CONTENTS Azcuenaga, Mary L., Commissioner, Federal Trade Commission... Bailey, Patricia P., Commissioner, Federal Trade Commission Gardner, Stephen, on behalf of National Association of Attorneys General.. Hawkins, James D., executive director, Opticians Association of America.. Ignatius, Amy, on behalf of National Association of Attorneys General...... Jaffe, Daniel L., senior vice president, Association of National Advertis- Jenckes, Linda, on behalf of Health Insurance Association of America ....... Oliver, Daniel, Chairman, Federal Trade Commission. 217 45 144 169 219 O'Toole, John, executive vice president, American Association of Adver- 16 Rector, John M., vice president and general counsel of government af- 152 Sick, Thomas O., on behalf of Health Insurance Association of America..... 144 92 32 Streino, Andrew J., Jr., Commissioner, Federal Trade Commission. Suttle, William W., senior vice president, American Insurance Associa- Wagner, Glen, on behalf of National Council of Farmer Cooperatives Wenning, Thomas F., chairman, Antitrust Committee, Small Business Material submitted for the record by: Calvani, Terry, Commissioner, Federal Trade Commission........ Letter, dated May 1, 1987 from Daniel Oliver to Chairman Luken re response to letter dated April 3, 1987 requesting answers to ques- Letter, dated July 8, 1987 from Emily Rock to Hon. John D. Dingell re responses to questions submitted in June 2, 1987 letter to the Health Insurance Association of America, Rules Governing Advertise- National Association of Federal Credit Unions, statement. National Association of Retail Druggists, documents in response to ques- 193 179 National Credit Union Administration, letter from Roger W. Jepsen, May 216 Transportation, Tourism, and Hazardous Materials Subcommittee: Ques- tions of Hon. John D. Dingell to Daniel Oliver, Federal Trade Commis- Whittaker, Hon. Bob, statement 4 FEDERAL TRADE COMMISSION AUTHORIZATION WEDNESDAY, MAY 26, 1987 HOUSE OF REPRESENTATIVES, COMMITTEE ON ENERGY AND COMMERCE, AND HAZARDOUS MATERIALS, Washington, DC. The subcommittee met, pursuant to notice, at 10:12 a.m., in room 2322, Rayburn House Office Building, Hon. Thomas A. Luken (chairman) presiding. Mr. LUKEN. Good morning. This morning, the Subcommittee on Transportation, Tourism, and Hazardous Materials meets to receive testimony from public witnesses on the FTC's authorization request for fiscal year 1988. Next Tuesday, the subcommittee will receive the testimony of members of the Commission and complete the scheduled hearings on this subject. It is hoped that within 2 or 3 weeks we can schedule a markup and report an authorization. The last FTC authorization bill enacted by the Congress was in 1980, and expired in October 1982. The Commission has been operating without an authorization bill for the last 5 years. As a result, a number of provisions which directly affect the authority of the Commission have been attached in appropriation bills and continuing resolutions. The annual limitation on these bills has created uncertainty about the Commission's authorities in a number of areas. The Federal Trade Commission needs an authorization bill which resolves these uncertainties by either making some of these provisions permanent amendments to the Federal Trade Commission or by rejecting them as statutory requirements. Today's hearing will focus on those areas about which controversy remains, at least controversy as known to us. These areas include the issue of commercial advertising, in terms of restricting the commission's rulemaking authority; the need to define the commission's consumer protection/unfairness authority in section 5 of the act; and the prohibition on the Commission's authority to study and investigate agricultural, cooperatives and marketing orders, and the business of liability and casualty insurance. I would like to depart and offer a comment of my own on the question of advertising. The FTC Act, in regard to advertising, must provide the best standard, the clearest beacon to illuminate the path to trustworthy advertising. (1) In the welter of modern advertising, the opportunities for deception from Madison Avenue techniques, the temptations for the advertiser to bowl over the unsuspecting consumer with the hype, the capacity of the purveyor to cloud the issue with oversimplification, might lead us to a conclusion that we should oversimplify in our legislative product. I think if we do, we would be falling in the same trap the advertisers are attempting to set for the unwary consumer. Of course, the FTC controls commercial speech, not political messages. But if I read the Cincinnati paper this morning correctly, the defeated Governor Brown of Kentucky might claim that the political advertising against him was unfair, since the winner suggested that he was going to solve the financial problems in Kentucky by establishing a lottery. Now, this, of course, doesn't apply, most of us would agree, because it is political advertising. But most of us would agree that that would be an