accepted trade practices, its probable effect Private litigants [read: state attorneys an (485 F.2d at pages 997-98, footnotes omitted.) Should Congress now discard all that? Establish some 200 or more federal district division courts as mini-FTCs, "burden[ed]" with trying to crystallize nationally coherent laws regulating all unfair or deceptive acts or practices or unfair methods of competition in commerce, in the light of "the interplay of numerous factors" identified, in part, by the court, and "weigh[ing] each action against [a] broad range [of] policy goals and [determining] its place in [an] overall enforcement program"?7 We submit the answer to all of that is obvious: No! 7we have already pointed out the difficulty of objectifying and operationalizing "unfairness". Supra pages 6-8. Imagine a multitude of federal district and appeals courts struggling to came up with a coherent national concensus on a case-by-case basis. And, apart from all the above, franchising state at torneys general as enforcers of the FTCA is totally unnecessary. As the Department of Justice points out in its letter of July 8, 1986 to the Honorable John C. Danforth (with which we agree), "Almost every state (49 states plus the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands) has enacted legislation similar in purpose and scope to the [FTC] Act. Thus, the availability of the FTC Act to state attorneys general to initiate actions against fraudulent and deceptive practices within their state is unnecessarily duplicative." Even where such unlawful practices may be launched from an outside state, jurisdiction over offenders can be secured via the long-arm statutes that are common across the country. Plus, such across-state practices will inevitably involve use of mail, wire or broadcast facilities, thereby arming the Department of Justice to attack them even by criminal prosecution under the mail and wire fraud statutes (18 U.S.c. SS 1341 and 1343). Finally, as recently as January 15th of this year, FTC announced a joint national enforcement initiative by it and state attorneys general against boiler-room operators who, doing business mostly by telephone, bilk consumers and businesses for huge sums of monies. FTC noted that this is not the first of such joint programs with state attorneys general, leading to prosecutions, and to a January 12, 1987 court action (FTC v. Atlantex Associates) against sellers of oil and gas drilling partnerships. Clearly, where desirable, a coherent, national policy for enforcement profiting synergistically from the resources of state attorneys general in coordination with FTC is at hand, without ordaining fifty state atorneys general to let loose a helter-skelter deluge of disorganized, disparate and heterogeneous cases under the FTCA upon the federal judiciary. Again, we thank your Committee for giving serious Mr. LUKEN. Thank you. I have a couple of points, following up the testimony. The testimony of you gentlemen on the question of unfair emphasizes that if the Senate amendment, which passed the Senate on defining the word "unfair" in section 5 unfair acts or practices authority. If this subcommittee and the House were to adopt that amendment, the FTC could still act on deceptive or false and deceptive advertising. How about misleading? The gentleman from Oregon used the term, misrepresent, before when he was talking about the MEDIGAP provision. It would seem to me that misleading and misrepresent are elements of deception. Mr. SNYDER. I think that there are many, many cases-in fact, I know there are many cases where the FTC has challenged misleading claims under its deception authority. These are claims that are not false statements but they are claims that need to be qualified in some way. They are demonstrations that don't truly depict the circumstances. And so there are many, many times the Commission has said, under its deception authority, it can reach inisleading advertising Mr. LUKEN. Well, I believe it was in the Central Hudson case that the Supreme Court gave some protection to truthful statements. That was your testimony, Mr. Snyder. Mr. SNYDER. Yes, that is right. Mr. LUKEN. Admittedly adding that there were further considerations. But without going into all of the legal considerations, the Supreme Court did put, even under commercial speech, truthful statements under some category of protection. Would you have any further comment on that? Mr. JAFFE. Truthful statements, what the Court said is that false or deceptive advertising or advertising for an illegal product has no constitutional protection, that those types of advertising can be totally banned without any consideration, and then went on to say that there could be some regulation even of truthful advertising, but then stated a very tight test as to when you could regulate truthful statements. You had to show that there was a substantial State interest, that the interest was directly advanced by the regulation, and that the regulation was no more restrictive than necessary. So, it put some very tight constraints on what anybody can do in regard to truthful speech. So, it made it very clear that speech does have, truthful speech does have strong first amendment protection. Mr. LUKEN. Well, if we decide to regulate commercial speech beyond false and deceptive, we could run into a constitutional problem. At least there would be a constitutional attack that we might expect. The other aspect that your testimony raises, under last year's bill, as passed by the House, the standard of violating public policy seems to be an independent one. Isn't that what you said, Mr. Snyder? That if the FTC would decide under such legislation that the advertising violates public policy, just that standard alone, it could be prohibited or controlled. Mr. SNYDER. The way that I read the legislation from last year certainly indicates that a violation of public policy could serve as an independent ground for a finding of unfairness. And that harkens back to the case that my colleague mentioned, the children's rulemaking and other things, where that became really the basis, that there was some public policy in restricting these ads. And I think that that particular addition really allows the agency to go into unfairness actions without any restraints whatso ever. Mr. LUKEN. What are we operating under now with the rider that the Appropriations Committee has attached each year recently? Mr. Jaffe. Mr. JAFFE. Mr. Chairman, there is a ban on the use of unfairness for trade regulation rulemaking. Mr. LUKEN. For rulemaking only? Mr. JAFFE. Rulemaking only. Mr. LUKEN. That is only part of it. That is section 18. Mr. JAFFE. And that has been in effect now since 1982. Mr. LUKEN. But the Commission then has not had the prohibition against using the standard of unfair, is that right? Mr. JAFFE. On a case by case basis, that is right. Mr. SNYDER. And, of course, it can use unfair in any other practice in rulemaking, other than an advertising practice. So, it has authority to use this unfairness. Mr. LUKEN. As to advertising, is it your position that if the Senate bill, as passed by the Senate, S. 677-which incidentally has an incorrect date on it, the printed version we have, of 1986; it is really 1987-if that passed, would the standard be, since unfairness alone, solely based on unfairness would be eliminated from consideration, would the standard be false and deceptive or false or deceptive? Is that clear? Mr. Jaffe, do you have anything? Mr. JAFFE. I think it is false and deceptive practices would be regulated, as well as the right go against cases on an unfairness basis. Mr. LUKEN. In other words, deceptive would always include―― Mr. JAFFE. I think all false statements- Mr. LUKEN. Are deceptive. But are all deceptive statements necessarily false? Mr. JAFFE. No. You can have what is known as deception by omission. In other words, every statement in itself would be true, but you have not stated a sufficient amount of information so that a person could make an appropriate decision and in fact would be led to make decisions that would be harmful to him and/or her. And the FTC has a number of cases, numerous cases, in fact, in which they have struck down those types of ads. So, it is not just that the ad, on its face, lies. It is that even if the ad tells-everything on its face is true, but it doesn't tell information that is material to the decision, purchase decision, and would lead to the harm of the consumer, that the FTC has been able to move in against that. Mr. LUKEN. If there were an amendment that would change the false and deceptive to false or deceptive, Mr. Jaffe, do you think that would change it in any way? |