Congress acted illegally when it vetoed a Federal Trade Commission rule that would have required used-car dealers to give customers more information about the cars on their lots, a federal appeals court ruled yesterday.
In a unanimous decision, the U.S. Court of Appeals here found that Congress violated "the principles of separation of powers established in . . . the Constitution" when it vetoed the rule last May.
It was the second time this year that the appeals court has declared the legislative veto illegal, finding that Congress had overstepped its legislative authority by barring an agency from issuing a regulation.
In recent years, Congress has made increasing use of the legislative veto as part of a broader effort to limit the power of government rule makers.
In the FTC case, the House and Senate voted overwhelmingly to veto the used-car rule, which would have required dealers to post a one-page sticker on all used cars to alert customers about any known major defects. The sticker would also have told customers what warranty rights a dealer was offering.
The veto was a major victory for car dealers, who had lobbied vigorously against the rule ever since it was first proposed six years ago. Over the past three years, the National Automobile Dealers Association made nearly $1 million in campaign contributions to members of Congress, a factor many of the rule's supporters said was critical in Congress' vote.
The NADA yesterday declined to comment on the ruling, saying it had not yet seen the decision.
Consumer groups, however, which supported the rule and had filed the suit challenging the legislative veto, expressed satisfaction with the court decision.
"The fact that the entire court found the legislative veto to be unconstitutional is a significant statement," said Ellen Broadman, an attorney for Consumers Union.
The legal counsel for the Senate said it would appeal the decision promptly to the Supreme Court, which is already scheduled to hear two other cases involving legislative veto during this court term.
One of the cases involves an appeals court ruling last January. In that case, the court here found that the House acted illegally by barring the Federal Energy Regulatory Commission from implementing a rule to deregulate the price of natural gas, making industrial gas users bear more of the costs of deregulation than residential users.
In that case, a three-member panel said the veto violated the fundamental separation of power set out in the Constitution because it allowed Congress to intrude improperly on executive branch authority.
The only proper way Congress could tell executive agencies how to act is to enact legislation that is passed by both houses of Congress and then signed by the president, the court ruled then.
In the decision handed down yesterday, eight members of the court cited the panel's reasoning in the January decision as the basis for their ruling. Yesterday's action is not expected to have any immediate impact on the used-car rule. Until the appeal is resolved, the FTC is not expected to put the rule into effect.
Even so, commission members were heartened by the outcome. "I have always believed that this rule is an important consumer measure and from that point of view, I'm glad to know that it is still alive and kicking somewhere," said FTC Commissioner Patricia Bailey.
Other commissioners said the used-car industry could try to make an end-run around the court ruling and persuade Congress to enact legislation barring the FTC from regulating car dealers, just as Congress is considering exempting physicians and other professionals from FTC scrutiny.