University of New Orleans
ScholarWorks@UNO
Marketing and Logistics Faculty Publications
Department of Marketing and Logistics
10-1-1982
Partisan Presidential Change and Regulatory
Policy: The Case of the FTC and Deceptive
Practices Enforcement, 1938-1974
Jane S. Cromartie
University of New Orleans, [email protected]
Joseph Stewart Jr.
Clemson University
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Recommended Citation
Stewart Jr., Joseph, and Jane S. Cromartie. “Partisan Presidential Change and Regulatory Policy: The Case of the FTC and Deceptive
Practices Enforcement, 1938—1974.” Presidential Studies Quarterly 12, no. 4 (1982): 568–573.
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PARTISAN PRESIDENTIAL CHANGE AND
REGULATORY POLICY: THE CASE OF THE FTC AND
DECEPTIVE PRACTICES ENFORCEMENT, 1938-1974
by
JOSEPH STEWART, JR.*
Fellow
Culpeper
Rice
in the Social
Sciences
University
and
Assistant
Science
of Political
Professor
of New
University
Orleans
and
JANE S. CROMARTIE
Associate
University
of New
Abstract
regulation
provides
an
Orleans
from political
tain policies
influences.1
reasons,
But, for both legal and political
are active in the affairs of "in
Presidents
and
commissions
regulatory
dependent"
areas of policy responsi
the commissions'
puts it, "the known
bility.2 As Kohlmeier
to
from Wilson
evidence of interventions
that Presidents, Dem
Nixon demonstrates
have not disasso
ocratic or Republican,
from the substance of
ciated themselves
The President
has such an
regulation."3
the commissions
that
influence
upon
that "independence
concludes
Bernstein
from executive
control
of commissions
has become highly qualified."4 Kohlmeier
when he asserts, "the
is more definitive
politics of regulation begins at the White
brief piece of research tracks the
in the Federal
Trade Commis
patterns
sion's (FTC) issuance of off icial deceptive
and the changes that
complaints
practices
occur with partisan
in the
transitions
it is found,
the
White House.
Generally,
issues an increasing number of of
FTC
each year there is a Re
ficial complaints
a declining
and
President
publican
number in each year there is a Democratic
President. Activity during the Truman ad
the only systematic
ministration
provides
this pattern.
deviation from
A look at the literature on deceptive
This
practices
of Marketing
Professor
explana
tion for the overall pattern. And, a look
at the historical record provides plausible
the Truman-era
both
for
explanations
the question
and
deviations
of how
are able
to exert
their in
Presidents
research
Suggestions
for future
fluence.
scholars are presented.
by Presidential
House."5
administrations
As Presidential
change,
particularly when the party in the White
or policy
the activities
House
changes,
of
commissions
decisions
regulatory
to change. Wel
also be expected
might
born
One of the major goals of the architects
of our system of regulatory commissions
was to insulate the administration
of cer
New
notes:
administrations
.
.
.
come
to
power with a sense of regulatory prob
on
lems informed by party orientations
and stimulated
economic
by
questions
the interests to which they are sensitive.
in transi
When
party control changes
are
that much
the pressures
tion,
*
on this manuscript
was
work
Stewart's
sup
Inc.
Foundation,
ported by the Charles E. Culpeper
of New Orleans.
He is on leave from the University
thank Steve Shull, Mike McDonald,
The authors
for their comments,
heeded and
and Charles Bullock
on earlier drafts of this manuscript.
unheeded,
stronger.6
568
FTC AND DECEPTIVE PRACTICES ENFORCEMENT | 569
the pat
This research seeks to outline
tern in one particular area of regulatory
activity over a thirty-seven year span and
on the differences
to focus particularly
or Republicans
found when Democrats
White
House.
the
occupy
Specifically,
this work looks at the changes in the Fed
eral Trade Commission's
(FTC) issuance
of deceptive
when
practices
complaints
House
the party in the White
changes
this study is
from 1938 to 1974. Although
narrow
in scope,
it suggests
important
lines of research for those
and neglected
in Presidential
interested
policy-making,
in general,
and the
politics
regulatory
these
FTC in particular. Before examining
a
brief
of
the
outline
changes, however,
FTC's
and enforcement
responsibilities
efforts is in order.
complaint by the FTC. These are chosen
at the discretion of the Commission,
and
thus these choices are subject to political
influences.
