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Consumer Protection Agency - Consumer Protection/Regulatory Reform Message
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Consumer Protection Agency - Consumer Protection/Regulatory Reform Message
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John O. Marsh Files (Ford Administration)
John Marsh's General Subject Files
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U.S. Congress. 1789-
Consumption (Economics)
Presidential messages
Regulatory reform
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1975-03-31
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1975
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1975-03-01
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1975
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The original documents are located in Box 10, folder "Consumer Protection Agency -
Consumer Protection/Regulatory Reform Message" of the John Marsh Files at the Gerald
R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 10 of the John Marsh Files at the Gerald R. Ford Presidential Library
Tues 4:00 pm 1
[3/75?]
V/P
INDEX TO CONSUMER MESSAGE OPTIONS
I.
CONSUMER REPRESENTATION PROGRAM
I-A Consumer Representation Act of 1975
I-B Departmental and Agency "Office of Consumer
Representation"
I-C Office of Consumer Affairs Restructuring
I-D Consumer Benefit Analysis
II.
CONSUMER/REGULATORY REFORM PROPOSALS
II-A Regulatory Reform Commission
II-B Surface Transportation Reform
II-C Air Transportation Reform
II-D Financial Institutions Act
II-E Reform of Robinson-Patman Act
II-F Flexibility in Food Standards
II-G Conference on State-Local Regulatory Reform
II-H Support for Special Senate Committee on Regulatory
Reform
II-J Streamlined Hearing Procedures under FFDC Act
FORD is LIBRARY SERALD
Index to Consumer Message Options
Page 2
III.
CONSUMER LEGISLATIVE INITIATIVES
III-A Repeal of Fair Trade Laws
III-B Prohibit Pyramid Sales
III-C Decision on Federal No-Fault
III-D Review of Antitrust Immunities
III-E Announce Intention to Veto Bills Raising Consumer
Prices
III-F
Changes in Federal Reporting Act and Federal Register
III-G Remove Impediments to Advertising Prices of
Prescription Drugs
III-H National Appliance and Motor Vehicle Labeling Act
III-J
Support Drug Identification Act
III-K Medical Services Legislation
III-L Consumer Product Test Methods Act
IV.
CONSUMER (NON-LEGISLATIVE) INITIATIVES
IV-A Improved Quality Grading Systems
IV-B Improved System for Disseminating Product Recall
and Hazard Information and Follow-Up
I. CONSUMER
REPRESENTATION
PROGRAM
)
Consumer Message Option I-A
Proposal: Consumer Representation Act of 1975
This would be Administration legislation which would combine many
of the features of Office of Consumer Affairs expansion and creation
of Consumer Representation units within Federal Departments.
Title I would create an Office of Consumer Affairs within the Executive
Office of the President. This Office will have responsibility for coor-
dinating the activities of the individual consumer representation offices
each agency would be required to e stablish by Title II. The Office will
continue to fulfill the functions already assigned by Executive Order
No. 11583 and would also perform the functions assigned to the President's
Committee on Consumer Interests in Executive Order No. 11566 of
October 26, 1970.
Title II would establish within each federal agency an office of consumer
representation. Each office would be authorized to represent consumer
interests that may be affected by agency action, either by representing
an interest of consumers as an advocate in a proceeding, or by submitting
views, or by requesting that agency to prepare a consumer impact
evaluation. The choice of which way to proceed is left generally to the
Office's discretion.
This new approach is designed to create far greater flexibility in the
choice of suitable means to represent consumers. At the same time,
this new flexibility is offered within the framework of existing agency
structures. Because each office is a part of the agency itself, it will
have full access to all of the information and necessary expertise needed
to insure that attention is focused upon consumer needs. It may use this
information to call for and help develop consumer impact statements as
part of OMB's Inflationary Impact Statements. If suitable, the office
may choose a party advocate's role in proceedings or other advocacy
before the agency, but without engendering the excess of internecine
struggles between agencies (as under the Consumer Protection Agency
proposal). Yet the Title still makes it possible for the office to appear
in court in appropriate proceedings.
Consumer Representation Act of 1975
Page 2
Pro:
Such legislation seeks to provide a new approach to balanced,
realistic and effective federal protection for consumer interest
by assuring consumers a voice in government without creating
a massive, expensive, and potentially disruptive and uncon-
trollable new bureaucracy. This Act would provide the President
with significant public and political credit, establish for him
a lead consumer position and provide our allies with a positive
consumer bill to support. The Act would also provide excellent
leverage for vetoing undesirable CPA legislation.
Con:
New spending initiatives would be entailed.
Cost:
Decision:
Pro:
(Favored by: Baroody, Knauer
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
Consumer Message Option I-B
Proposal: Statutory establishment of an Office of Consumer
Representation within the various independent agencies
and Executive branch departments. (This could be
done via Executive order within the departments).
This could either stand as a separate proposal or
become part of the Consumer Representation Act of 1975.
The existing Office of Consumer Advocate within the Civil Aeronautics
Board could be used as a model. The CAB's Consumer Advocate has
the authority to participate in agency proceedings in the same manner
and to the same extent, subject to the same requirements and limitations,
as a private party. Each Office of Consumer Representation would have
that authority granted it by agency regulations. The head of each agency
would have ultimate responsibility for determining the role of the
Consumer Advocate in light of the underlying functions of the particular
agency involved.
Although some of the federal agencies and departments have offices
charged with handling consumer complaints, the major shortcomings are
the complete absence of a consumer representation unit in most agencies
and departments, and the inadequate staff resources in those offices
already in existence. These offices would cooperate and coordinate with
the various operating units within its department or agency and would be
responsible for insuring that consumer benefit data be considered by its
respective agency in its decision making process. For this Administration
initiative to be received as a credible and viable alternative to CPA, it would
be designed to operate in coordination with the enhanced Office of Consumer
Affairs operation.
Pro:
The establishment of various individual Offices of Consumer
Representation, which would be reasonable in size, substantially
accomplished within existing resources and especially if packaged
with an enlarged, amicus OCA, would provide the Administration
with a viable and substantive alternative to CPA. It would provide
visible proof of the President's commitment to consumer repre-
sentation within the governmental process.
Con:
An increased staff necessary to accomplish the objectives of the
separate offices would require sizeable spending initiatives.
Statutory establishment of an Office of Consumer
Page 2
Representation within the various independent agencies
and Executive branch departments.
Cost:
Decision:
Pro:
(Favored by: Knauer & Baroody as part of
Consumer Representation Act of 1975).
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
Consumer Message Option I-C
Proposal: Statutory establishment of an Office of Consumer Affairs
within the Executive Office of the President
This office is to be headed by a Director appointed by the President.
Generally, the Director
of the Office of Consumer Affairs would perform most of the amicus
type functions outlined in the Brown Bill - (H. R. 13810) - and have
the same functions as spelled out in Executive Orders 11583 & 11566.
A primary function of the Office would be to publish and widely
distribute a Consumer Register to inform consumers of Federal
activities of interest to them in language which is readily understand-
able to the layman. The Office would also have the responsibility of
transmitting consumer complaints to the appropriate agencies within
the Federal government.
As an interim initiative, the President via Executive Order would
expand the present Office of Consumer Affairs. Such an expansion
could entail a staff increase of about 35 (most of whom would be
lawyers, economists and support personnel) and transfer the Consumer
Product Information Center from GSA to OCA. The budget of such a
combined and expanded operation would be about $4 million--only 40%
of the proposed CPA and $2.5 million of which is already in the FY'75
budget. Therefore, such an action would entail only a $1.5 million
FY'76 budget increase.
