That's basically what FTC Chairman Jon Leibowitz told the Association of National Advertisers when he spoke to their "Advertising Law & Public Policy" conference last Thursday. As I noted last week, there's intense pressure in Congress to pass a financial regulatory overhaul and, unfortunately, the version passed by the House in December--Rep. Barney Frank's "Wall Street Reform and Consumer Protection Act of 2009" (H.R. 4173)--would also grant the Federal Trade Commission vast new powers for all its regulations, not just those relating to the non-bank financial institutions it currently regulates. In particular, HR 4173 would:
Leibowitz has lobbied hard to have his agency put on steroids (as former FTC Chairman Jim Miller put it), asking for all these things, as well as more funding, at the first Senate hearing on Hr 4173 back in February. (Conveniently, he was the only witness!) He repeated his calls for these powers on Thursday but tried to allay fears about how they'd be used.
As Communications Daily reports:
The FTC would use expanded authority only where consumers suffer "significant harm," bad behavior is common in the industry, standards would improve practices and the expected burdens are "reasonable," Leibowitz said. "We'd be really stupid if we try to solve every problem in American society with a rule," he said, so the commission will use any new authority "very judiciously...." Â Where business practices and consumer expectations are "evolving," self-regulation is working and First Amendment issues are involved, the FTC would hold back, he said... [including] behavioral advertising and marketing to children. It would show "enormously bad judgment to pursue those matters, Leibowitz said. "We do believe in self-regulation."
In evaluating whether, and how, to change the scope and extent of FTC regulatory authority, I believe we must first ask whether there is a particular exigency, or area of consumer harm, that is so pervasive that the FTC's existing enforcement capabilities and rulemaking processes are not sufficient to address the issue.Â Second, if there is such an exigency, is the proposed legislative change broadly applied, resulting in greater regulatory burdens across a wide range of industries, or is it appropriately narrow to provide the FTC greater ability to develop rules and carry out enforcement actions directly relevant to that exigency.Â Third, we need to consider whether the FTC has sufficient personnel in key areas of its responsibility to carry out its enforcement and consumer protection mandates.
While manyÂ other agencies do have the authority to issue rules following notice and comment procedures [under the Administrative Procedure Act (APA)], theÂ Commission's rulemaking is unique due to the range of subject matter (unfair or deceptive actsÂ or practices) and sectors (reaching broadly across the economy, except for specific carve-outs).Â Except where Congress has given the FTC a more focused mandate to address particularÂ problems, beyond the FTC Act's broad prohibition of unfair or deceptive acts or practices,Â IÂ believe that it is prudent to retain procedures beyond those encompassed in the APA.
In other words, Leibowitz wants Congress to write his agency a blank check to do whatever it deems necessary in the future. Specifically, the FTC would get to decide which issues were appropriate for preemptive regulation, as well as achieving much the same effect of aggressive regulation through litigation designed to intimidate--imitatingÂ Teddy Roosevelt's approach to foreign policy:Â "Speak softly and carry a big stick!"
We've been down this road before. In the 1970s, theÂ FTC so thoroughly abused its uniquely vast jurisdiction by issuing rules to, among other things, ban advertising to children, that it was dubbed the "National Nanny" by the Washington Post--hardly a Thatcherite bastion. This experience led Congress in 1980 to impose theÂ procedural safeguards that would be repealed by HR 4173.Â Congress was so angry it actually briefly shut down the agency to make it clear that it had not dubbed the agency a regulatory knight errant, free to tilt its steely lance at imagined windmills of "unfairness" or "deception."
The good news is that Sen. Dodd's draft 1336-page legislation seems to do precisely what Sen. Hutchinson and others have suggested: Change the FTC's authority only with regards to a particular problem--in this case, financial regulation. (Dodd's billÂ differs in a number of other respects from HR 4173). In a nutshell,Â Dodd's bill would transfer the FTC's consumer financial protection functions to the newly created Bureau of Consumer Protection at the Federal Reserve, but the FTC could also punish violations of the bill's financial protections on its own under Section 5 of the FTC act. Â Further, the Fed's BCP would have to consult with the Federal Trade Commission before imposing any regulations. TheÂ FTC could impose civil penalties, but only for "knowing violations" of the CFPA Act--i.e., only for financial offenses. In an important recognition of the dangers of unbridled agency discretion, the Dodd bill alsoÂ imports the FTC's existing definition of "unfairness" as requiring that an act or practice be "likely to cause substantial injury to consumers, which is not reasonably avoidable by consumers" and which is "not outweighed by countervailing benefits to consumersÂ or to competition."
The bad news is that Dodd's bill is unlikely to be the final word on the FTC's authority, as Sen. Rockefeller's Commerce Committee may insist on some or all of the provisions of HR 4173 that expand the FTC's powers across the board among a flurry of other amendments. Still, whatever its other shortcomings or advantages,Â Dodd's bill offers a path forward for financial overhaul that does not require remaking the FTC--and thus transforming regulation of the Internet, other media, advertising, cyber-security and privacy--among many other things. And for that, the Dodd bill deserves careful consideration as an alternative to just giving the FTC all the power it could ever want, and then just hoping the agency doesn't abuse it--which is essentially what Chairman Leibowitz, much like the FCC's Chairman Genachowski, is suggesting we do.