As
acts
or
practices
in
com
consumer."10
The basic means
the FTC
by which
sought to exercise this explicit power from
1938 through 1974 was by means of the is
suance of an official complaint.11 Appli
are filed in large
cations for complaints
numbers
by
businesses,
consumers,
and
FTC
staffers who
of
allege violations
Wheeler-Lea.
Only a fraction of these ap
is selected for action
plications,
however,
in the form of the issuance of a formal
lines.12
party
along
"Common
"anti-business"
regulation-oriented,
Dem
ocratic Presidents,
the FTC would
issue
more
There
is evidence,
complaints.
though, that in regard to the policy focus
of this research,
be
may
Republicans
more
com
supportive of issuing official
Nadel notes
plaints than are Democrats.
that:
commission
in
involved
merce" unlawful.9 Thus, the Commission
was specifically
to "center its
empowered
on the direct protection
attention
of the
analysis
influences
that
then,
suggest,
knowledge"
might
under
the
relatively
"pro-business"
the FTC would
Presidents,
Republican
issue fewer complaints;
under the more
The
The FTC is charged with implementing
the premise
that "the consumer
is to be
full and accurate
assured
information
which will permit him to make a reasoned
choice in the marketplace."7
Based on this
over
FTC
took
the
charge,
jurisdiction
advertising practices to protect the public
In 1931, though,
the Supreme
interest.
Court ruled that the FTC lacked jurisdic
tion over false advertising
unless it could
first prove that the advertising
damaged
or competitor.8
then
competition
Only
an issue.
did the public interest become
The Court did suggest, however,
that the
to Congress
Commission
for
appeal
broader powers. Subsequently,
Congress
the Wheeler-Lea
Act
of
passed
1938,
which made "unfair methods
and unfair
deceptive
run
may
The FTC and Deceptive Practices
or
noted
earlier, Welborn's
that these political
suggests
became
false
in no
way
antibusiness.
its policies
aim of
rather
petitors
commission
was
the FTC
the
Rather,
to protect
therefore
com
. . . The
consumers
than
was
. . .
cases
to this area,
In its approach
was
increasingly
advertising
more
of
a
in a system of self-regula
participant
tion than an exclusive regulator itself.13
summarizes
his arguments
Stone
along
the same line by stating that "business
against
sought administrative
protection
conduct which was bad for the industry as
a whole
or which
was
uneconomic."14
In
to the extent that
light of these arguments,
are pro-business,
they would
Republicans
be expected to support FTC activity in the
deceptive practices policy area. Thus, this
research examines the proposition
that the
annual number of official deceptive prac
issued will vary with the
tices complaints
in the White
House,
party
increasing
are in office,
when Republican
Presidents
are
Presidents
declining when Democratic
in office.
If changes appear in the FTC's
issuance of deceptive practices complaints
to party turnover
in the
corresponding
White House,
it will suggest a relationship
of the
the partisan occupation
between
White House and the regulatory policy in
the
areas
of
practices.
deceptive
Data
The
number
of
official
complaints
I PRESIDENTIAL STUDIES QUARTERLY
570
charging any form of false adver
and/or
under
tising
misrepresentation
Secton 5 of the FTC Act as amended by
Wheeler-Lea
is collected by year from the
"Federal Trade Commission
Docket
of
in the Trade Regulation
Re
Complaints"
Clear
porter published by the Commerce
1938
ing House. The time period covered,
to 1974, includes the entire span when the
was the
issuance of official
complaints
tool in this policy area
major enforcement
for the FTC. Over this time span, four
distinct periods of partisan control of the
are present:
White
House
1938-1952,
and 1969-1974.
1953-1960,
1961-1968,
issued
Findings
shows the number
Figure 1 graphically
of official
issued annually.
complaints
The data points show a wide fluctuation
in activity from a zenith of 374 official
issued in 1940 to a nadir of 30
complaints
in 1947. Overall,
there appears
however,
to be a downward
trend in activity.15
to the point of this research,
More
1 is divided
into four
however,
Figure
parts to reflect the partisan control of the
House
the time period
White
during
covered.
trend lines are
Additionally,
drawn for each period of partisan control
to summarize
the overall direction
in the
number
of official
issued
complaints
within each set of years.16
A
of the trends across
comparison
control of
periods of different
partisan
the White House
reveals patterns consis
tent with the proposition
stated earlier.
