On Structural Versus Case-by-Case Approaches

Thomas C. Blaisdell’s 1932 analysis of the agency concluded that it “has been little more than a body for the regulation of the trade practices of ‘small business.’ This is contrary to the expectation and plan of its founders, who conceived a body to protect both small business and the consumer…”[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][1] Similarly, the National Industrial Conference Board published three reports on the early Commission, concluding that the agency directed its attention against insignificant companies, and characterized the agency’s trade conference procedures as a form of tokenism.[2]

In modern times, pursuit of trivial matters is signified by the “mailbag approach,” where the FTC merely reacts to whatever complaints are submitted by consumers. This is opposed to structural approaches, where the FTC plans a litigation strategy against a certain practice, and takes high-impact cases or engages in rulemaking. Both approaches have advantages and disadvantages. The case-by-case approach is incremental and conducive to a kind of consensus making, but it can be abused through the pursuit of marginal, poorly-resourced actors. It can act as a ratchet for more and more requirements. The case-by-case approach presents a kind of prisoner-dilemma problem where individual companies have incentives to sign a broad consent agreement to save their own skin. In the process, the company effectively binds all other companies to the promises in the consent agreement.

Industry-wide approaches may be more comprehensive, with more input from stakeholders. At the same time, industry-wide rules can be stultifying and critics see such regulation as “transcendent and dangerous.”[3]

Consider Professor Stephen Calkins’ defense of mailbag cases: “These cases raise few of the subtle issues associated with traditional advertising cases; they do not challenge actions by major advertising agencies; and they are rarely defended by the traditional advertising bar…However, no one suggests that this kind of fraud is declining, and it is an odd notion to say that the FTC should avoid these cases because the wrongdoing is so obvious.”[4]

[1] Blaisdell, a liberal critic of the Agency, explained that a combination of factors stripped the FTC of its power, the most important being that the country’s political leadership shifted from agrarian and small business interests to those of big business, with a corresponding shift in agency leadership and priorities. Others included the skepticism of the courts in the agency’s enforcement of unfair methods of commerce unless they were already illegal at the common law; the development of more advanced forms of public relations among companies; the distraction caused by the FTC’s efforts to support the wartime economy; and the FTC’s own “sluggish” handling of complaints. Blaisdell also summarizes thousands of pages of reports concerning methods of “making” public opinion that would be recognized today as modern public relations strategies. These included: “Newspapers and magazines had been supplied with articles, news releases, and ‘boiler plate’ favorable to the ideas of those in charge of the corporations in the industry. Speakers with the ‘right attitude’ had been made available to meetings of the Rotary Clubs…Articles by college professors, also in the employ of publicity committees, had been distributed without indicating the relationship of the professor to the industry. Outlines had been prepared to assist instructors giving course in public utility economics. Textbooks had been written…influence brought to bear to have ‘prejudiced’ textbooks dropped, well-known college administrators employed to organize conferences…All this had been done for the purpose of cultivating good-will towards the industry.” The Federal Trade Commission: An Experiment in the Control of Business 261 (1932). The reports on industry good-will can be found in Utility Corporations, Letter from the Chairman of the Federal Trade Commission in Response to Senate Resolution No. 83, Senate Doc. 92, 70th Congress 1st Sess. March 15, 1928.

[2] National Industrial Conference Board., Watkins, M. W., United States., & National Industrial Conference Board. (1940). Public regulation of competitive practices in business enterprise. New York City: National Industrial Conference Board, Inc.

[3] Bernice Rothman Hasin, Consumers, Commissions, and Congress: Law, Theory, and the Federal Trade Commission, 1968-1985 (1987).

[4] Stephen Calkins, Kirkpatrick II: Counsel Responds, in Marketing and Advertising Regulation: The Federal Trade Commission in the 1990s (Patrick E. Murphy and William L. Wilkie, eds. (1990). See also Richard A. Posner, The Federal Trade Commission, 37(1) The University of Chicago Law Review 47, 81 (1969)(“Strange as it may seem, the FTC’s frequently decried proclivity for going after small chiselers rests, one imagines accidentally, on sound economic foundations. In general the problem of consumer deception is created by the fly-by-night operator and the con man, not by the reputable firm.”).[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]


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