Tricks of the Trade

MORE THAN half a decade before Rachel Carson published The Silent Spring, a Princeton undergraduate named Ralph Nader successfully persuaded the university to stop spraying its trees with insecticides toxic to song birds. Within the same years, an article by Nader appeared in the Princeton paper criticizing American automobiles as death-traps. Later, of course, Nader wrote Unsafe At Any Speed. Anticipating issues and revealing hidden crises is hardly new to Nader. But the report on the Federal Trade Commission published this January by seven law students working with Nader may be his most politically potent project.

Nader brought together a group of Harvard and Yale law students in the spring of 1968 to plan an investigation of how well the Federal Trade Commission protected consumer interests. The students, known informally as 'Nader's Raiders,' spent the summer in Washington, reading whatever information the F.T.C. agreed to release and interviewing present and former employees at the Commission. Over Christmas three of the seven students returned to Washington and for twenty hours a day wrote up the conclusions reached from the summer's work. The critique, "The Consumer and The Federal Trade Commission," made headlines throughout the country upon its release, and prompted a rather lengthy rebuttal from the Commission's chairman, Paul Rand Dixon.

The Nader study is most obviously important because it lifts the falsely reputable facade of the Trade Commission. Since the last intensive study of the F.T.C. in 1949, the Federal Trade Commission has dwelt safely behind the public reputation created by its own press releases and has been done little damage by cursory academic studies.

With the Nader report for the first time in a generation, the Commission's whole record in consumer protection is considered, and devasted. The present-day morass of unregulated business practices is a real consumer crisis, yet the Nader report shows that the Commission once created to "prevent unfair and deceptive practices" in business is instead inactive and lethargic.

THE POVERTY of the F.T.C.'s performance is strongly argued. The F.T.C. fails to detect many violations because it relies mainly on individual consumer complaints filed with it by mail or by Congressmen. It monitors T.V. and radio advertisements only rarely, and has no ghetto investigative teams. The individuals who are presumably to register complaints often do not know they have been deceived or where they can find redress. Further, only rarely does the F.T.C. challenge large corporations. It prefers to tackle small companies whose practices, less important to consumers, have less political leverage.

The diffidence of the F.T.C.'s case selection has been challenged to a certain degree by public and Congressional pressure. But the strongest camouflage for the Commission's lassitude is erected by their "voluntary enforcement" policy. The Wheeler-Lea Act of 1938 granted the F.T.C. authority to issue "cease and desist" orders, which become effective after 60 days if not challenged in Federal court. Any subsequent violation of the order then incurs up to $5000 per day in civil penalties. Yet the F.T.C. insists upon its preference for "voluntary enforcement" of Commission recommendations. This is the only method consonant with the chairman's repeated declaration of his faith in the wide honesty of American business. In place of compulsive cease and desist orders, the F.T.C. more often issues industry-wide "guides" and "trade regulations." It has no way of demanding compliance with these voluntary orders, and usually is satisfied by an unsubstantiated assurance by the businessman that he has complied. The manufacturer is virtually free to continue any business practice so long as he is willing to "promise," no questions asked, that he is not doing it.

FURTHER, whatever cease and desist orders are issued, are made innocuous by incredible administrative delays in enforcement. The average delay is over four years between the issuance of a complaint and the beginning of an investigation until the decision to issue an order. By this time, the report points out, the advertising campaign or fraudulent practice in question has long since finished. Yet the F.T.C. often forestalls indefinitely the issuance of a complaint by secretly but interminably extending the "deadlines" for investigations.

The Nader Report suggests that greatest blame for the F.T.C.'s inactivity must lie with Chairman Dixon. According to their findings, authority in the Commission is extremely centralized: Dixon is responsible for most decisions on what complaints to consider, what enforcement tactics to use, what information to withhold from the public. Appointed in 1960 by Kennedy as a Southern political debt, Dixon has driven, says the report, most Republicans out of high-level positions, and has staffed the agency with cronies, political appointees, and Southerners who share little of the interest of some low-grade attorneys in vigorous industry regulation. Dixon's self-declared admiration for an imagined high level of business ethics which he divines in each manufacturer leads him to waste the mandatory enforcement procedures available to the F.T.C. in favor of the ineffective voluntary procedures.

Certainly Dixon is responsible for the present inactivity of the agency--James Goddard's excellent tenure in the Food and Drug Administration showed the difference in an agency's efficacy that a vigorous administrator can make. Widespread replacement of personnel by men with a more wary view of business practices would indeed change the whole character of the agency. But the Nader report also notes that the conclusions of the Hoover Commission in 1949 were much the same as the F.T.C. deficiencies of 1969. Though the immediate problem lies with Dixon and his appointees, such consistent faults suggest consistent causes.

MUCH OF THE Commission's sympathy to business must be blamed on the "conditioning process" to which all regulatory agencies are open. Congressional and lobby friendships, the interchange of jobs between agency and the industry it is regulating, inundation by the industry viewpoint -- are pressures to which all agencies are subject. The Nader report offers some hope of escape. It notes that the F.T.C., in "regulating" all of business, has a non-specific "clientele" and so is less likely to have interlocking relationships with it. The chairman can widen his awareness of consumer problems--he need not address business groups uncountably more times than he addresses consumer groups. He could send investigative groups to ghetto areas, and establish storefront offices. This must be done by a new chairman, but it is questionable if any but an exceptionable appointee will resist the wooing influence of business.

The long-range political prospect for the recommendations of Nader's group is uncertain. Several Senators--Ribicoff, Magnuson, Nelson, Pastori, and Kennedy--can be expected to be sympathetic to an F.T.C. reform effort; the Kennedy staff has "requested" a copy of the Nader report and the January 25 copy of Business Week reports that three Congressional investigations into the F.T.C. are slated for the spring. More public sentiment for reform may be generated upon commercial publication of the Nader report--leading perhaps to preliminary injunctive power for the Commission if not a change in personnel.

Dixon, however, is valiantly attempting to convince President Nixon that the Nader group is essentially anti-business (and thus Nixon should keep favor with business by retaining Dixon). Nixon, up to now, has made no response.

This year's project members are now seeking grants from several foundations, and expect to have investigations of several government agencies and programs under way next summer, all under the advisement of Nader. With "administrative discretion" executive agencies are often able to withhold information to cloak their weaknesses. Broad systematic investigation of Federal agencies are impossible for a Congressman who lacks enough staff and fears political liabilities. Some of the balance will be restored next summer when for the first time agency critiques are conducted by students whose political constraints are as yet unauctioned.