by excluding State officials from a partnership effort in developing the rules and policy of such a program. As President Ford told the above-referenced meeting of State officials: "New Federalism envisions State and local government officials as strong and powerful allies with Federal officials in problem solving." I would simply add that this means that State officials must be given full rights in the partnership. DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, OFFICE OF THE SECRETARY, Re A Proposed Trade Regulation Rule on Funeral Industry Practices Docket No. 215-46 Mr. WILLIAM D. DIXON, Assistant Director for Rulemaking, Federal Trade Commission, Washington, D.C. DEAR MR. DIXON: Because of the tremendous amount of press coverage my comments concerning the FTC's proposed Trade Regulation Rule on Funeral Industry Practices has received, especially my statement regarding the choice of a non-embalming option. I think it may be useful to provide the Commission a further explanation of my observation (pp. 5 and 6) regarding this particular issue. My statement regarding cost-saving possibilities through the choice of nonembalming was directed to consumers who might be interested in less costly funeral arrangements. One such option is immediate disposition. In this context I believe it proper for a consumer to know whether embalming is required by law, and the limited effect embalming will have on long-term preservation of the remains. Under these conditions a consumer would be better equipped to decide whether to choose a traditional funeral or a less costly alternative such as immediate disposition (either burial or cremation). With the exception of contagious diseases, transportation needs, or excessive periods without refrigeration, generally once a consumer has decided to have the body embalmed, it follows that he has chosen to have the body viewed. Viewing necessarily incurs additional expenses such as the viewing room, a more expensive casket, flowers, etc. Thus it is possible for a consumer to purchase various options costing from a low of $200 to $400 ranging up to an average of $1,400. My comments simply observe that a consumer could save up to $1,000 on total charges if he chose an option which excluded embalming and other related expenses which logically follow embalming. Stated differently, $1,000 can be the difference in price between the average traditional funeral and immediate disposition. Our research regarding embalming charges alone has indicated that they range from $75 to $150. With regard to my funeral comments in general, I have received a substantial amount of mail-both pro and con. Because many of these comments are relevant to your considerations, I am forwarding them to you herewith for inclusion in the official record. A reply to these letters from the FTC is unnecessary as each will receive a reply from my office. In placing these letters in the official record, please take whatever steps are necessary to assure their protection under the privacy Act. Thank you. Sincerely, VIRGINIA H. KNAUER, Director. REGULATIONS OF VARIOUS FEDERAL REGULATORY AGENCIES AND THEIR EFFECT ON SMALL BUSINESS (Part 4) TUESDAY, APRIL 6, 1976 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ACTIVITIES OF REGULATORY AGENCIES Washington, D.C. The subcommittee met, pursuant to notice, at 9:30 a.m., in room 2359, Rayburn House Office Building, Hon. William L. Hungate (chairman of the subcommittee) presiding. Mr. HUNGATE. This morning the subcommittee welcomes a threeman panel representing the Chamber of Commerce of the United States. They will share their views with us on the Federal Trade Commission. Unfortunately, the Consumer Federation of America was unable to appear today again, due to a sudden illness. They will submit a written statement for the record at a later date. The subcommittee has been approached by other interested witnesses on the subject of FTC jurisdiction. As a result, the Chair will try and arrange a June date so they may be heard. At this time, I would like to submit the following for the record: A statement on the FTC submitted by Hon. Martha Keys, Congresswoman from Kansas. A statement from the Idaho Pharmaceutical Association sent to us by Congressman Steven D. Symms. A memorandum prepared by the Library of Congress on FTC jurisdiction. [Material referred to above follows:] PREPARED STATEMENT OF HON. MARTHA KEYS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KANSAS Mr. Chairman and members of the subcommittee, I appreciate this opportunity to relate to you who serve on the Subcommittee on the Activities of Regulatory Agencies my concerns regarding the authority of the Federal Trade Commission to prescribe rules which preempt State and local laws. As you well know, the purpose of the Federal Trade Commission is to protect consumers and competitors alike from deceptive trade practices. To this end, the FTC directs its actions toward curtailment of unfair competition. The FTC's objective of increasing competition and thereby lowering prices is admirable indeed. However, in the past six months, the FTC has struck out in a new direction. It is attempting, through its regulatory authority, to usurp state powers and preempt state laws in such areas as retail drugs, credit, funerals, and optometry. I have been contacted by many professional groups who are concerned about many of the newly proposed FTC regulations. There are many questions which this Subcommittee must study: What is the jurisdictional right of the FTC to require compliance? What is the real cost of compliance with the many statements and procedures required by proposed rules and regulations? Are the many rules and regulations necessary in view of the fact that most states have