This augmentation of OCA could be done quickly in recognition of the
importance of consumer representation to the Ford Administration.
Pro:
Virginia Knauer's office presently comments and occasionally
testifies on certain proposed regulations and legislation.
However, her resources are thin, particularly in light of her
other responsibilities on the Energy Resources Council and the
Council on Wage and Price Stability as well as in such Office
of Consumer Affairs program areas as consumer complaint
handling, consumer education and stimulating voluntary
business-consumer initiatives that she cannot make the broad,
visible and substantive impact necessary in this area.
I-C,
Statutory establishment of an Office of Consumer Affairs
Page 2
within the Executive Office of the President
Such an expansion would not only permit OCA to more
effectively carry out its duties but would also provide
visible proof of the President's pro-consumer commitment,
and provide extensive leverage for legislative negotiations
as well as a formidable justification for vetoing overreaching
legislation especially in conjunction with the other agency offices.
This program would obtain for the President significant public
and political credit. This option would be strongly supported
by Mrs. Knauer and many consumerists. As a substitute for
CPA legislation it would command strong business support as
well.
Con:
This would be a new spending program. It is questionable
whether such a step (especially taken in isolation) would thwart
Congressional appetites for a CPA. In addition, Congress
could make undesirable changes in the proposed legislation.
Cost: $1.5 million
Decision:
Pro:
(Favored by: Knauer, Baroody - in conjunction
with the individual agency offices preferably as
part of the Consumer Representation Act of 1975.
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
Consumer Message Option I-D
Proposal: Consumer Benefit Analysis
Each Executive branch department and each independent agency
would be required to prepare a Consumer Benefit Analysis setting
forth the direct and indirect costs to consumers as well as the
benefits of any proposed legislation or regulations which may have
a significant impact on consumers. The Consumer Representative in
each agency would be responsible for insuring that this material
is considered in the agency's decision-making process.
Pro:
This, in effect, could become an adjunct to or name change
of OMB's "Inflation Impact Statements. "
This proposal would receive wide political support.
Con:
Already adequately provided for in OMB "Inflation Impact
Statements. 11
Cost:
Decision:
Pro:
(Favored by: Baroody, Knauer)
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
II. CONSUMER/
REG. REFORM
PROPOSALS
Consumer Message Option II-A
Proposal: Regulatory Reform Commission
Although a Regulatory Reform Commission would have a broad
mandate to review the entire spectrum of regulatory activity, it
would also be specifically charged with examining agency
responsiveness to consumer interests. In addition, the legislation
would provide for review of not only independent agencies, but also
any other semi-autonomous agencies, bureaus, and departments
which have a regulatory function.
You could make the point in your message that until such a commission
reviewed the work of the various agencies and made recommendations
it would be inappropriate to create yet another independent agency, as
CPA legislation would do. Thus, you would be preserving your option
of later endorsing an independent agency if this commission's work and
the other steps you propose in this Message are not sufficient.
You could also make the point in your message that you have not been
inactive since submitting reform legislation last Fall. Rather you are
prepared to submit during the next few months specific regulatory
reform proposals to Congress which should be given the highest
priority by both the Commission and the Congress.
Pro: The widespread recognition of the need for regulatory reform,
following your proposal of last October, is apparent. By
listing regulatory reform as part of your consumer program
you will be making the logical linkage between the two and,
more importantly, harnessing the political energy behind each.
Also your imminent submission of specific legislation will
stimulate action in this area and put you in a strong leadership
position.
Con:
Commissions are generally ineffective, producing studies which
are usually ignored. Proposing a Commission will be viewed
by some consumer advocates as a dilatory tactic which merely
evades the real issue. The Administration's support for the
concept of regulatory reform can better be established by either
announcing support for the Special Senate Committee on
Regulatory Reform or submitting significant reform measures
directly and asking for immediate attention rather than further
Commission studies.
Regulatory Reform Commission
Page 2
Cost:
Decision:
Pro:
(Favored by:
Con:
(Favored by:
Hold for further study and consideration
(Favored by:
Consumer Message Option II-B
Proposal: Reform of Surface Transportation Regulation
In no other industry are consumers more at the mercy of outdated
regulation than in our various modes of transportation. While the
Interstate Commerce Commission was created originally to protect
the public from monopoly power of the railroads, today, the
hundreds of rules and regulations established by this agency to
regulate competition cost the consumer an estimated $4-10 billion
annually.
As the result of a 4 month task force effort by DOT, Justice, CEA,
CWPS, and OMB, detailed legislative proposals to modify ICC pricing
practices, liberalize market entry, exit and licensing restrictions
and eliminate antitrust immunities for both rail and trucking would
be ready for submission to Congress by March 21, 1975. A Presidential
message could announce the submission of this legislation and
establish a long term goal of eliminating all unnecessary and costly
government regulations.
PRO:
--Inclusion in a Consumer Message would indicate the kind
of Presidential interest and support needed to get these
measures enacted. and place the President in a strong
leadership role.
--Would cast the issue as a consumer problem thus taking
transportation regulatory reform out of its normally
limited Congressional and Special Interest forum.
CON:
--This issue will receive opposition from truckers and
teamsters and therefore may have some political cost.
-Surface transportation at present is not thought of as a
"sexy" consumer issue and would take some work to arouse
public concern and support.
Cost:
Decision:
Pro:
(Favored by: Baroody, Knauer
Con:
(Favored by:
Holf for future study and consideration
(Favored by:
Consumer Message Option II-C
Proposal: Air Transportation Regulatory Reform
The impact of economic regulation of the airlines by the CAB is even
more evident to the consumer in terms of cost than is surface
transportation regulation. At present, any increase or decrease in
airline fares must be approved by the CAB; all route changes must be
approved; leaving competition among the airlines limited to differences
in services offered and flight frequency. Concrete evidence of the
added cost of regulation may be easily seen in California and Texas
where regulated carriers compete with intrastate carriers which are
not CAB regulated in the same markets. In these cases, fares of the
non-regulated carriers are as much as 40% lower.
To resolve these problems, an Administration task force is currently
developing specific legislative reforms to liberalize both CAB pricing
practices and entry/exit restriction and end antitrust immunities for
the airline industry. A Message would highlight the problems and
costs of CAB regulation and announce forthcoming submission of legis-
lation.
PRO:
--This issue is currently receiving considerable press attention
as a result of the Kennedy hearings, etc. Announcement of
an Administration bill would put the President out front and
capitalize on current public interest.
--To some degree, as in the case of surface transportation,
air carrier reform legislation will require a strong
Presidential commitment which could be signalled in a message.
CON:
--The airlines will object to such legislation.
--The legislation will probably not be ready for formal
submission for a month.
Cost:
Decision:
Pro:
(Favored by: Baroody, Knauer
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
Consumer Message Option II-D
Proposal: Financial Institutions Act
Banks and thrift institutions are among the most highly regulated
businesses in the country. Virtually every aspect of their operations
is regulated. For example, the rates at which these institutions may
pay interest to their depositers are subject to Federally-established
maximums. At present, these laws favor large depositors rather than
the small saver who have less money to invest.,
The Administration is on the verge of resubmitting legislation
seeking to remove outdated constraints on the services and rates
which banks and savings institutions may offer. Such action will
open up new sources of deposits and increase lending power of these
institutions, thus providing some much needed credit to finance
industrial growth and housing construction. In addition, the average
consumer will have a better opportunity to earn an honest return on
his savings investment. A Presidential message could announce sub-
mission and urge enactment.
PRO:
--In the current economic situation, increased savings
dividends would be a popular item in a Consumer Message.
--A message would provide a good vehicle by which to signal
Presidential interest and concern to the Congress.
