DEPARTMENTS OF STATE, JUSTICE, AND COMMERCE, THE JUDICIARY, AND RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1978 FRIDAY, APRIL 22, 1977 U.S. SENATE, SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, Washington, D.C. The subcommittee met at 10:05 a.m., in room S-146, the Capitol, Hon. Ernest F. Hollings (chairman) presiding. Present: Senators Hollings and Young. FEDERAL TRADE COMMISSION STATEMENT OF MICHAEL PERTSCHUK, CHAIRMAN CALVIN J. COLLIER, COMMISSIONER R. T. MCNAMAR, EXECUTIVE DIRECTOR GERALD P. NORTON, ACTING GENERAL COUNSEL DARIUS W. GASKINS, JR., DIRECTOR, BUREAU OF ECONOMICS MARGERY W. SMITH, ACTING DIRECTOR, BUREAU OF CON- EDWARD C. McCONNAUGHEY, JR., ASSISTANT BUDGET REQUEST EXECUTIVE Senator HOLLINGS. Our next request is that of the Federal Trade Commission. The amount requested is $59,543,000, an increase of $6,843,000 over the 1977 appropriation to date, and provides for 1,668 permanent positions. Appearing on behalf of this request is Mr. Michael Pertschuk, Chairman, who is accompanied by Mr. Calvin J. Coller, Commissioner, and Mr. R. T. McNamar, Executive Director. Mr. Pertschuk, this is your first appearance as the chairman. We are now "Chairman" to each other. This will sound like one of those Marx Brothers movies. I am sorry we couldn't be at your swearing-in yesterday. We had to go vote. You have always gotten your Senators to the vote so I am sure you appreciate why we couldn't be at the ceremonies. There is no doubt in my mind that you will grace the Commission. I don't know if you will grace the Commission's budget. Let me hear you. CHAIRMAN'S STATEMENT Mr. PERTSCHUK. This is certainly fitting that my first appearance should be before you. This is the most important committee of Congress for me. I have begun to examine each of the Commission's programs in some detail. To the best of my knowledge, they are soundly based. However, I have been troubled to find that time and time again worthy programs are limited because of the necessity to choose among competing programs of demonstrable value and importance. Of course, the Commission cannot have all of the funds that it would like to have to do each of the things it would like to do. Priorities must be set and hard choices made. Because I am particularly sensitive to the Commission's accountability to Congress, I welcome the opportunity to share with this committee the burdens of setting Commission priorities. Today I have asked Commissioner Collier to present the Commission's budget to you. While he was Chairman, the Commission made great progress in using program budgeting as a basic management tool. Commissioner Collier deserves great credit for that initiative and for the preparation of the budget document before you. In the context of this morning's hearing, he can, therefore, be much more responsive to your questions than I could. But if I may, Mr. Chairman, I would like to present three issues before this subcommittee, because I believe you personally understand them quite well. In fact, you have been an important influence in my own thinking on these issues. CHILDREN'S ADVERTISING First, we at the Commission are just beginning to recognize the full impact of television advertising directed at children. As a citizen and as a parent, I am deeply concerned about the economic, social and psychological effects that TV advertising has upon our children and upon their families. I would hope that, as Chairman of the FTC, I can effectively continue and expand the Commission's early work in this area. It will take money and time and people. And my fear, Mr. Chairman, is that our budgeted resources may not accommodate an aggressive approach to this issue. I raise this question now because I know that your leadership both of this subcommittee and the Subcommittee on Communications has made you sensitive to this problem and aware of the possible depth of resources required to address it. THE SPECIALLY DISADVANTAGED Second, Mr. Chairman, let me confess that I am troubled by the budgetary constraints preventing the FTC's vigorous pursuit of those businesses that prey upon our citizens who may be poor, who lack education, who are locked into minority ghettos, who are aged or ill, or for whom English is a second language. I believe this Congress and the President have renewed the Government's commitment to care about those of our neighbors who need and have a right to additional help and attention. My disappointment, Mr. Chairman, is that the Commission's budget is not yet strong enough to substantially improve the lot of the disadvantaged or minority consumer. I think that situation has to change. ENERGY CONSERVATION Finally, Mr. Chairman, as the President asked us on Wednesday evening, we must invest more of our time and resources into those areas where the payoff may be increased energy conservation. If I may, Mr. Chairman, I would like to read a pertinent section from my statement submitted March 30 to the Senate Commerce Committee. I was concerned then with the substantive issue of energy and resource conservation: At a time when our leadership is turning inevitably toward a national policy of resource and energy conservation and