The trend in the number of official decep
tive practices
issued goes
complaints
ad
sharply downward during Democratic
ministrations
and rises notably during Re
publican administrations.
After
the immediate burst of activity
that might be expected to follow the ad
the FTC
vent of newly clarified authority,
com
fewer official
issued significantly
ad
plaints through the Roosevelt-Truman
The high and low points of
ministrations.
activity noted earlier both came during
this
period.
On
the
average,
each
succeed
ing year from 1938 through 1952 saw ap
com
twenty fewer official
proximately
plaints issued than the previous year. This
in spite of an
is present
average decline
trend found at the end of this
upward
era when Truman held office.
Democratic
If one separates the Roosevelt
and Tru
man years, the average decline during the
Roosevelt
years is approximately
thirty
three official complaints
per year and the
average increase during the Truman years
is
approximately
seven
cases
per
year.
Thus, while the findings hold with the ex
for Democratic
FTC
Presidents,
pectation
activity clearly deviates from expectations
Dur
during the Truman administration.
ing that time the trend in activity ismore
like what is expected during Republican
administrations.
era pro
The Eisenhower
Republican
duces a significant upward trend in offi
cial complaints
issued as per the expecta
the FTC issued
tions. On the average,
more
sixteen
approximately
complaints
ad
during each year of the Eisenhower
ministration
than it had in each previous
the data points cluster
year. Furthermore,
very closely around the trend line and ex
hibit none of the divergence noted during
era. It should be
the Roosevelt-Truman
that
the
trend
however,
noted,
upward
era
the Eisenhower
is much
during
than the trend noted
during
sharper
Truman's
tenure.
However
"Republican
like" the FTC activities were when Eisen
hower took office,
they were transformed
even more away from the Roosevelt Dem
time
ocratic pattern during Eisenhower's
in the White House.
trend during Demo
The downward
is reestablished
administrations
cratic
the
Kennedy-Johnson
period. The
during
FTC issued an average of eleven fewer
in each succeeding year of this
complaints
the
time span. Furthermore,
although
as tightly
data points
do not cluster
around the trend line as they did during
the Eisenhower
era, there is no apparent
the Kennedy
break in the trend between
as was
Johnson
administrations
and
found between the Roosevelt
and Truman
the
years. By the end of this period
number of FTC official
prac
deceptive
issued had fallen to a
tices complaints
level unseen since the advent of the Eisen
hower administration.
the Nixon-Ford
administra
Finally,
the charac
tions (through 1974) produce
FTC AND DECEPTIVE PRACTICES ENFORCEMENT 571
|
Figure
Official
Practices
Deceptive
1
Issued
Complaints
Roosevelt-Truman
1938
-i?i?i?i?i???i?i?i?i?i?i?ri
44
40
42
46
by the FTC, 1938-74
i Nixon-Ford
Kennedy-Johnson
r
48
50
52
n?i?i?i?i?r
56
54
58
n?r~r
64
62
n?i?r
66
68
70
n?i?i?r
72
74
YEARS
teristic Republican
averages,
however,
upswing.
only
The
increase
six official
issued per year.
complaints
This is far below the trend noted during
terms and is more
in line
Eisenhower's
was
with
what
observed
the
during
Truman
years.
Discussion
approximately
In sum,
the proposition
advanced
earlier that the volume of official decep
tive practice complaints
issued by the FTC
would decline during Democratic
admin
istrations and rise during Republican
ad
I PRESIDENTIAL STUDIES QUARTERLY
572
is generally confirmed.
The
ministrations
years of differing partisan control reveal
clear trends in the data. The views of
Nadel and Stone concerning
this particu
lar
area
of
to
appear
regulation
con
be
firmed.
idea of the
Likewise, Welborn's
in the
of partisan
importance
change
in these policy
White House
is confirmed
at least two items
outputs. Nevertheless,
remain for discussion.
First, how can one
explain the uncharacteristic
upward trend
how
during the Truman
years? Second,
in the White House
do partisan changes
lead to policy output changes?