CON:
--This is not a new legislative initiative--consumers with
a particular interest in this issue could view its resub-
mission with a ho-hum attitude.
Cost:
Decision:
Pro:
(Favored by: Baroody, Knauer
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
II-D (Continued)
Financial Institutions Act
Page 2
Option for Discussion:
Additional consideration should be given to the title of this proposed
legislation. An effort should be made to distinguish this bill from
last year's unsuccessful proposal, preferably by giving this year's
bill a new and more politically appealing title. "Financial
Institutions Act" is bland, dull, staid and sounds too Republican,
big business, banking oriented. Resubmission of a retitled bill
especially one so artfully reconstructed - will avoid many of the
difficulties encountered last year and ehance the prospects of
broader appeal and support and ultimate passage. One suggested
title would be: "Expansionary Credit and Small Investors Act of
1975. "
Consumer Message Option II-E
Proposal:
Announce Legislation Will Be Submitted to Reform the
Robinson-Patman Act
Like "fair trade" laws, the 1936 Robinson-Patman Act denies consumers
the benefit of stiff competition in the stores by making it difficult
for producers to give price breaks they might otherwise offer. The
Act generally forbids a company from selling the same commodity at
different prices to different outlets unless it can conclusively
prove that certain economies of production and distribution permit it
to do SO. Companies subject to the law (the service sector is exempt)
have found it very difficult to satisfy the court's requirement for
proof of innocence and therefore tend to comply carefully. The
legislation to be proposed by Justice will suggest revisions which
preserve a special remedy against anti-competitive price discriminations
while eliminating language, and interpretations, which discourage
legitimate price competition. The existing law is patently anti-
competitive and anti-consumer. Economists, lawyers, and two Presi-
dential Commissions, are in broad agreement that a thorough revision
of the Act is needed.
PRO:
--As part of a program to reduce consumer costs, this action
by the President, would be seen as pro-consumer.
--Presidential leadership is essential if any Congressional
action is to be taken.
CON:
--The proponents of Robinson-Patman--such groups as retail
druggists and retail grocers--will fight any modification
of the Act on the grounds that it helps small businesses
compete against the advantages of large firms buying in
great quantity at low prices.
--It is a complicated issue and one that is difficult to
explain simply to the general public.
Cost:
Decision:
Pro:
(Favored by: Baroody, Knauer
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
Consumer Message Option II-F
Proposal: Provide for easier deviation from food standards in
order to develop new foods
This proposal would amend the Federal Food, Drug, and Cosmetic
Act to facilitate the issuance of such permits for reasonably lengthy
periods to evaluate public acceptance of the new product with clear
criteria stated in the amendment for FDA in the issuance of the
permits.
Pro:
The Report of the White House Conference on Food Nutrition
and Health speaks favorably about encouraging the marketing
of new foods, provided the consumer is not misled or
confused about the identity of what he is buying. A problem
for consumers and marketers arises where a new food
deviates in some way from a food standard, requiring "sub-
standard" or "imitation" labeling, unless the marketer can
obtain a temporary permit to deviate from the standard. No
criteria for such deviation or permission for such permits
can be found in existing law.
Con:
Cost: None
Decision:
Pro:
(Favored by:
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
Consumer Message Option II-G
Proposal: Establish Intergovernmental Task Force on State and
Local Regulatory Reform Leading to a White House
Conference
Following the President's October 8 call for a review of State and
local regulation and restrictive practices, there has been considerable
interest expressed for obtaining additional information on the types
of actions State and local governments might take to remove such
practices. The President's December 4 letter to Governors, Mayors,
and State Legislators urged these officials to review and modify
regulations which unnecessarily restrict competition and raise costs
to the consumer and provided some examples of the kinds of practices
to be reviewed.
In addition to working with the public interest groups (e.g. g. National
Coalition, State Legislators), OMB has been working with other
Federal agencies (Justice, FTC, Productivity Commission, etc.) to
identify and make specific recommendations on "targets of opportunity"
in this area.
The Consumer Message would (1) highlight priority areas of concern
(e.g. g. public utility regulation, insurance and financial institutions
regulation, occupational licensure, certain price-fixing arrangements
and prohibitions against competition (e.g. real estate settlement fees,
drug and eyeglass advertising), building codes, and local transportation
regulation; (2) set in motion an Intergovernmental Task Force including
State and local officials; (3) announce our willingness to provide a
forum for the discussion of these issues and the exchange of information
among interested officials at all levels of government (e.g. White
House Conference).
Pro:
Continues momentum of past Presidential action.
Gives Presidential leadership to a growing bipartisan consumer
concern.
Indicates a cooperative means of working with State and localities.
Con: Not a major result-oriented event.
Question could be raised as to whether the Federal government
should be playing a major role in this area.
II-G (Continued)
Establish Intergovernmental Task Force on State and
Page 2
Local Regulatory Reform Leading to a White House
Conference
Cost:
Decision:
Pro:
(Favored by: Baroody, Knauer
Con:
(Favored by:
Hold for further study and consideration
(Favored by:
Consumer Message Option II-H
Proposal: Announce Administration Support for Special Senate
Committee on Regulatory Reform
The Senate has action underway to create a joint Commerce-
Government Operations Committee to review government regulation.
It is planned as a 1 1/2 year effort with a budget of $750,000. This
is their substitute for a National Commission on Regulatory Reform.
Indications are that it could provide a useful vehicle for airing a
number of difficult regulatory issues.
Pro: Allows Administration to voice support for a "regulatory
reform commission" effort and state its views that such a
committee can be a vehicle by which to review forthcoming
Administration legislative proposals for reform (e.g. g.
surface and air transportation).
Permits the President to provide his views that such a
group should not be an excuse for inaction but rather a
vehicle for change.
Con:
Will more or less signal Administration non-support for
creation of a National Commission on Regulatory Reform.
Cost:
Decision:
Pro:
(Favored by:
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
Consumer Message Option II-J
Proposal: Streamline hearing procedures under the Federal Food,
Drug and Cosmetic Act
This proposal recommends that the hearing provisions of the FFD&C Act
be amended in order to accelerate the hearing process without injuring
the necessary due process protection of affected parties. (The recom-
mendation of the Administrative Conference would be a good starting
point).
Pro:
The Administrative Conference of the U.S., affected industry
and consumer advocates have, from time to time, criticized the
prolonged hearing procedures under the Federal Food, Drug, and
Cosmetic Act, hearings which in some cases (food standard
hearings primarily) have lasted for years.
Con:
Cost: None
Decision:
Pro:
(Favored by: Baroody, Knauer, DHEW, FDA)
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
III. CONSU MER
LEGISLA TIVE
INITIA TIVES
Consumer Message Option III-A
Proposal: Repeal federal law allowing for state resale price
maintenance laws (with fair trade laws)
This proposal would reiterate the Administration's support for
Senator Brooke's bill to repeal the Miller-Tydings Act (1937) and
the McGuire Act (1952) which permit States to establish laws allowing
manufacturers to dictate the retail prices at which their merchandise
can be sold without being in violation of the Federal Antitrust Laws.
These are the Resale Price Maintenance Laws or "Fair Trade Laws
as they are generally known. Basically, these laws allow a manu-
facturer to enter into a contract with one buyer at a set price and
this agreement will be binding on all retailers who sell the product
in that state. While it has been argued that these laws keep preda-
tory retailers from drawing more than their share of the market by
"undercutting" other businesses, in reality the laws have allowed
manufacturers to set their prices at an artificially high level.
