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FTC poised to gain stronger hand in making rules with financial reform bill

The Federal Trade Commission could become more powerful with a provision tucked in the financial reform bill that would expand its rule-making abilities.

That has the support of consumer protection groups but has also sent the U.S. Chamber of Commerce and online advertisers scrambling to protest the provision as Senate members deliberate this week over a bill that would overhaul of the financial regulatory system.

“The financial troubles of the past year have not been laid at the FTC’s doorstep, and provisions to expand the commission’s authority are out of place in legislation to reform the financial system,” more than three dozen trade groups, including the U.S. Chamber, wrote in a letter to Senate Majority Leader Harry M. Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.) last Friday.

Specifically, the provision would make it easier for the FTC to create regulations and step up its enforcement abilities. Currently, the agency acts as an enforcement agency for consumer protections and can create guidelines for business practices that affect many industries such as online advertisers, drug companies and retailers. The provision was included in the financial reform bill to strengthen the FTC’s oversight of the financial sector. But critics said it would greatly expand the agency’s ability to create new rules for other industries such as online advertising.

Consumer interest groups, however, support the bill. They say online advertisers are gathering personal data about consumers and potentially abusing that information with little federal oversight of their practices.

“Marketers have been unfairly targeting consumers using dubious practices involving stealth data collection, user profiling, and tracking their behavior online,” said Jeffrey Chester, executive director of the Center for Digital Democracy. “The bottom line is that these powerful special business interests want to keep the Internet as their private financial playground – where they get to reap the big bucks without any regulatory oversight.”

Online advertisers say the FTC ran amok as a regulatory agency before Congress reformed it in 1975, when the agency was stripped of many of its regulatory abilities. Under current law, if the FTC wants to create a new industry-wide rule, it must hold hearings. Then it has to prepare a statement of basis and purpose that includes the economic impact of the rule and any potential harms that the rule could create.

By Cecilia Kang  |  April 26, 2010; 8:30 AM ET
Categories:  FTC  
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