Player Profile: Beales makes regulation academic as FTC director

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Just as Federal Trade Commission Chairman Tim Muris has come home, so has J. Howard Beales III, this time as the director of the bureau of consumer protection. His new position puts Mr. Beales, an economist who had a stint with the FTC right after grad school, in direct day-to-day charge of the commission's enforcement direction and makes him the first non-lawyer in the post. Now 51, Mr. Beales, most recently a George Washington University professor, comes back to a very different FTC than the one he left in 1989-and he returns carrying some ideas for new areas for the commission to probe, such as testimonials.

"We seem to be seeing more and more of these testimonial ads ... more and more testimonial claims," Mr. Beales said. The commission staff has noticed an increase in advertisers attempting to use a "results not typical" disclosure in situations where the results are more likely to vary substantially than be typical. Some of the testimonial ads raise even bigger questions about whether the product is responsible for the advertised benefit.

"They are creating the impression that the product works," he said.

The FTC is concerned, Mr. Beales said, that some ads appear to be akin to saying "I took the product and I recovered from cancer" without ever showing the product had anything to do with the recovery.

Mr. Beales' areas of focus reflect the conversations Mr. Beales and Mr. Muris have had over the years since Mr. Beales graduated from the University of Chicago in 1978. Mr. Beales-who eventually became at various times associate director for policy and evaluation, acting deputy director, and assistant to the director in the Bureau of Economic Protection-was frequently in touch with Mr. Muris, who also rose through the ranks.

Having worked closely with Mr. Muris first at the FTC, then at the Office of Management and Budget under President George H.W. Bush, and later in academia, Mr. Beales said he and Mr. Muris have similar views on a range of issues. It didn't take Mr. Beales long to accept Mr. Muris' offer to head the consumer protection bureau and leave his job as an associate professor of strategic management and public policy.

"Government has this flow of incredibly interesting problems and no time to think about it," he said. "Academia has all the time in the world, but you have to look for problems."

Like Mr. Muris, Mr. Beales in his academic writing has indicated that he believes that the cost of regulation needs to be weighed against benefits in looking at potential actions.

"He brings a real strong economic analysis to the post," said American Advertising Federation CEO Wally Snyder, who in the 1980s worked for Mr. Beales and Mr. Muris at the FTC. "My sense is he believes strongly in a case-by-case approach. I think his priorities will be in the fraud area where consumers lose money." Mr. Snyder also said he expected the FTC under Mr. Beales and Mr. Muris to use an innovative approach on privacy regulation that avoids the need for legislation.

"What the Internet did was to make it cheap to reach a large national audience," Mr. Beales said, adding that the ability of smaller companies not versed in FTC rules to reach millions of consumers has brought with it new challenges for the FTC.

During his years in academia, Mr. Beales did some consulting for R.J. Reynolds Tobacco Co. when it faced FTC charges over the use of Joe Camel. Mr. Beales is expected to recuse himself from any tobacco investigations.

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