Pro:
The Department of Justice has estimated that resale price
maintenance increases prices on fair traded goods by 18
to 27 percent. The elimination of these laws should save the
consumer between $1. 5 and $3 billion a year.
Additional Presidential attention will bring national attention
to the problem, thus creating public pressure on both Congress
and State legislatures to take action.
Would again exhibit Congressional/Executive Branch coopera-
tion by emphasizing Administration support for Senator Brooke's
initiative.
Con:
President has already endorsed this action, therefore, mention
in a Consumer Message would simply be a re-statement of
support.
Cost: Enforcement costs only
Decision:
Pro:
(Favored by: Baroody, Knauer)
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
Consumer Message Option III-B
Proposal: Prohibit pyramid sales transactions
This proposal would provide for the prohibition of pyramid sales
transactions (transactions in which generally the incentive for the
buyer of a distributorship is the prospect of monetary gain from
the sale of further distributor ships) in inter state or foreign
commerce or by use of the mails, and would give SEC regulatory
authority to carry out the Act.
Pro:
This proposal is intended to follow generally along the lines
of S. 1939 which was passed by the Senate in August 1974.
This proposal is primarily a response to such promotional
schemes as Koscot, Dare To Be Great, and Holiday Magic.
Con:
Cost: Enforcement costs only
Decision:
Pro:
(Favored by: Baroody, Knauer)
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
Consumer Message Option III-C
Proposal: Announce Decision on Auto No-Fault Legislation
In the last Congress the Senate passed S. 354, a Federal minimum
standards type no-fault insurance bill, but the measure died in
House Committee. Senator Magnuson has reintroduced an identical
bill, based on model State legislation developed by DOT.
In the next week or so, a Presidential decision will be sought on
whether or not to include no-fault as part of the Administration's
economic program of reducing consumer costs.
Pro: No-fault is a major consumer issue which might translate
into savings as high as $2-3 billion, if enacted on a
national basis. If the President decides to support no-fault,
the Consumer Message should highlight this as part of his
consumer program.
Con:
Considerable opposition to Federal no-fault remains centered
around Federal encroachment upon individual choice and
State responsibilities.
Cost:
Decision:
Pro:
(Favored by
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
Consumer Message Option III-D
Proposal:
Announce a Review of Antitrust Immunities to be Completed
in 90 days
Restraints on competition and market efficiency exist in a number of areas
as a result of exemptions from the antitrust laws. Justifications for these
exemptions vary widely. For example, exemptions are sometimes said
to be necessary in order to prevent a disparity in- economic power from
unfairly disadvantaging some industry or identified groups, such as agri-
cultural cooperatives, small retailers, exporters, or labor unions. The
separation of Federal and State powers is said to argue for State regula-
tion of certain industries without Federal antitrust interference.
In response to an Economic Policy Board request, a Task Force has been
set up in the Executive Branch under the lead of the Justice Department,
to review antitrust exemptions in a number of areas. For example, the
Capper-Volsted Act permits agricultural cooperatives to set prices
collectively, a privilege which was rooted in certain political and economic
considerations which no longer reflect realities in the agricultural sector.
Competing ocean carriers are permitted to organize themselves into
cooperative arrangements known as "conferences" which, in turn, are
explicitly exempt from the antitrust laws. And the McCarran-Ferguson
Act protects State-supervised, private ratemaking bureaus in their
establishment of non-competitive prices for insurance services.
Although specific legislative proposals other than modification of antitrust
immunity in air and surface regulation and repeal of the fair-trade laws
will not be made at this time, it is recommended that the Consumer
Message announce that such antitrust immunities are under review and further
legislative proposals may be forthcoming.
PRO:
-- Provides Presidential leadership in trying to remove exemp-
tions to antitrust actions and reliance on free competition
and the marketplace.
2
III-D (Continued)
-- Continue President's efforts at strong antitrust en-
forcement.
CON:
-- Could be viewed as just another study.
-- It is an issue that is not fully understood by the general
public.
Cost:
Decision:
Pro:
(Favored by: Baroody, Knauer
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
Consumer Message Option III-E
Proposal: Announce the President's Intention to Veto any
Legislation which Unnecessarily Raises Prices to the
Consumer or Restricts Production; Highlight Specific
Examples
A number of Congressional "threats" in the form of anti-consumer
legislation are likely to reach the President's desk this year. As in
the case of his veto of the Cargo Preference legislation last year,
which could have increased the consumer's energy bill by $5-6 billion
annually, the President could commit to vetoing any such legislation.
An example of possible threats which might be highlighted is new farm
price support legislation which has already cleared a House committee.
The legislation would put a very high target price on a given output of
a wide range of commodities. When prices fall below these high target
prices, direct payments would be made to the farmer.
The result is twofold: either very high budget outlays (OMB estimates
possibly as high as an additional $25 billion if the legislation in its
present form were enacted) or a return to the constraints on agricultural
production characterized by the last several decades. The Farm
legislation of 1973 marked a return to a largely unregulated agricultural
sector.
OMB believes that the result would be a combination of high budget
outlays and a return to regulation of the agricultural sector, To the
extent the latter is the result, significantly increased food costs to
the consumer would ensue.
Although the President has not made a decision to "signal" a veto of
such legislation, the Secretary of Agriculture believes such a veto
would be in order. OMB is seeking a Presidential review of the issue.
Pro:
The proposed farm legislation is intended to benefit the
agricultural sector at the expense of the taxpayer and the
consumer. Shoul the President decide that a veto signal is
in order, the Consumer Message should highlight his inten-
tion as an example of his willingness to protect the consumer
against this and all other such legislation.
III-E (Continued)
Announce the President's Intention to Veto any Legislation
Page 2
which Unnecessarily Raises Prices to the Consumer or
Restricts Production; Highlight Specific Examples
Con: A "veto signal, " for tactical reasons, may be undesirable
at this time.
Cost:
Decision:
Pro:
(Favored by: Baroody, Knauer
Con:
(Favored by:
Hold for further study and consideration
(Favored by:
Consumer Message Option III-F
Proposal: Propose changes in the Federal Reporting Act and Federal
Register that afford the public better notice and clearer
understanding of proposed Federal decisions
This proposal would modify the Federal Reports Act to affirmatively
encourage Federal consumer protection agencies to obtain better
survey and marketing data before proposing (or denying) complex
regulatory schemes.
The proposal would provide for public (consumer) representation in
form and survey review by OMB and encourage public representatives
to identify needed survey areas. The proposal would also create a
public (including media) advisory board to the Director of the Federal
Register with new powers to the Director instructing and allowing him
to make the Federal Register a better working and source document
for school curricula development as well as by public interest groups
and media representatives seeking to obtain notice of Federal agency
activities.
Pro:
Present posture of agencies is to avoid White House clearance
and industry scrutiny of survey forms--resulting in more
insular rule-making policy and practice.
The Register is at present aptly described as an instrument of
"minimum legal notice" at a time when Congressional delegations
of greater rule--and policy-making powers to Federal agencies
using the Register demand increasing public notice of involvement
in the execution of such powers. This proposal should have
endorsement by both ends of the philosophical and political
spectrum as an instrument for piercing bureaucratic screen and
make government more responsive and understandable.
Con:
Cost:
Decision:
Pro:
(Favored by: Baroody, Knauer)
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
Consumer Message Option III-G
Proposal: Remove impediments to advertising prices of prescription
drugs
This proposal would prohibit states and localities from enacting or
enforcing any law or regulation which would prohibit or burden the posting
of prices or prescription drugs.
Pro:
This would allow the consumer to stretch his medical dollars
by allowing him to comparison shop when buying prescription
drugs.
