Congress fashions leash for a consumer watchdog

The dormant Federal Trade Commission probably will reawaken next week, but not without new curbs on its power and a continuing congressional eye on its activities.

On May 1, for the first time in United States history, a federal agency had to close its doors because of close-call budgeting by Congress. But to the relief of many, a temporary truce in the three-year test of wills between business and consumer interests over the direction of the Federal Trade Commission (FTC) is at hand.

In order to get the $55 million it needs to resume operation, however, the 66 -year-old agency -- once known derisively as "the little old lady of Pennsylvania Avenue" but lately criticized for its zeal -- will have to temper its probes into the funeral home business, children's television, the insurance industry, and giant agricultural cooperatives, and stop petitioning for cancellation of a trademark on the grounds that it has become "generic."

Speaker of the House Thomas P. O'Neill Jr. (D) of Massachusetts says the temporary shutdown should "send a message to the FTC that in the minds of a great many members of Congress the agency has overstepped its bounds."

At least part of the animosity toward the FTC stems from the work of chairman Michael Pertschuk, whom many in the business community view as an overregulator. Mr. Pertschuk claims the FTC is striving to promote competition -- "the best regulator of the marketplace" -- by preventing unfair business practices. He has accepted the bill that appears to be headed toward congressional passage, saying "the most serious threats to the agency's ability to protect consumers" have been eliminated from it.

Underlying the reining-in of the FTC is the desire of Congress to reassert itself over what many see as a regulation-happy federal bureaucracy. The bill that is expected to emerge from Congress within days could usher in a new era of legislative-branch control over what traditionally have been executive-branch functions.

A strong, two-house "legislative veto" is being born in the FTC case. If finally approved -- and spared the presidential veto -- the FTC legislation would subject every regulation promulgated by the agency to a 90-day review by Congress. An unpopular regulation could be vetoed at this stage.

While the FTC actually is more of an independent agency than an executive branch one, proponents of the legislative veto concept are ready to follow up with a move against executive agencies, too.

The vehicle for spreading congressional influence, says an aide to Rep. Elliott H. Levitas (D) of Georgia, a leading advocate of the veto, is a broad "regulatory reform" bill due to come under consideration this summer.

With the legislative veto could come a whole set of realignments in lawmaking , rulemaking, the bureaucracy, and lobbying. An American Bar Association (ABA) specialist on regulatory reform sees this as upsetting the balance of power among the three branches of government.

"A few years ago," comments Craig H. Baab of the ABA governmental relations office, "the executive branch was guilty of an excess of power. One of the things that happened then was that the President [Richard Nixon] was turned out of office. Now another branch [Congress] is moving off key."

Mr. Baab says Congress is taking on an inappropriate, and possibly unconstitutional, role by seeking to review every federal regulation: "It is entirely appropriate for Congress to decide policy -- to tell the FTC to curb the 'kidvid' [children's television] or the funeral home investigations. But it is another matter for Congress to be reviewing each regulation."

Essentially, Congress will be taking back the function it gave the FTC when it established the agency: regulation of certain aspects of business. With a legislative veto, Congress also encroaches upon the courts by attempting to review the "proper role" of an agency, a task traditionally left to the judicial branch. Moreover, he says, regulatory reform will not really be accomplished.

"It is unfair and of questionable honesty to the public," says Mr. Baab, "to suggest that Congress is going to sit there with any amount of real effectiveness and make a decision about the value of all of those rules."

A more effective way to regulate the bureaucracy, Mr. Baab says, is to pass "sunset" legislation that calls for periodic review of a federal agency. The ABA is supporting such legislation.

But Ronald Farley, an aide to Congressman Levitas, says the actual effect of the legislative veto -- which, he points out, has existed in less prominent laws since 1932 -- will be to cause agencies such as the FTC to give more careful consideration to the consequences of regulation while they are being drafted.

Mr. Farley sees the actual right to draft regulations as a law-making power, and therefore one belonging to the legislative branch.

"The fundamental thing about the legislative veto," he says, "is that Congress retains its power and brings itself more into the whole governmental process."

Critics have warned that the veto may cause the Capitol Hill bureaucracy to mushroom in order to keep track of regulations -- and also may signal a new avalanche of lobbyists on the Capitol. Mr. Farley says he does not anticipate either effect.

At the FTC building, which looks like an ocean liner jutting out into Pennsylvania Avenue, the dynamics of political science were little consolation to employees May 1.