United States: Congress Considers Significant Expansion Of FTC Powers: Stay Tuned

In today's competitive environment, the focus on effective advertising—whether by you or your competitor on the Internet, in the print media, on broadcast media, through telemarketing, or through direct mail—necessarily requires a great deal of resources. Likewise, in today's regulatory environment, compliance with governmental trade regulations as well as concerns about potential federal and state investigations necessarily captures a great deal of senior management's attention. Therefore, interested parties should be aware that Congress is considering expanding the powers and authority of the Federal Trade Commission ("FTC")—the United States federal agency which enforces numerous laws and regulations that prohibit business practices that are anticompetitive, deceptive, or unfair to consumers.

Summary Of Legislation

On April 8, 2008, Senator Byron Dorgan (D-N.D.) introduced S. 2831, the "Federal Trade Commission Reauthorization Act of 2008," legislation designed to reauthorize the FTC and which would make significant changes to the FTC's regulatory authority. The bill is co-sponsored by Senator Daniel Inouye, (D-Hawaii), Chairman of the Senate Commerce Committee, which has jurisdiction over the FTC.

Specifically, the Act authorizes a 10% increase in the FTC's appropriations each year over the next seven years, grants the FTC greater civil penalty and independent litigation authority, streamlines the process of creating rules against deceptive practices in the subprime mortgage lending arena, and clarifies that state law with more restrictive requirements for intrastate or interstate telemarketing will not be preempted. Key provisions include:

• Independent Litigation Authority: The bill provides the FTC with the authority to litigate any civil action involving the Federal Trade Commission Act ("FTC Act"). Under current law, the Commission may litigate certain cases in its own name, but many cases are brought by attorneys at the Department of Justice, often with the assistance of FTC attorneys.
  
  
• Civil Penalty Authority: The bill expands the Commission's authority to recover civil penalties for any violation of the FTC Act. Currently, the FTC is limited to recovering civil penalties for violations of a rule or a final cease and desist order with respect to an unfair or deceptive act or practice.
  
  
• Application of the FTC Act to Non-Profits: The bill expands the Commission's authority to regulate non-profits for unfair or deceptive acts or practices. Currently, some non-profits have used their tax-exempt status as a shield to block FTC enforcement action.
  
  
• Aiding and Abetting as a Violation: The bill allows the Commission to hold entities accountable that aid or abet another in violating any law enforced by the FTC.
  
  
• Streamlines Rulemaking Process: The bill allows the Commission, by majority vote of the full Commission, to promulgate rules under the Administrative Procedure Act (APA), instead of the lengthy procedure set forth in the Magnuson-Moss Act. This provision would help the Commission to conduct rulemakings with respect to any consumer protection matter at a more expedited pace.
  
  
• Inclusion of All Banking Agencies under the FTC Act: The bill increases the number of federal agencies permitted to promulgate rules regarding unfair or deceptive financial acts or practices under the FTC Act.
  
  
• Enforcement of State Attorneys General: The bill allows State attorneys general (AGs) to bring cases under the FTC Act to seek civil penalties, disgorgement or injunctions against bad actors. State AGs must provide notice to the FTC regarding their intent to bring suit, and may not bring a case if the FTC has initiated a civil action or an administrative action.
  
  
• Common Carrier Exception: The bill repeals the telecommunications common carrier exemption. Currently, common carriers subject to the Communications Act of 1934 are exempt from the requirements of the FTC Act. The legislation repeals this exemption, allowing the Commission to investigate unfair and deceptive acts or practices by telecommunications common carriers, particularly in the areas of advertising, marketing, and billing.
  
  

On April 8, 2008, the Senate Commerce Committee held a hearing on the bill. This bill was referred to the Senate Commerce Committee's Subcommittee on Interstate Commerce, Trade, and Tourism. Senator Dorgan is the Chairman of this Subcommittee, which has authority of the activities of the FTC.

Short-Term Outlook: No Activity Expected During Remainder Of The 110th Congress

It is unlikely that this legislation will receive either a hearing or a vote during the remainder of the 110th Congress. The problem is the lack of time. Congress has 10 remaining weeks of legislative activity scheduled before the month-long August recess, which includes the political conventions. For a multi-year authorization bill, there would have to be hearings and votes scheduled on the committee level, with testimony from affected parties. Delaying matters further is that there is no counterpart bill in the House, as of yet.

Furthermore, the climate in the Congress has already turned political. Democratic leaders are only focusing on activities that make easy political points, such as holding hearings on the price of energy. The President, for his part, has shown little interest in working with Democrats during his remaining days in office. And with the Presidential race being run by sitting Senators, Senate leaders will likely defer to their campaigns and not schedule any tough votes in the fall. In fact, it is very likely that Congress could adjourn early for the year—perhaps in October—and leave everything to 2009, when the 111th Congress is seated.

Long-Term Lobbying Strategy, Including Outreach To Key Members Of Congress And Staff

It is recommended that a dialogue be initiated with key Members of Congress and staff on this legislation, starting with Senator Dorgan. In addition to being the sponsor of S. 2831, his chairmanship of the Subcommittee on Interstate Commerce, Trade and Tourism will likely continue in the 111th Congress. It is likely that he has introduced this bill as a marker of what he expects to do next year. Speaking to him and his staff now, before formal activity commences, is the best way to alert them to concerns by impacted businesses and industries. Additional players on this bill who are likely to remain in their positions include Senator Inouye (D-Hawaii), the Chairman of the full Senate Commerce Committee and a Co-sponsor of S. 2831; Congressmen John Dingell (D- Mich.-15), and Bobby Rush (D-Ill.-1), who chairs the House counterpart committee, Energy and Commerce, and its subcommittee.

At this juncture, it appears that the Democrats are likely to retain and possibly expand their majorities in the next Congress. Thus, efforts to pass an FTC reauthorization bill with expanded powers for the FTC would probably face a much better chance. Accordingly, it is recommended that impacted parties work with them on this bill both early and often.

This article is presented for informational purposes only and is not intended to constitute legal advice.