The Federal Trade Commission staff has recommended that the agency drop its efforts to develop nationwide regulations on health spas, an industry that has been plagued in the past by bankruptcies and charges of consumer abuse.
The FTC staff said the cost of a health spa regulation would outweigh its benefits, and urged the commission to abandon making an industry-wide rule in favor of case-by-case litigation.
The staff recommendation brought praise from the industry but was attacked by some consumer groups.
"This is good for the health spa industry and good for everyone in the country concerned," said Frank Bond, chairman of U.S. Health Inc., which owns Holiday Spas. "We have enough regulation already."
"I think incorporating a bureaucratic phenomenon into the health spa industry would be very inhibiting on a young industry in its growth," said Bond, who also was founding chairman of the Association of Physical Fitness Centers, the health spa industry trade association.
But Mark Silbergeld, Washington director of Consumers Union, said, "This is a typical FTC assumption -- that the industry will straighten up and fly right if only the government leaves it alone.
"The rulemaking record today clearly identifies a problem that is best dealt with by a rule instead of a case-by-case approach," he said. "Having sat on this rulemaking for most of four years, the Miller FTC is hardly in a position to argue that the record of abuses is now stale." James C. Miller III is chairman of the FTC.
Fed by America's interest in keeping fit, the health spa business has grown to a $5 billion-to-$10 billion industry, according to Bond, who said precise figures are difficult to find because most health spas are private companies. The Association of Physical Fitness Centers estimated that 6,200 spas have sprung up throughout the country.
But companies in this burgeoning industry have been accused by consumers of such practices as misleading, false and deceptive advertising and sales representations; high-pressure sales tactics; and offering unsatisfactory instructors and overcrowded facilities.
Other complaints against health spas have included charges of restrictive and unfair cancellation policies; the failure of new spas to open as promised; and the closing of many spas without the fulfillment of long-term advance payment contracts with customers.
Since 1975, the FTC has been involved in developing regulations for the health spa industry because of its alarm over abuses. The health spa industry is riddled with "widespread consumer abuses that warrant government regulation," FTC official Roger Fitzpatrick said in a 1979 report.
But the makeup of the FTC has changed over the last decade, and its staff concluded that health spa abuses are limited to a certain segment of the industry. "The record . . . does not contain sufficient evidence of unfair or deceptive practices engaged in by a significant percentage of the health spa industry to warrant a rule," according to the FTC report issued last week.
The FTC staff said, for example, that almost 25 percent of the complaints involved one large chain operation, European Health Spas. "Similarly, almost one-half of the complaints concerned eight major spa operations in an industry composed of several thousand small-to-large businesses," the staff report said.