To address these questions we focus on
"the principal
influ
tool of presidential
. . . the
ence
appointing
and
process"17
In
essence,
the
then,
answer to the first question appears to be
that it was
for the trend
impossible
established
years to
during the Roosevelt
continue. Any further diminution
of ac
total inactivity.
tivity would have meant
Therefore
the appointment
of almost any
living person to the FTC by Truman was
amount of
bound to interject a noticeable
in FTC
energy. In this sense the upswing
activity during the Truman years may be
as
viewed
a natural
return
to
a minimal
level of activity
that might
be expected
from a body with the FTC's responsibili
ties. By appointing
with at
commissioners
a
least
"modicum
Truman
of
revived
slightly
in which
mission
lost
counts,
a
the
second
reform
by all ac
interest."22
Truman
Furthermore,
for
competence,"21
a comatose
com
"Roosevelt,
that
query.
suggests
Truman's
is responsible
an
answer
for
Reorganiza
tion Plan 8 of 1950 provided for the chair
men of the regulatory commissions
to be
and serve at
"appointed by the President
his
pleasure."23
dential
Thus,
transition
each
included
partisan
in the
by a change
accompanied
of the FTC. The FTC, more
chairmanship
than any of the other regulatory commis
sions, has given general executive powers
to its chairman and thereby increased his
powers.24
Presi
in this analysis
It
seems
plausible
to
argue,
then, that even though Presidents may not
be acutely concerned with the FTC or de
the differ
ceptive practices enforcement,
ent orientations
of Democratic
and Re
in this regulatory pol
publican Presidents
icy area lead them to name different types
of chairmen who can then exercise their
executive powers to effect policy outputs
consistent with partisan preferences.
Implications
ex
record pro
amine the relevant historical
vided by Graham
and Kramer.18
Their
valuable work offers plausible answers to
Graham
both
and
First,
questions.
Kramer note that "Truman
inherited an
FTC"19 which he
inbred and moribund
was forced to change,
in spite of his in
terest in the status quo, because of death,
and rejection of a continua
resignation,
Senate of incumbent
tion by the U.S.
Commissioners.20
was
This
work suggests several potentially
lines of research for scholars
profitable
interested in the Presidency,
policy mak
ing, and regulation. First, it is clear that
the President
does have an influence on
what the FTC does in deceptive practices
Other
enforcement.
commissions
and
other areas of policy responsibility
could
be examined
to ascertain whether or not
Presidential
influence
is more
broadly
manifest.
Of course, broader examinations
could
also try to assess the relative impact of
other actors in the policy process vis-a-vis
the President.
Those who
to
subscribe
Seidman's
that "these commis
position
sions have been transformed
into arms of
Congress"25 would certainly expect some
impact from that branch of government.
A comparison
of Presidential
and Con
influences could add to the lit
gressional
erature which seeks to ascertain whether
or Congress
the President
is "closer" to
these "independent"
commissions.26
those who see the intended
Likewise,
of
subjects
regulation as "owning," unduly
or "capturing" the
influencing,
co-opting,
commissions27
seek to
regulatory
might
measure
on
group
impact
regulatory
This could
policy vis-a-vis the President's.
lead to a more explicit description
of how
interest groups work
and in
through
fluence
on
Presidential
policy making
these
matters.
In sum, this work suggest that Presi
dential scholars might be well advised to
seek patterns and changes
in policy out
FTC AND DECEPTIVE PRACTICES ENFORCEMENT 573
|
effect.
puts as indicators of Presidential
By examining policy outputs over time, as
is done here with official deceptive prac
tice complaints,
the actions of individual
can be placed in context, and
Presidents
such as partisanship,
forces,
important
as explanatory
will
variables.
emerge
are
Even when
such broad explanations
not possible,
tracking policy outputs over
to important
time could alert scholars
changes which occurred and focus efforts
for those seeking to explain the historical
import of particular Presidents.
Notes
M. Welborn,
1. David
"Presidents,
Regulatory
and Regulatory
Jour
Commissioners
Policy,"
nal of Public
Law, Vol.
1, 1966, p. 3;
15, No.
Grant McConnell,
Private Power
and American
New York: Vintage
Books,
1966,
Democracy.
p. 289.
H. Bernstein,
2. Marver
Business
Regulating
by
Commission.
Princeton:
Princeton
Independent
Emmette
Press,
1955, pp. 109-113;
University
S. Redford,
"The President
and Regulatory
Texas Law Review,
Vol.