Legislation based upon this proposal would not be expected to
include any provision making FDA responsible for administering
mandatory price posting. It also would not be expected to
include any new authority for the FTC.
Con:
Cost: Enforcement costs only
Decision:
Pro:
(Favored by: Baroody, Knauer)
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
Consumer Message Option III-H
Proposal: Propose a National Appliance and Motor Vehicle Labeling
Act
This proposal--recently introduced as S. 349 "Truth-in-Energy Bill"
authorizes the President to develop energy conservation specifications
for a broad range of motor vehicles and appliances in order to provide
information to the public on the energy consumption characteristics of
these "big-ticket" items so consumers, by comparing such
characteristics when purchasing major appliances and motor vehicles,
may select those that can effect savings in energy consumption.
Pro:
S. 3255 and H.R. 15616 of the 93rd Congress reflected this
proposal and were submitted by and supported by the
Administration.
Con:
Unwarranted Federal government intervention into the private
sector.
Cost:
Decision:
Pro:
(Favored by:
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
Consumer Message Option
III-J
Proposal: Support Drug Identification Act
In sum, the Drug Identification Act would establish a code system
for the identification of prescription drugs. Present labelling pro-
visions of the Food, Drug and Cosmetic Act relating to the identification
of drug products and their production or distribution origin do not
require that this information be shown directly on the tablets or capsules
of drugs marketed in these forms. Thus in cases of personal emer-
gency, such as over-dosage or accidental ingestion of a drug,
identification may be seriously delayed and may require elaborate
and time consuming laboratory analysis. A quick identification of
the drug in such emergencies, by labeling and direct product coding,
would facilitate prompt medical treatment. Moreover, a uniform
drug coding system to identify drug manufacturers and distributors
would also be of great value to this and other Federal and State
agencies in the administration of drug purchase and reimbursement
programs.
Pro:
This legislation was prepared to carry out a recommendation
by President Nixon contained in his consumer message of
October 30, 1969, and reiterated in his message of January 26, 1971.
Con:
Cost:
Decision:
Pro:
(Favored by: Knauer
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
Consumer Message Option III-K
Proposal: Support medical devices legislation based upon the
deliberations surrounding S. 1446 in the 93rd Congress
This proposal would allow FDA to provide for classification of
medical devices into three regulatory categories:
1.
Those exempt from standard setting and premarket review
2. Those for which standards should be set and enforced
3.
Those of a life threatening character which require
premarket review.
Other gaps medical device legislation would fill include:
-
mandatory registration for establishments manufacturing
devices
-
specific Federal authority to assure the use of good manu-
facturing practices
-
increased Federal inspection authority
-
a requirement that device manufacturers maintain records
and reports on clinical experience with devices
-
procedures to require manufacturers or distributors of
devices violative of Federal standards to repair or replace
the devices or refund their purchase price.
Pro:
Present law imposes no duty upon medical device manufacturers
to establish the safety or efficacy of their products prior to
marketing. Nor does FDA have authority to prescribe standards
of safety to which these devices must conform. Instead, to
prove a device unsafe or useless, consuming and expensive court
efforts must be undertaken. Even where successful in court it
is difficult to recapture those faulty devices distributed during
the court battle.
The Administration has supported this measure in the past and
it can be packaged as a consumer protection measure in this
message.
III-K (Continued)
Support medical devices legislation based upon the
Page 2
deliberations surrounding S. 1446 in the 93rd Congress
Con: Although some say FDA's device inventory eliminated the need
for medical device legislation, a close look at the inventory
reveals it was compiled with information voluntarily submitted
and not complete. Further, attempting to have all devices
held to be drugs by the courts in order to give FDA jurisdiction
is futile.
Also since this proposal would add regulation it may be some-
what inconsistent with the deregulation thrust of the overall
message.
Cost:
Decision:
Pro:
(Favored by:
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
Consumer Message Option III-L
Proposal: Propose legislation aimed at product testing in the private
sector - -a Consumer Product Test Methods Act such as
has been supported by the National Bureau of Standards
Product characteristics would be identified and measured against tests
and standards developed by the N. B.S. and labeled and advertised
accordingly (voluntarily by marketers) providing the consumer with an
important purchasing tool (objective product information) and the
advertiser with a national and objective basis for product comparisons
(comparisons which are now frequently criticized by the FTC and the
CBBB).
Pro:
This proposal would stimulate greater price and quality
competition, improved product efficiency, and better value
comparisons by consumers in the sale of consumer durables.
FTC Chairman Engman has endorsed legislation going
further--rhandatory labeling. Also, this proposal differs from
the bill introduced by Senator Magnuson last session in that
use of the test results in labeling and advertising would be
voluntary.
Con:
Unwarranted Federal intervention into the private sector. A
first step toward new and onerous regulation of producers.
Would require increased spending for N.B.S. to develop
standards.
Cost:
Decision:
Pro:
(Favored by:
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
IV. CONSUMER
(NON-LEGISLATIVE)
INITIA TIVES
The II wants to
defen for be days
a big reason for deferral is
the fact IT has based have attach no
on fact Democrate are plan,
now they do and they him
parting forden on to
to allow time
consider s
FORD is GERMID LIBRARY
Consumer Message Option IV-A
Proposal: Improved Quality Grading Systems
Proposal would direct the Special Assistant to the President for
Consumer Affairs to develop a task force with USDA (Ag. Extension),
FDA, and DOC which would recommend harmonization of grade-
labeling systems to facilitate consumers' value comparison and
thereby fight inflation.
Pro:
The USDA has recently announced that consumers do not
understand the numerous (sometimes inconsistent) and
disparate voluntary grade-labeling system promoted by
USDA (and others) for packaged and canned fruits,
vegetables, jams, meats, poultry, etc. Inability to
understand and use these systems means insufficient
information for consumers.
Con:
Cost:
Decision:
Pro:
(Favored by: Knauer
Con:
(Favored by:
Hold for future study and consideration
(Favored by:
1, Vue- graphs
A. D/R charts
B. Corg. break-out
2.
MAR
375
THE WHITE HOUSE
WASHINGTON
March 10, 1975
MEMORANDUM FOR:
JIM LYNN
JACK MARSH
MAX FRIEDERSDORF
DICK CHENEY
JIM CAVANAUGH
PAUL O'NEILL
FROM:
JIM CANNON
SUBJECT:
Consumer/Regulatory Reform
Message Options
For discussion later today, I'm attaching a copy of the decision paper
on the above subject.
Attachment
FORD is LIBRARY 076839
THE WHITE HOUSE
WASHINGTON
MEETING ON CONSUMER PROTECTION
Tuesday, March 11, 1975
5: 30 p.m. (30 minutes)
The Oval Office
From: Jim Cannon
I.
PURPOSE
To discuss options on consumer/regulatory reform.
II.
BACKGROUND, PATRICIPANTS, PRESS PLAN
A. Background: During your meeting with Virginia Knauer last
week concerning consumer issues, you directed that she and
Bill Baroody work with the Domestic Council in developing
options for a possible special message on consumer initiatives
and regulatory reform. That paper, presenting those options
for your decision was provided and will be discussed at this
meeting.
B. Participants:
James Lynn
Jack Marsh
Jim Cannon
Max Friedersdorf
Dick Cheney
Jim Cavanaugh
Paul O'Neill
C. Press Plan: Not to be announced. White House photograph
only.
III.
TALKING POINTS
None required.
THE WHITE HOUSE
WASHINGTON
March 8, 1975
MEMORANDUM FOR THE PRESIDENT
FROM :
JIM CANNON June
SUBJECT :
Consumer Regulatory Reform Message
At your meeting last week with Virginia Knauer to discuss
consumer issues, you directed that she and Bill Baroody
work with us in developing options for a possible special
message on consumer initiatives and regulatory reform.