unfair kind of approach. And all I am doing is suggesting, by way of analogy, that we don't want to oversimply these issues. But we want to look at the issues and find out what the best standard is to get where we want to go in providing the consumer with reliable messages. We will also be receiving testimony regarding the Commission's enforcement practices in its statutory authorities under the antitrust laws and the Robinson-Patman Act. Later this year, we intend to hold extensive hearings on the Commission's enforcement policies, but I believe it important that they be first raised in the context of the authorization process in order to consider the need for specific directions to the Commission to ensure that it is fully exercising its statutory responsibilities. Specifically, I believe that periodic reports to Congress on its enforcement action would be appropriate requirements for inclusion in the authorization bill. It is my intention, shortly after the conclusion of these hearings, to work with my colleagues on both sides of the aisle to draft a concensus bill and move forward in enacting legislation. I appreciate, in advance, the participation of the witnesses. I will now call upon the gentleman from Kansas for any opening remarks which he may have. Mr. WHITTAKER. Thank you, Mr. Chairman. This morning the subcommittee will be embarking upon the task of reauthorizing the Federal Trade Commission. The Commission has not been reauthorized in over 41⁄2 years. Along with expiration of authorization, certain provisions which had been tied to the authorization have also expired. The Appropriations Committee has had to extend those provisions by default when it has appropriated funds for the Commission. It is the Energy and Commerce Committee's responsibility to review the substantive authority of the Commission and to consider extending those provisions. Despite extensive efforts during the last three Congresses, controversy has always developed during the conference over a number of these provisions. This year, I am hopeful that the subcommittee will maintain its focus on the reauthorization issue, with an eye toward legislation, rather than diverting its attention to the ongoing investigations and enforcement policies, which are probably more appropriately left to the oversight process. I believe that this will be necessary if the committee is to meet its authorization responsibilities and meet its deadlines, as well. In closing, I would like to extend a warm welcome to all of the witnesses, and I am looking forward to an informative hearing. Thank you, Mr. Chairman. Mr. LUKEN. Thank you, Mr. Whittaker. Mr. Florio, the gentleman from New Jersey. Mr. FLORIO. Thank you very much, Mr. Chairman. I commend you for the speedy action in starting the process of reauthorizing the FTC. As both individuals have previously stated, the reauthorization of this agency would be something that is long overdue and certainly would provide for stability in the agency, hopefully stability that would result in some activity at the agency in ways that we have not seen in the past few years. I think the enforcement statistics that are starting to dribble out tell us the whole story, that we are talking about the highest level of merger applications, merger filings, and yet the lowest level of merger investigations. The irony, of course, is that more and more when you need someone to be looking at the appropriateness of mergers, we are having the agency that shares responsibility with the Justice Department doing less and less. Certainly, that is not the goal that we should be striving for. Likewise, in a whole host of other areas the performance at the FTC has not been what it should be. One that comes to mind is the concept of resale price maintenance. It used to be regarded as per se illegal. Vertical price fixing is anathema to the concept of competition, to the marketplace forces. And yet this administration at FTC has, as a matter of policy, that it will not follow the law and regard vertical price fixing as per se illegal. Hence, we have had virtually no enforcement in this area. The gentleman from Ohio, the chairman, made reference to the Robinson-Patman Act. And the whole concept of predatory pricing is a nonoffense anymore. We don't have the Agency becoming involved in this practice, which is regarded in so many areas of the law as illegal. That is, pricing below cost for the purpose of driving the competition out of the market is regarded and has been regarded as illegal, and yet we see non-enforcement of this basic principle of the law by the administration at FTC over the last number of years. Last, and what is particularly disconcerting, as a result of our hearing from the Chairman of the FTC at one of the recent hearings that we had, was the Chairman's espousal of the self emasculation that would result if we have statutory elimination of a key component of the Agency's jurisdiction, the elimination of the Agency's ability to become involved in rulemaking on unfair advertising. |