Commissions,"
44,
1965, pp. 288-321.
3. Louis M. Kohlmeier,
New
Jr., The Regulators.
York: Harper & Row,
1969, p. 46.
4. Bernstein,
op. cit., p. 131.
5. Kohlmeier,
op. cit., p. 36.
6. David
M. Welborn,
Governance
of Federal
Knoxville:
of
Regulatory
Agencies.
University
Tennessee
Press,
1977, p. 73.
7. Dorothy
"The Federal Trade Commis
Cohen,
sion and the Regulation
of Advertising
in the
Consumer
Vol.
Interest," Journal of Marketing,
33, January,
1969, p. 40.
v. Raladam
8. FTC
51 S. Ct.
597
Company,
(1931).
9. Emphasis
added.
legislative
politics
"The FTC
Stone,
An Examination
Vol. XXI,
Policy,
10. Pep Boys ?Manny,
For a brief account
of the
see Alan
of Wheeler-Lea,
and Advertising
Regulation:
of Agency
Public
Failure,"
1973, pp. 203-234.
Spring,
Moe
and Jack, Inc. v. FTC,
122 F. 2d 158 (1941)
com
of the issuance of an official
primacy
tool ended with
the
plaint as an enforcement
Act (PL 93-637)
passage of the Magnuson-Moss
President
Ford
into
law
in
which
signed
to
1975. This Act directed
the FTC
January,
than had previously
engage in more rule-making
11. The
been
12.
13.
14.
15.
com
the case,
official
deemphasizing
tool.
plaints as an enforcement
fn. 6.
Supra,
Mark V. Nadel,
The Politics
Pro
of Consumer
tection.
1971, p.
Bobbs-Merrill,
Indianapolis:
27.
Stone, op. cit., p. 221.
A simple bivariate
of number of of
regression
over time indicates an average
ficial complaints
=
decline
of 3.13 complaints
per year (r2
.20)
over this span. However,
this figure obviously
masks
the surges and declines
in a
apparent
of the data points and does
visual examination
not reveal the full richness of the data.
16. The trend lines are estimated
in
using multiple
as demonstrated
time series analysis
terrupted
S. Lewis-Beck
and John R. Alford,
by Michael
"Can Government
The Coal
Regulate
Safety?
American
Political
Mine
Science
Example,"
Vol. 74, September,
Review,
1980, pp. 745-756.
ex
The equation,
available
from the authors,
17.
18.
73 percent
of
the variance,
and
the
plains
Durbin-Watson
statistic
(1.90) reveals no signi
ficant autocorrelation
problem.
Bernstein,
op. cit., p. 109.
James M. Graham
and Victor H. Kramer, Ap
to the Regulatory
The
pointments
Agencies:
Federal
Communications
Commission
and the
Trade Commission
Federal
Com
(1949-1974).
on Commerce,
94th Cong.,
mittee
2nd Sess.,
1976.
April,
Ibid., p. 3
Ibid., P. 3-4.
Ibid., P. 5.
P. 2.
Ibid.,
Ibid., P. 10.
19.
20.
21.
22.
23.
24. Welborn,
op. cit., pp. 21-22.
Governance,
25. Harold
Position
and Power,
Politics,
Seidman,
3rd ed., New York: Oxford
Press,
University
1980, p. 259.
an argument
26. For
in
Presidential
regarding
see Joseph
fluence
E.
James
Stewart,
Jr.,
and Zona
and
"Presidential
Taylor,
for
Support
Independent
Commissions:
of the
Implications
Western
Political
Process,"
Budgetary
Quarter
1982, forthcoming.
ly, Vol. XXV,
September,
see Edward
27. For example,
F. Cox,
C.
Robert
and
John E.
The Nader
Schulz,
Fellmeth,
on the Federal
New
Trade Commission.
Report
York: R. W.
The In
Baron,
1969; Fellmeth,
terstate
Commerce
Omission.
New
York:
The
J. Green,
1970; Mark
Grossman,
ed.,
Makers.
New
York:
Grossman,
Monopoly
with Beverly
C. Moore,
Jr. and
1973; Green
Bruce
The
Closed
Wasserstein,
Enterprise
for
Center
the
D.C.:
System.
Washington,
1972; and Kohlmeier,
Law,
Study of Responsive
op. cit.
Anderson
Congressional
Regulatory