Business Groups Oppose Expanded FTC Authority in House-Passed Wall Street Bill

The provision is not part of the Senate version of the bill, but because the changes have been advocated by current FTC Chairman Leibowitz, business groups are concerned that it could be incorporated into the Senate bill by amendment or added as part of a House-Senate conference committee to resolve differences between the bills if the Senate version of the bill is passed.

FTC Could More Easily Impose Civil Penalties and Take Action

According to the letter, H.R. 4173 (as passed by the House) would amend the Federal Trade Commission Act to make the following changes:

Civil penalties. The bill would give the FTC new enforcement authority to seek civil penalties for unfair or deceptive acts or practices; to seek such penalties without coordinating with the Department of Justice; and to punish any person that “knowingly or recklessly” provides “substantial assistance” to another, even without actual knowledge of the violation.

(Currently, the FTC primarily imposes an administrative order to change a company’s behavior or seeks a court order to force a company to return ill-gotten gains. Only after an order or court order is imposed may the FTC seek civil penalties, which provides an incentive for companies to reach an agreement to change their business practices, rather than litigating. In addition, the FTC is currently required to notify the Department of Justice when it intends to seek civil penalties. DOJ then has 45 days to decide whether to pursue the case on the FTC’s behalf, providing time to coordinate across agencies and serving as check against excessive penalties.)

Unfair or deceptive practices, economic effects. The bill would eliminate the current requirement that unfair or deceptive practices be prevalent in order for the FTC to act and would eliminate the requirement that the Commission address the economic effect of its rulemakings.

Judicial review. The bill would change the standard for judicial review of FTC actions by eliminating the court’s ability to strike down rules that are not supported by substantial evidence in the rulemaking record as a whole.

Outside influence. The bill would eliminate existing restrictions on the ability of Commissioners to meet with outside parties and the prohibition on ex parte communications with Commissioners.

Opposition to Bill Based on Need for Safeguards, Proper Forum

In their letter to the Senate leadership, opposing the proposed expansion of the FTC’s power, the coalition of business groups note that the procedural “safeguards” that the bill would eliminate were imposed decades ago following findings by two separate Congresses that the Commission had overstepped its regulatory authority.

Safeguard removal opposed by former Commissioner. The coalition letter also refers to opposition to the proposed increase in FTC regulatory authority by former FTC Commissioner Muris, citing his July 2009 testimony before Congress opposing the removal of “these longstanding safeguards” and urging that the FTC Act’s “sensible and important” protections be retained.

Incorrect forum. The coalition letter also states that the financial overhaul legislation is not the correct forum for changes to the FTC’s regulatory authority­—that the changes are “not a necessary or relevant response to the causes of the recent recession”—and asks that FTC-related issues be considered as part of future FTC reauthorization legislation, as has been historically done.

Coalition letter to Senate leadership (dated 04/22/10) available at http://www.uschamber.com/NR/rdonlyres/ediiokekaxwcccl3haivq5zt4yj272teuxhaw2rznrd4jikmdrmlm7xms6nwwrvhvi4kye3wul645wkeq5hfbuydq6h/100422MultiIndustryFederalTradeCommissionReidMcConnell.pdf.

Text of H.R. 4173 as passed by the House available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4173rfs.txt.pdf.