The Senate gave final approval Aug. 11 to the legislation, which is expected to be signed into law by month's end, that defines unfairness for the Federal Trade Commission, the government agency regulating advertising.
The bill defines unfairness as "acts or practices that cause or are likely to causesubstantial injury to consumers, which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or competition" (AA, March 14).
Further, "in determining whether an act or practice is unfair, the FTC may consider established public policies as evidence to be considered, with all other evidence. Such public policy considerations may not serve as a primary basis for such determination."
"It's a major historic development ...," said Dan Jaffe, exec VP of the Association of National Advertisers. "There are two key terms that give the FTC authority-deception and unfairness. This is the first time unfairness has been defined. This is the first time unfairness is not a whim or in the eyes of the beholder-an FTC commissioner."
The compromise ends a tug-of-war between the Senate, which had the advertising industry's backing in seeking to limit the FTC's authority on unfairness, and the House, which was supported by consumer groups in keeping the agency's powers broad.
Since 1980, Congress had been unable to approve legislation reauthorizing the FTC because ad industry lobbying persuaded the Senate to reject any compromise offer from the House that failed to bar the FTC from taking industrywide unfairness action. The impasse developed after a 1976 FTC inquiry that attempted to classify all children's TV advertising as unfair.
The new legislation allows the FTC to initiate industrywide unfairness action, but under the new, strict definition. The FTC also must have "reason to believe that the unfair or deceptive acts or practices ... are prevalent."
The American Advertising Federation, American Association of Advertising Agencies and Association of National Advertisers hailed the compromise.
Representatives of the Center for Science in the Public Interest and Consumer Federation of America, which pushed for broad FTC powers, were not available for comment last week.
"We would much rather the FTC not have this [unfairness] authority at all. We think the FTC has enough authority with deception," said Wally Snyder, AAF president. "But it is clear we were not going to get that. We voted to seek a compromise as long as they had a strong definition of unfairness. This is a very strong test."
"No one got everything they wanted ...," said Mr. Jaffe. "But at some point you have to bring things to an end. We have got to get on with other issues."
The impact on the advertising industry depends on how the FTC interprets the definition.
"[I]f the Commission uses its powers too broadly, as we believe it did in the '70s, the ANA will mount strong opposition," said John J. Sarsen, ANA president, in a prepared statement.