The following paper presents those options for your
decision.
SUMMARY
The proposals that follow have been put together with the
objective of providing options for a total package that
would serve as a strong Administration alternative to
Consumer Protection Agency (CPA) legislation.
Virginia Knauer says that your message could be an
opportunity for you to reassert your leadership in the
consumer area and highlight what you have already done
and are doing for consumers.
The 24 options attached fall into two categories:
1) Consumer oriented proposals, e.g.,
a) To strengthen the present
Office of Consumer Affairs,
b) To improve present procedures
for determining food and drug
safety.
2) Regulatory reform proposals, including
a) Surface transportation,
b) Air transportation,
c) Financial institutions,
d) Robinson-Patman Act,
e) Repeal of Federal laws allowing
"fair trade" laws.
2
Should you decide to go with all or part of this package,
we can be ready to send your message to the Hill next
week.
The Senate held their last day of hearings on the CPA
bill yesterday, and we feel it is important to offer
an Administration alternative before the Senate Committee
completes its mark-up.
OPTIONS
1. Consumer Representation Act of 1975
At your meeting with Mrs. Knauer you said you would con-
sider her proposal to expand the present Office of Consumer
Affairs as an alternative to Administration support of
a CPA. The Consumer Representation Act of 1975 would do
that in two ways. Title I would statutorily create an
Office of Consumer Affairs within the Executive Office of
the President. Title II would statutorily establish within
each independent agency and executive department an
Office of Consumer Representation.
Title I: Statutory establishment of an Office of
Consumer Affairs within the Executive
Office of the President.
An expanded version of Mrs. Knauer's present
office, this agency would perform most of
the amicus type functions outlined in the
Brown CPA bill. In addition, it would
publish a Consumer Register, coordinate
the activities of the consumer offices es-
tablished by Title II in other agencies,
and transmit consumer complaints to the
appropriate Federal agencies.
On an interim basis, the existing office
could be expanded by Executive Order. This
would entail a staff increase of 35 and an
FY'76 budget increase of $1.5 million.
Pro: In conjunction with the separate Offices
of Consumer Representation, would permit
the Office of Consumer Affairs (OCA) to
more effectively carry out its duties,
and would command strong support from
Mrs. Knauer, many consumerists, and
business as an alternative to CPA
legislation.
Con: Would be a new spending program. Goes
against Administration policy of not
creating special interest offices in
the Executive Office of the President.
Also, could run the risk this would
not stop CPA legislation, and we
could end up with both this office
and a CPA.
-2-
Decision
Pro (Knauer, Baroody, CEA, Marsh, Lazarus)
Con (OMB, Seidman, Cannon: would prefer
it established by Executive Order)
Hold for further study and consideration
Title II: Statutory establishment of an Office of
Consumer Representation within each indepen-
dent agency and executive department.
These offices, similar to the CAB Consumer
Advocate, would have the authority to parti-
cipate in agency proceedings in the same
manner as a private party. Their authority
would be granted by agency regulations, with
the head of each agency having the respon-
sibility for determining the role of its
office. Among their responsibilities, the
new offices would ensure that consumer bene-
fit data be considered in the agency decision
making process. Finally, they would operate
in coordination with the expanded Office of
Consumer Affairs.
Pro: Combined with an expanded, amicus OCA,
these consumer offices could provide
a viable Administration alternative
to a CPA. Could provide visible
proof of the President's consumer
commitment.
Con: Could require sizable increased
spending to provide necessary staff.
Could have the effect of relieving
agency operational units of considering
the public interest and risk that the
consumer offices be "captured" by
vested interests. Same undesirable
effects as the previous issue.
-3-
Decision
Pro (Marsh, Seidman, Knauer, Baroody,
Lazarus)
Con (OMB, CEA, Cannon)
Hold for further consideration
-4-
2. Consumer Benefit Analysis
Each executive department and independent agency
would be responsible for preparing a Consumer Benefit
Analysis setting forth the direct and indirect cost and
benefits to consumers of proposed legislation and regu-
lations. The consumer representative in each agency would
be responsible for seeing that it be considered in
decision making.
Pro: Could receive wide political support and be
an adjunct to the Inflation Impact Statement.
Con: Could be expensive and could be considered
already adequately covered in the Inflation
Impact Statement.
Decision
Pro (Marsh, Seidman, Knauer, Baroody, Lazarus)
Con (OMB, CEA)
Hold for further consideration
-5-
3. Regulatory Reform Commission
Not only would the Administration continue its support for
a Regulatory Reform Commission, but also we would
expand its mandate to include semi-autonomous agencies,
bureaus and departments with regulatory functions. Also,
the Commission could be charged with examining agency
responsiveness to consumer interests, giving a further
reason why a CPA should not be established until the Com-
mission's work is completed.
The Commission proposal would be supplemented by specific
regulatory reform proposals you are making in this message.
Pro: Would strengthen both your consumer and regu-
latory reform programs by linking the two in
this manner.
Con: With your specific proposals a Commission could
be no longer necessary and could be viewed as
an excuse for delay of further reforms.
Decision
Pro (Marsh, Seidman, CEA, OMB, Knauer, Baroody,
Lazarus)
Con
Hold for further consideration
-6-
4. Reform of Surface Transportation Regulation
ICC rules and regulations to regulate competition annually
cost the consumer an estimated $4-10 billion. As the
result of a four month interagency task force effort,
detailed legislative proposals to modify ICC pricing
practices, liberalize market entry, exit and licensing
restrictions, and eliminate antitrust immunities for both
rail and trucking will be ready for submission to Congress
by the end of the month.
Pro: Inclusion in this message would cast the issue
as a consumer problem, taking transporation
regulatory reform out of its normally special
interest forum.
Con: Could receive opposition from truckers and
teamsters and have some political cost.
Decision
Pro (Marsh, Seidman, OMB. CEA, Baroody. Knauer,
Lazarus)
Con
Hold for further study
-7-
5. Air Transportation Regulatory Reform
An Administration task force is currently developing
specific legislative reforms to liberalize both CAB
pricing practices and entry/exit restrictions and
end antitrust immunities for the airline industry. The
Administration has already testified on this before the
Kennedy subcommittee and indicated that reform legislation
would be forthcoming.
Pro: This issue is receiving considerable press
attention and inclusion in the message could
put the President out in front on this.
Con: Airlines will object to this reform.
Decision
Pro (Marsh, Seidman, CEA, OMB, Knauer, Baroody,
Lazarus)
Con
Hold for further consideration
-8-
6. Financial Institutions Act
The Administration is on the verge of resubmitting legis-
lation seeking to remove outdated constraints on the
services and rates which banks and savings institutions
may offer. Not only would such action benefit the
financial institutions and provide much needed credit, it
would also give the average consumer a better opportunity
to earn an honest return on his savings investment.
Pro: In the current economy, increased savings
dividends would be popular with consumers.
Con: This is not a new legislative initiative.
Decision
Pro (Marsh, Seidman, CEA, OMB, Baroody, Knauer,
Lazarus)
Con
Hold for further study
-9-
7. Announce Legislation to be Submitted to Reform the
Robinson-Patman Act
Like "fair trade" laws, the 1936 Robinson-Patman Act
denies consumers the benefit of stiff competition in
stores by making it difficult for producers to give price
breaks they might otherwise offer. Legislation to be
proposed by Justice will suggest revisions which preserve
a special remedy against anti-competitive price discriminations
while eliminating language and interpretations which
discourage legitimate price competition. The existing law
is patently anti-competitive and anti-consumer. Economists,
lawyers, and two Presidential Commissions, are in broad
agreement that a thorough revision of the Act is needed.