away from decades of reckless resource and energy waste, we will have to confront the reality that such marketing and advertising revels in waste-the "automatic" this and the "disposable" that, the new rather than the renewable, technological innovations which save the consumer marginal exercise while wasting the nation's scarce energy resources. Congress has already indicated both its concern at the marketing of energy wasteful products and its intention to assign responsibilities to the Commission above and beyond those necessary to police deceptive practices by assigning the Commission the responsibility to develop energy-cost labels for 13 categories of home appliances. I wanted to raise this especially at this hearing because of what you did in the last two Congresses on energy conservation. The Commission must use the expertise which it has developed in surveying advertising and marketing practices, in cooperation with the President's energy policy makers, to develop new policies, perhaps through legislation, which will reward conservation and penalize waste. During the next few weeks I intend to study this area in much more detail to see how the Commission can best contribute to the program outlined by the President and under consideration by the Congress. Aside from these three issues, Mr. Chairman, I believe the budget document before you represents a prudent yet humane balance of Commission resources for fiscal 1978, and I urge your thoughtful review and guidance. Thank you. BUDGETARY CONSTRAINTS Senator HOLLINGS. Let's go first to that “vigorous pursuit of businesses that prey upon our citizens who may be poor, etc." You are talking about budgetary constraints. How do you draw a conclusion like that? Just your study, your oversight? I know you have been working in this field for a long time. The natural question is how much do you need? Mr. PERTSCHUK. I can't tell you at this moment. All I know is one of the areas which the President raised in my talk with him is the feeling that the Commission should be doing more than it is doing in the areas of those programs which are particularly directed at the ghetto consumer and rural consumer. I think one of the Commission's most significant actions in this area was its adoption of the holder-in-due-course rule. It is an important step toward addressing the needs of poor and most ignorant consumers who have been preyed upon by the finance companies in the ghetto. You know the situation in which either door-to-door salesmen or high pressure shopkeepers sell an appliance or furniture that doesn't work or falls apart. Then the finance company comes in, and the consumer is left wth a debt for shoddy merchandise. The Commission has a rule in effect, or several rules in preparation, that deals with other credit abuses. This is one area. JUSTICE FOR THE POOR Senator HOLLINGS. But how much do we need to do that? This is almost like a public works project where we ask the corps what their capacity is; what can they orderly accomplish in the year of a budget. Mr. COLLIER. I think Chairman Pertschuk is going to provide very fresh and useful perspective on this because he has articulated this issue as an issue of justice for the poor, whereas, the Commission has tended to approach it as a consumer problem. And I could give examples where we often get to the problems of the poor but not by the kind of analysis that will cut across the various programs that would provide that. I think the melding of his approach with our activities would produce such an analysis. I don't think I could put a dollar amount on it, and I don't know if I would want to preempt Mike from taking a look at the various programs that do address the poor, to get a dollar number on it. I think one of the problems I have talked to him about already is the problem the Commission has with regard to certain local fraud operations not amenable to across-the-board solutions. We met the other day as a Commission with the various attorneys general of the States, and I think we had a very constructive meeting. Mike wants to follow up on it to provide, for example, cooperative arrangements with local authorities directed at these local problems. He and I have talked, and the Commission has supported private rights of action in connection with some of our activities, in particular rules and orders that we issue. I know Mike has additional ideas in that regard. I think all of these remedies have to be considered to get the most efficient mix of consumer protection with us, with the private side, the public interest groups, as well as the State and local enforcement authorities. I think the Commission will be excited to embark upon that analysis with our new chairman. We haven't done it yet, so I can't give you a figure. Senator HOLLINGS. This is a valid area of investment of personnel. We get into the children's area, which is the perfect area for you to get into. It is never going to be gotten into otherwise. But what are we going to do within the Federal Trade Commission to really bring things to a conclusion so it won't turn into some discombobulation of just lawyers bringing cases, cases, cases, and the business |