laws, rules, and regulations needed to provide complete consumer protection? To what extent is state law being overridden without the intent or action of Congress? Also of concern to me is the investigatory process employed by the FTC prior to announcing a new set of proposed rules or regulations. I have been told that often the FTC investigates practices in only three or four cities or areas, then proposes rules and regulations for the entire nation, and that these regulations are generally accompanied by comment critical of the profession. Certainly such a practice is not fair to those in other parts of the country who conscientiously maintain the ethics and good business practices of their profession-those who carefully adhere to the laws of their state. I hope this Subcommittee will look into this problem so that a person's personal and professional reputation is not publicly damaged before all the facts have been collected and studied-and before a profession or business has the opportunity to submit information. Many professional groups have expressed to me their concern with the increased scope and involvement of the FTC in matters which historically have been left to state and local governments. It is highly important that the Congress review this matter. Federal regulatory agencies such as the Federal Trade Commission must not be allowed to expand their powers and authority beyond the limits imposed by Congress. IDAHO STATE PHARMACEUTICAL ASSOCIATION, INC., Representative STEVEN SYMMS, 1410 Longworth Building, Washington, D.C. OFFICE OF THE SECRETARY, Boise, Idaho, February 4, 1976. DEAR STEVE: Thank you for your recent letter in regard to the expanding bureaucracy in Washington. The Federal Trade Commission is still carrying on its witch hunt under the guise of consumerism. Only yesterday we received a call from someone in the staff of FTC requesting us to fill out a lengthy questionnaire in regard to regulations pertaining to the ownership of pharmacies in Idaho. Even after we explained several times to this person that there were no particular requirements for ownership of a drug store in our state we were still requested to fill out the questionnaire and submit it. I explained that I did not have time to fill out lengthy questionnaires that were not relevant to state requirements. Numerous FTC press releases, law suits, and proposed trade regulations are all aimed at promoting price advertising of health related products and professional services, extending to physicians, pharmacists, opticians, hearing aids and veterinarians. Funeral directors, lawyers and real estate brokers are also receiving attention. FTC's major effort seems to be to repeal state laws and codes of ethics that prohibit advertising of these professions. FTC's charges are that these restrictions lessen competition, when in reality the advertising of professional services will only lead to mediocracy. We have noticed the U.S. Chamber of Commerce has appointed a "working group" to monitor FTC's efforts to preempt state laws. Ironically, the chairman of this group is a former FTC commissioner Mayo Thompson, whom you will remember as the FTC innovator who first called for the repeal of state pharmacy laws by federal regulation preemption. FTC is testing its trade regulation rules under a new FTC law in order to determine its preemption power. Needless to say, the business community is opposed to giving FTC the power to destroy the economy and to further expand the federal bureaucracy. You will also note that Representative William Hungate (D-Mo.) is holding FTC oversight hearings and starting an intensive investigation into the FTC rule making authority, especially FTC's claim to having the right to preempt local and state laws, via "trade regulation rules." It is said that "money is power", so it is quite evident that FTC has too much money to spend and we believe a large cutback in their appropriation is in order. Thanking you again for your interest and assistance, I am Yours sincerely, To: House Subcommittee on Activities of Regulatory Agencies Attention: Mr. Lynch. From: American Law Division. Subject: Federal Trade Commission's Jurisdiction to Promulgate Industrywide Rules. The enclosed report (20 copies) is in response to your request for a detailed memo on the above captioned subject. The remainder of your request, for a comparison of the proposed FTC regulations on funeral industry practices with State regulations on the subject, will follow. HENRY COHEN, Legislative Attorney. FEDERAL TRADE COMMISSION'S JURISDICTION TO PROMULGATE INDUSTRY WIDE RULES a. Power to promulgate substantive rules Pursuant to Section 202 of Public Law 93-637, the Magnuson-Moss-Federal Trade Commission Improvement Act, the FTC may prescribe "(A) interpretive rules and general statements of policy with respect to unfair or deceptive acts or practices in or affecting commerce (within the meaning of section 5(a)(1) of this Act), and "(B) rules which define with specificity acts or practices which are unfair or deceptive acts or practices in or affecting commerce (within the meaning of such section 5(a)(1)). Rules under this subparagraph may include requirements prescribed for the purpose of preventing such acts or practices. "(2) The Commission shall have no authority under this Act, other than its authority under this section, to prescribe any rule with respect to unfair or deceptive acts or practices in or affecting commerce (within the meaning of section 5(a) (1)). The preceding sentence shall not affect any authority of the Commission to prescribe rules (including interpretive rules), and general statements of policy, with respect to unfair methods of competition in or affecting commerce. (New Section 18(a)(1) of