Demoted and Defanged, Consumer Watchdog Mike Pertschuk Keeps on Kicking About the Hard-Sell Sins of Big Business
05/02/1983 at 01:00 AM EDT
Now that the Reagan Administration has been reducing government regulation of business for two years, many of the Washington bureaucrats who once did the regulating have long since packed up and left. Gone are the days of the '70s when such watchdog agencies as the Federal Trade Commission were at full growl. One consumer champion who has stayed on to fight from within is Michael Pertschuk, 50, whose controversial reign from 1977 to 1981 as chairman of the FTC caused the president of one major U.S. corporation to brand him "the most dangerous man in America." When President Carter put him in charge of the FTC, Pertschuk outraged businessmen by such proposals as banning TV commercials aimed at children. In 1981 President Reagan named a new, conservative chairman, James C. Miller III. In a surprise move, Pertschuk chose to remain on the five-member commission as a minority member for the remaining three years and nine months of his seven-year term rather than resign. He has since taken time to reflect on what he calls "the rise and pause of the consumer movement" in a book published in December, Revolt Against Regulation (University of California, $12.95). Pertschuk lives with his second wife, Anna Sofaer, an artist turned archaeologist, in a green stucco house in Washington, where he recently discussed the fate of consumerism with Dolly Langdon of PEOPLE.
What ever happened to the consumer movement?
Its heyday fell between Vietnam and Watergate—the late '60s, when people were looking for causes, to the late '70s, when they became disillusioned. The economy weakened and government began to heed business complaints about overregulation—some valid, some phony. Then came Reagan.
Wasn't there a consumer backlash against overregulation?
There wasn't any popular backlash. But there was a business backlash. When we started calling for new trade rules in industry after industry, we hit the money nerve. In the prosperous '60s business didn't really feel threatened by the consumer movement. Ralph Nader was even named one of the Junior Chamber of Commerce's outstanding young men in 1966. But by the early '70s Congress had enacted more than 25 consumer, environmental and other social regulatory laws, and businessmen began to feel real economic pain. When business gets organized, it gets very organized. It started mobilizing PACs—political action committees—to help fund campaign costs for friendly candidates. It looked as if it were preparing for World War III. By the late '70s corporations were estimated to be spending close to $900 million on local elections and lobbying Congress.
What victories did business win over consumerism?
The auto industry's success in fighting a rule for mandatory safety air bags, an issue that is still in the courts, shows its significant political clout. Lobbying by business killed legislation to establish a federal Consumer Protection Agency in 1978. Business lobbyists have succeeded in stalling enactment of two very fair FTC rules—one to force funeral directors to itemize their price lists and the other to make used car dealers fully spell out their warranty terms and disclose serious defects they know about. This is called the used car rule. In addition, the insurance industry got Congress to forbid the FTC from ever investigating that business without congressional approval. So, for instance, consumers still can't easily compare whole life policies to see which is the better buy. Business's biggest win was the defeat of the FTC's suggested ban on television advertising to children. In that case, we really hit the money nerve.
What is the most serious consumer issue facing the country now?
Without a doubt, it's the role of business money in elections. Until something is done about the political influence of very narrowly focused business groups such as PACs—whether they be set up by oil companies or auto dealers, or breakfast cereal manufacturers—consumers are not going to get any kind of an even shake. That's the problem. The issues are not being decided on whether a particular regulation is good for the public, but whether the PACs and business lobbies oppose it.
Isn't the FTC after the professions now?
The commission isn't trying to regulate the professions; we're trying to deregulate the professions by allowing doctors, lawyers and optometrists who want to offer lower-cost services through advertising to have the freedom to do so. The issue is competition in the health-care field, and it looks as if this is one time the FTC is going to win. In fact, we've already won on eyeglasses. Our economists found that after we instituted a rule in 1978 prohibiting the optometrists' association from restricting price advertising by competing optometrists, the price of eyeglasses dropped by 40 percent.
What were some of the costly mistakes you made at the FTC?
The biggest was suggesting an all-out ban on TV advertising aimed at children in 1979. That was a rough year. There was a lot of popular support for limiting advertising to kids, but we were challenging a $600 million-a-year industry. The cereal and sugar companies went to work pressuring Congress, and so did the broadcast lobby, and they killed our whole inquiry into the exploitation of kids. Our mistake was in even considering a ban. Bans do not sit well with the public. They raise the specter of prohibition. We should have promoted other forms of restraint, such as requiring nutritional warnings—what the trade calls "counter-commercials."
How about the FTC's reputed penchant for overregulation?
One of the silliest examples that comes to mind was the brainchild at least in part of none other than Caspar Weinberger, Reagan's Secretary of Defense, when he was the first Nixon chairman of the FTC in 1969. The commission published under Weinberger's name a report on automobiles that called for regulating the auto industry as a public utility. It would have required that cars last for 40,000 or 50,000 miles, that loaner cars be provided in case you buy a lemon, and various other kinds of regulations. Who wouldn't want that? What was crazy about that report was that nowhere did anyone ask what the cost would be to manufacturers and the public.
What are some decisions you object to within the FTC since you became a minority commissioner?
Reagan's regulators have refused to enforce the law that allows stores to sell below listed prices. As a result, manufacturers are pressuring discount stores to raise prices. The commission also has eased up on deceptive advertising. It has cut back on requiring advertisers to have hard evidence in hand to substantiate their claims. A Food and Drug Administration official in Seattle told a reporter: "Since the commission cut back on enforcement activities, I've never seen such blatant claims in advertising." Recently the Washington Post dubbed the FTC "the Great Wimp of Pennsylvania Avenue."
How do you get along with the new FTC chairman?
Jim Miller is an honest man who truly believes that consumers don't need much help from consumer laws and regulations. So sometimes we agree; most of the time we fight like hell—but cleanly. The difference is that he looks at the world through the eyes of a theoretical economist and sees a marketplace that works perfectly for consumers. I see a lot of people who are getting ripped off.
Where do you figure consumerism is heading?
The big shift is toward grass-roots participation. Even Ralph Nader is focusing on helping people organize on a local level. In Illinois and Ohio, for example, over a hundred farmer, labor, church, senior citizen and community groups have banded together in "citizen-labor energy coalitions," canvassing door to door to roll back natural gas price hikes. In Wisconsin, the Consumer Utility Board, or CUB, is challenging utility rate hikes. These specialized groups address issues that mean most to local people, and they do stiffen the backbones of Congressmen to stand up for consumer issues. Of the 94 congressional candidates endorsed last November by the Consumer Federation of America, the largest consumer protection group in the U.S., 77 won. Of 81 Congressmen voted out of office, 60 had worse-than-average consumer voting records. The consumer movement is about to rise again.