Pro: Could be seen as pro-consumer action on the
part of the President and an example of
Presidential leadership in reducing consumer
costs.
Con: The proponents of Robinson-Patman will fight
any modification of the Act on the grounds
that it helps small businesses compete against
the advantages of large firms.
Decision
Pro (Seidman, CEA, Knauer, Baroody, Lazarus)
Con
Hold for further consideration (Marsh, OMB)
-10-
8. Provide for Easier Deviation from Food Standards in
Order to Develop New Foods
Legislation would be submitted to amend the Federal Food,
Drug, and Cosmetic Act to encourage the marketing of new
foods. The issuance of temporary permits to deviate
from an accepted food labeling standard would be authorized
while public acceptance of the new product is being evaluated.
Pro: Could encourage further development of new,
less expensive food products.
Con: Administrative authority already exists for
FDA to issue temporary deviation permits. Also,
this could be interpreted by consumers as
encouraging misleading food marketing.
Decision
Pro (CEA, Knauer, Baroody)
Con (OMB, Lazarus)
Hold for further consideration (Marsh)
-11-
9. Establish Intergovernmental Task Force on State and Local
Regulatory Reform Leading to a White House Conference
Following the President's October 8 call for a review of
State and local regulation and restrictive practices,
there has been considerable interest expressed by State
and local governments on the types of actions they might
take to remove such practices. In the message you could
(1) highlight priority areas of concern (i.e. public
utility regulation, occupational licensure, etc) .; (2) set
in motion an Intergovernmental Task Force including State
and local officials; (3) announce a willingness to pro-
vide a forum for the discussion of these issues and the
exchange of information. The latter could be a White
House Conference.
Pro: Indicates a cooperative concern to work with
State and local officials on this important issue.
Con: Could be inconsistent with allowing States
and localities to exercise their own priorities
and with your December 4 letter to those officials.
Decision
Pro (Marsh, CEA, Knauer, Baroody, Lazarus, OMB:
Federal cooperation but not in a task force
or White House Conference
Con
Hold for further study
-12-
10. Announce Administration Support for Special Senate
Committee on Regulatory Reform
The Senate has action underway to create a joint Commerce-
Government Operations Committee to review Government
regulation over a one and a half year period. This body
could prove a useful vehicle for airing a number of
difficult regulatory issues.
Pro: Permits the President to state that such a
group should be a vehicle for change not an
excuse for inaction.
Con: Could undermine Administration support for a
Regulatory Review Commission. Also, there
is a real chance this committee could delay
indefinitely consideration of reforms.
Decision
Pro (Seidman, Knauer, OMB: pending establishment
of the Review Commission
Con (CEA, Lazarus
Hold for further consideration (Marsh, Baroody
-13-
11. Propose Legislation to Streamline Hearing Procedures
Under the Federal Food, Drug, and Cosmetic Act
The Administration could submit legislation to amend the
Federal Food, Drug, and Cosmetic Act so that the hearing
process is accelerated. In some cases hearings can now
drag on for years.
Pro: These prolonged hearings have been criticized
by the Administrative Conference of the U.S.
and such a proposal would be popular with consumers.
Con: Could be too insignificant an issue for inclusion.
Decision
Pro (OMB: the specifics must be identified by
HEW first; Marsh; Seidman; CEA; Baroody;
Knauer, Lazarus)
Con
Hold for further consideration
-14-
12. Repeal Federal Law Allowing for State Resale Price
Maintenance Laws (with fair trade laws)
This proposal would reiterate the Administration's
support for Senator Brooke's bill to repeal the Miller-
Tydings Act (1937) and the McGuire Act (1952) Generally
known as the Resale Price Maintenance Laws or "fair trade"
laws, these acts allow a manufacturer to enter into a
contract with one buyer at a set price and then allow
that agreement to be binding on all other retailers who
sell the product in that State. While it has been argued
that these laws keep predatory retailers from drawing more
than their share of the market by "undercutting" other
businesses, in reality the laws have allowed manufacturers
to set their prices at an artificially high level. The
elimination of these laws should save the consumer between
$1.5 and $3 billion a year.
Pro: Would be action strongly approved by consumers.
Con: Would be a restatement of earlier Presidential
support. Also, because of pending action in many
States it could more appropriately be = State issue.
Decision
Pro (Marsh, Seidman, CEA, OMB, Baroody, Knauer,
Lazarus)
Con
Hold for further consideration
-15-
13. Submit Legislation to Prohibit Pyramid Sales Transactions
The Administration could announce its support for
legislation that would provide for the prohibition of
pyramid sales transactions (transactions in which the
incentive for the buyer of a distributorship is the prospect
of monetary gain from the sale of further distributorships)
in interstate or foreign commerce or by use of the mails.
The SEC would be given regulatory authority to carry out
the act.
Pro: Would show the Administration as willing to
take action to protect the consumer from schemes
such as Koscot, Dare To Be Great, and Holiday
Magic.
Con: Could be seen as a regulatory measure in an
essentially deregulatory message.
Decision
Pro (Scidman, CEA, Knauer, Baroody, OMB, Lazarus)
Con
Hold for further consideration (Marsh
-16--
14. Announce Decision on Auto No-Fault Legislation
A Presidential decision paper is being prepared on the
no-fault issue. If you should change your position on
this, the consumer message would be an appropriate time
to announce it.
Pro: No-fault is a major consumer issue and a new
position would be favorably received in a
consumer message.
Con: Considerable opposition to Federal no-fault
remains. Many see it as Federal encroachment
upon individual choice and State responsibilities.
Decision
Pro (Seidman, CEA, Knauer, OMB
Con (Marsh
Hold for further consideration (Baroody, Lazarus
-17-
15. Announce a Review of Antitrust Immunities to be Completed
in Ninety Days
In response to an Economic Policy Board request, a task
force has been set up in the Executive Branch under the
lead of the Justice Department, to review antitrust exemptions
in a number of areas. Although specific legislative
proposals other than modification of antitrust immunity
in air and surface regulation and repeal of the fair trade
laws will not be made at this time, the Consumer Message
could announce that such antitrust immunities are under
review and that further legislative proposals may be
forthcoming.
Pro: Would be seen as pro-consumer Presidential
leadership in trying to remove exemptions to
antitrust actions and reliance on free competi-
tion and the marketplace.
Con: Could be seen as just another study.
Decision
Pro (Baroody, Knauer, Marsh, Seidman, CEA, OMB,
Lazarus
Con
Hold for further consideration
-18-
16. Announce Intention to Veto Any Legislation Which
Unnecessarily Raises Prices to the Consumer or Restricts
Production
An appropriate statement could be made of your intention
to carefully review legislation and veto any which
would result in unnecessary price increases. Your veto
of the Cargo Preference legislation last year could be
given as an example of your commitment to this policy.
Pro: Would be example of your commitment to protect
the interests of consumers.
Con: Could have difficulty agreeing with public
on which price increases are necessary and
which are unnecessary. Impact on consumers is
already a consideration in approving legislation.
Decision
Pro (Seidman, CEA. Baroodv. Knauer, OMB: express
strong Presidential disapproval of but not veto
Con (Lazarus
Hold for further consideration (Marsh
-19-
17. Propose Changes in the Federal Reporting Act and
Federal Register to Give the Public Better Notice and
Clearer Understanding of Proposed Federal Decisions
The Administration could submit legislation to modify the
Federal Reports Act to encourage Federal consumer pro-
tection agencies to obtain better survey and marketing
data before proposing (or denying) complex regulatory
schemes. The legislation would provide for public
(consumer) representation in form and survey review by
OMB and encourage public representatives to identify
needed survey areas. It would also create a public
(including media) advisory board to the Director of the
Federal Register and give the Director new authority to
make the Federal Register a better working and source
document.