FTC Act, 15 U.S.C. § 58(a) (1).) Prior to this statute, the rulemaking power of the FTC was found in section 6(g) of the FTC Act (15 U.S.C. § 46 (g)), which provided: "The Commission shall also have power-(g) From time to time to classify corporations and to make rules and regulations for the purpose of carrying out the provisions of sections 41 to 46 and 47 to 58 of this title." On December 30, 1970 the FTC issued a Trade Regulation Rule declaring that failure to post octane numbers on gasoline pumps at service stations would be an unfair method of competition and a deceptive practice, constituting a violation of 15 U.S.C. § 45. The authority of the FTC to promulgate such a regulation was challenged in the United States District Court for the District of Columbia, which held that section 6(g) did not confer authority on the Commission to issue rules having the effect of substantive law, but "was intended only as an authorization for internal rules of organization, practice, and procedure." National Petroleum Refiners Association v. FTC, 340 F.Supp. 1343, 1345 (D. D.C. 1972). The U.S. Court of Appeals for the District of Columbia, per Judge J. Skelly Wright, reversed the action of the district court and upheld the Commission's authority to issue "substantive" Trade Regulation Rules defining "rules of business conduct," and violations of those rules which would be considered as "unfair methods of competition." The court of appeals found support for its conclusion (1) generally, in Section 5 of the FTC Act, 15 U.S.C. § 45(a), which 75-888-76-8 empowers and directs the Commission to enforce the prevention of "unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce"; and (2) specifically, in Section 6(g), under which the FTC could promulgate rules "to give greater specificity and clarity to the broad standard" set out in Section 5(a). 482 F. 2d 672 (D.C. Cir. 1973). The Supreme Court refused to hear an appeal, thus letting the decision of the court of appeals stand. Certiorari denied 415 U.S. 951 (1974). b. Power to preempt State laws Proposed House Concurrent Resolution 499 (94th Congress) provides, in part: Whereas the reports of the Senate Committee on Commerce (S. Rept. 93–151) and the House Committee on Interstate and Foreign Commerce (H. Rept. 931107) on Magnuson-Moss Warranty-Federal Trade Commission Improvement Act stated that the amendments to the Federal Trade Commission Act made by title II of that Act were not intended to preempt State and local jurisdiction: Now, therefore, be it Resolved by the House of Representatives (the Senate concurring), That the Congress has not delegated to the Federal Trade Commission any authority to preempt the laws of the States and their political subdivisions. (Concurrent resolutions do not become law; they may not embody legislation. Riddick, Senate Procedure 277 (1974)). The relevant paragraphs of the reports referred to in the resolution read: "S. Rept. 93-151: In considering certain arguments against expansion of the Commission's jurisdiction, the Committee was mindful of the danger of making the Commission alone responsible for eradicating fraud and deceit in every corner of the marketplace. This is not the Committee's intent in expanding the jurisdiction of the Commission, State and local consumer protection efforts are not to be supplanted by this expansion of jurisdiction. In many situations the Commission, through its Consumer Advisory Boards and expanded field office operations would work concurrently with State and local governments to attack in their incipiency flagrant consumer abuses. However, this expansion of jurisdiction, in conjunction with the authority to seek injunctive relief, will enable the Commission to move against local consumer abuses where State or local consumer protection programs are nonexistent or where fly-by-night operators hit one local area and then quickly move on to another before local officials can take actions. (For similar expansion of authority see section 206 and 209 of title II of this bill.) H. Rept. 93-1107: The amendments made by section 201 will permit more effective regulation of the marketplace by the FTC by placing within its reach unfair or deceptive acts or practices which, although local in character, affect interstate commerce. The expansion of the FTC's jurisdiction made by this section 201 is not intended to occupy the field or in any way to preempt State or local agencies from carrying out consumer protection or other activities within their jurisdiction which are also within the expanded jurisdiction of the Commission. Although these paragraphs may be interpreted in the way the sponsor and cosponsors of the resolution did, to mean that FTC regulations may not preempt conflicting State laws, they may also be interpreted to mean merely that the States may continue to legislate in areas over which the FTC has jurisdiction, provided such State legislation does not conflict with FTC regulations. (In some areas, Federal regulation is so pervasive as to preclude the States from supplementing it. City of Burbank v. Lockheed Air Terminal, 411 U.S. 642, 93 S.Ct. 1854, 36 L.Ed.2d 547 (1973).) In any event, the Congressional reports do not have the effect of law, and the Magnuson-Moss Act itself is silent on the issue of FTC preemption of State laws. Therefore, the answer must be sought elsewhere. The Supremacy Clause of the United States Constitution (Art. VI, cl. 2) reads: "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." "Laws of the United States" includes Federal agency regulations promulgated pursuant to such laws. Fry v. United States, 421 U.S. 542, 95 S.Ct. 1792 (1975); Public Utilities Commission v. United States, 355 U.S. 534, 78 S.Ct. 446, 2 L.Ed.2d 470 (1958). |