. Miller III urged Congress yesterday to enact legislation to limit radically his agency's ability to crack down on unfair and deceptive advertisements.
Criticizing previous commissions as bringing trivial and unreasonable cases, Miller told the Senate Commerce Committee that the only way to guarantee that the FTC doesn't abuse its consumer-protection powers is to enact legislation carefully limiting its authority.
Specifically, Miller said the commission should not be permitted to challenge any deceptive advertisements--such as misleading product claims--unless they adversely affected consumers' pocketbooks and involved misrepresentations of facts. Opinions by experts, even though they could be considered misleading or inaccurate by others, could not be challenged under this requirement.
Additionally, Miller would not bring cases if the ordinary consumer--and not just a small specialized group such as the elderly, children or the poor--was not misled by the ad. Deceptive ads aimed at the specialized consumer groups--such as ads aimed at the elderly that promote cures for cancer--still could be attacked, but only if the commission could prove that the advertisers "knew or should have known" that they were misleading.
What's more, Miller, who served as President Reagan's top regulatory adviser before taking over the agency last year, said the commission should not attack unfair acts or practices, such as high-pressure sales tactics, unless they cause substantial consumer injury not outweighed by any consumer benefit.
The commission should "be mindful that a given act or practice may benefit some consumers while harming others and not jump to the conclusion that an act or practice is unlawful just because some harm is associated with it," Miller testified in the first of several hearings on the future of the FTC. With the agency's legislative authorization due to expire this fall, Congress is considering a series of reauthorization proposals, all of which in some way would limit the FTC's powers.
However, Miller's proposals are among the most stringent being proposed, especially in the case of deceptive advertising. Even the nation's advertisers have not sought any restrictions in the FTC's authority to crack down on deceptive advertisements.
The first chairman in the FTC's 68-year-history to call for curbs on the agency's authority, Miller immediately was criticized by consumer groups, as well as by other FTC commissioners, who argued that the changes are unnecessary and could tie up the FTC for years in endless litigation.
"Amending, redefining, and complicating the commission's statutory authority would serve the interest only of those fringe advertisers tempted to shave the truth, dissemble, spawn half-truths, and make claims based on flimsy, hoked-up tests," Commissioner Michael Pertschuk, chairman of the commission during the Carter administration, wrote in a dissent to Miller's testimony.
Although the two other commissioners didn't write dissents, both Patricia Bailey and David Clanton indicated in telephone interviews that they also oppose any attempts to limit the commission's ability to attack deceptive advertisements.
"There is absolutely no evidence that I am aware of that the authority to prohibit deceptive practices has been used by the FTC in a manner that has injured consumers or businesses--except of course, for those businesses that have engaged in deceptive practices," Bailey said.
Miller, however, argued that the current law is too vague, saying only that an advertisement is "deceptive if it has a tendency or capacity to deceive. Under that definition, virtually any advertisement can be found to be deceptive."
The committee was not ready to endorse Miller's proposals, saying it needed more information. However, several members indicated that they favor a proposal--opposed by Miller--that would bar the FTC from investigating doctors, accountants and other professionals for anticompetitive practices, including price-fixing and restrictions on advertisements.