New Federal Trade Commission Rulemaking Powers

To: AAF Members
From: Clark Rector, Executive Vice President-Government Affairs
Re: New Federal Trade Commission Rulemaking Powers

As the Senate begins the debate on financial regulation legislation, the danger remains very real that Congress could use that bill to give the Federal Trade Commission extensive new and dangerous powers. These include greater authority to enact industry-wide rules limiting advertising and many other business practices, such as a ban on virtually all food advertising to children and youth under 18. It is very important that you and others in your company or advertising federation contact your Senators and urge them to oppose any effort to use the financial regulation bill—or any other—to make unneeded and unrelated changes to the FTC's rulemaking powers.

We have ramped up our lobbying efforts in Washington, DC. In addition to meeting with lawmakers and key Hill staff, AAF recently joined allied associations in placing an advertisement in the Capitol Hill newspaper Roll Call and in a letter to Senate leadership stating our position.

Please contact your Senators and ask them to oppose any effort to expand the Federal Trade Commission’s rulemaking authority. All Senators can be reached through links on the U.S. Senate web page at http://www.senate.gov/. Just a quick call or email will send a very powerful message.

For your convenience, I have reprinted below my earlier background on the issue.


Background

Language buried in the House-passed version of financial regulation reform (H.R. 4173) would repeal safeguards that have governed FTC rulemaking for more than three decades.  Under current law, before enacting industry-wide rules, the commission must
 

  1. hold hearings on the proposed rules,

  2.  prepare a statement of basis and purpose including the economic impact of a rule, and

  3.  identify an actual harm that a proposed rule is designed to address (show prevalence).

The House bill would authorize the FTC to issue rules by simply publishing them in the Federal Register, wait 60 days for comments, and then issue a final rule.  The most serious proposed change would require a court to determine that the FTC was arbitrary or capricious or abused its discretion before the court could overturn a rule, which is an almost impossible standard to meet if challenging a rule. Today courts may send a rule back to the FTC if the rulemaking record lacks substantial evidence to uphold the rule.

The danger is very real.  In December, the FTC and three other agencies (CDC, FDA and USDA) announced new “voluntary” federal guidelines dictating which foods may be advertised to children and youths under 18 years of age. For the first time, the proposal raises the age of who is a child from someone under 12 to somebody under 18 years of age.  The standards are so strict they would virtually ban the advertising of many familiar products including yogurt, vegetable soup, peanut butter and most breakfast cereals. All media would be subject to the ban, including television and radio, newspapers and magazine, outdoor and online.  Because of the age range, the "ban" would extend to advertising that supports more than 1,700 television programs.

While the standards were issued as "voluntary," if the new rulemaking procedures passed, the FTC could very easily and quickly make them mandatory.

The FTC has been down this road before.  In 1978 it proposed the "Kid Vid" rule, which would have banned advertising of many cereals to children in an attempt to reduce dental cavities. After three contentious years – and enormous Congressional backlash – the FTC withdrew the rule. The aftermath of the experience seriously debilitated the agency for two more decades. The proposal recommended by the four federal agencies would be "Kid Vid" on steroids.