Pro: Would have pro-consumer endorsement as making
rule-making policy more visible.
Con: OMB already has a procedure for soliciting
public comment. Also, the purpose of these
changes has been addressed in the Inflation
Impact Statement's policy.
Decision
Pro (Marsh, Seidman, Baroody, Knauer
Con (Lazarus
Hold for further consideration (CEA, OMB
-20-
18. Prohibit States and Localities from not Permitting
the Advertising of Prescription Drug Prices
The Administration would submit legislation that would
prohibit States and localities from enacting or enforcing
any law or regulation which would prohibit or inhibit
the posting of prices of prescription drugs.
Pro: Would allow consumers to comparison shop for
prescription drugs.
Con: Such Federal dictation of State and local laws
could be condemned as heavy handed.
Decision
Pro (Marsh, Seidman, CEA, Baroody, Knauer
Con (Lazarus
Hold for further consideration (OMB: the
details of how this would be enforced are critical
-21-
19. Make Note of the National Appliance and Motor Vehicle
Energy Labeling Act of 1975
The National Appliance and Motor Vehicle Energy Labeling
Act of 1975 is Title XII of the Administration's Energy
Independence Act of 1975. It would authorize the President
to require energy efficiency labels on all new major
appliances and motor vehicles. This would ensure that
consumers are fully apprised of the efficiency of various
appliances and motor vehicles and would encourage the
manufacture and greater utilization of more efficient
products.
Pro: This would demonstrate consumer awareness in
our energy program.
Con: Could be criticized as unwarranted Federal
Government intervention into the private sector.
Would increase costs to consumers.
Decision
Pro (Marsh, Seidman, Baroody, Knauer, Lazarus
Con (CEA, OMB
Hold for further consideration
-22-
20.
Resubmit Drug Identification Act
HEW is preparing to resubmit the Drug Identification
Act which would establish a code system for the
identification of prescription drugs. Labeling and
direct product coding would allow quick identification of
drugs in emergencies, and would facilitate prompt medical
treatment. This legislation has been pending since at
least 1969.
Pro: Would be seen as a pro-consumer initiative.
Con: Could be of some cost to the private sector.
Decision
Pro (Seidman, Knauer, OMB, Lazarus
Con
Hold for further consideration (Marsh, CEA, Baroody
-23-
21. Note that the Administration Plans to Resubmit Medical
Devices Legislation
The Administration supported legislation submitted to the
93rd Congress that would have allowed FDA to regulate
medical devices. Current law does not require manufac-
turers of medical devices to establish the safety or
efficacy of their products before marketing. HEW is
planning to resubmit the Administration's bill to this
Congress.
Pro: Could be packaged in message as a consumer
protection measure.
Con: Could be interpreted as a regulatory measure
and out of place in a deregulatory message.
Could result in increased costs to consumers.
Decision
Pro (Seidman, Knauer
Con (Marsh, CEA, Lazarus
Hold for further consideration (Baroody, OMB
-24-
22. Propose Legislation Aimed at Product Testing in the
Private Sector -- A Consumer Product Test Methods Act
such as Has Been Supported by the National Bureau of Standards
Legislation could be proposed which would allow products
to be identified and measured against tests and standards
developed by the National Bureau of Standards. The products
could be labeled and advertised accordingly, providing the
consumer with an additional purchasing tool and the adver-
tiser with a national and objective basis for product
comparisons.
Pro: Could stimulate greater price and quality
competition, improved product efficiency,
and better value comparisons by consumers in the
sale of consumer durables.
Con: Could be seen as unwarranted Federal interven-
tion into the private sector; could also
have a substantial inflationary impact on the
products tested.
Decision
Pro (Seidman, CEA, Knauer
Con (Marsh, OMB, Baroody, Lazarus
Hold for further consideration
-25-
23. Improved Quality Grading Systems of Packaged Food
Direct the Special Assistant to the President for
Consumer Affairs to develop a task force with USDA,
FDA, and Commerce which would recommend harmonization of
grade-labeling systems for packaged and canned fruits,
vegetables, jams, meats, poultry, etc. This would be a
measure to facilitate consumers value comparison.
Pro: Would be a pro-consumer initiative.
Con:
Could be seen as another study.
Decision
Pro (Marsh, Seidman, Knauer, CEA, Baroody, Lazarus
Con
Hold for further consideration (OMB: the specifics
and costs must be identified
-26-
24. Improve the System for Disseminating Product Recall
and Hazardous Information and Follow-up
Concern has been expressed both in the media and in
Congress that sufficient product recall information is
not getting to the affected consumer. In addition, business
is worried that massive paid advertising campaigns
might be required. You could direct Mrs. Knauer to chair
a task force of the affected agencies such as FDA, the
Consumer Product Safety Commission, Transportation, and
Agriculture that would explore options for improving
recall efforts and to report their findings to you.
Pro: Could be seen as an effort to solve this
problem for both consumers and business.
Con:
Could be interpreted as another ineffective
study.
Decision
Pro (Marsh, Knauer, Seidman, CEA, Baroody, Lazarus
Con
Hold for further consideration (OMB: anticipated
benefits must be identified
CONCLUSION
Should you feel that there are an acceptable number of items
in this package, we will proceed to work with the appropriate
agencies in the development of a special message.
DECISION: Draft special message
Approve
Disapprove
THE WHITE HOUSE
WASHINGTON
March 11, 1975
MEMORANDUM FOR DISCUSSION
FROM:
BILL BAROODY
SUBJECT:
CONSUMER MESSAGE
I strongly urge adoption of the Consumer Message package, for
I believe it is right on the merits. The options presented answer
a wide range of needs and would go far towards much-needed
reform.
In addition, sending such a Message puts the President squarely
on record as supporting political reform. Such a Message would
be the first step in establishing a major political theme that would
attract conservatives, reformers, populists, consumer advocates,
academics and many others.
Attached is a package which includes:
1) Proposed schedule of events to launch a major
political campaign.
2) A rough, first draft of a Presidential Consumer Message
which treats each of the options under consideration.
This was drafted to give a flavor of the potential
breadth and scope (and political utility) of such a
Message.
DRAFT
Proposed Schedule of Events
Surrounding a Presidential Consumer Message
1. Week Before Sending Message
- Line up sponsors and business and consumer support for Consumer
Representation Act of 1975. (Marsh - Friedersdorf)
2. Evening Before Sending Message
- Presidential "Fireside Chat" with U.S. Consumers on TV
(Hartmann - Theis)
3. Day Message Goes To Congress
A. Early morning Cabinet meeting to brief on details.
B. Late morning Press briefing on details, possibly including President,
Lynn, Seidman, Cannon, Baroody and Knauer.
C. Early afternoon Presidential appointees briefing in East Room.
D. Late afternoon Consumer and Business Leaders briefing in East
Room followed by reception. (Baroody)
4. Week After Message Goes To Congress
A. Distribution of materials to consumer offices, groups and leaders
through Nessen - Warren, OCA.
B. Distribution of materials to business firms, organizations and
leaders through Commerce's Field Offices.
C. Distribution of materials to Republican organizations and leaders
through the National Committee.
D. Utilize national TV media (Nessen)
CBS: "Morning News" & "Face The Nation"
NBC: "Today Show" & "Meet The Press"
ABC: "AM America" & "Issues & Answers"
Metro media "Panorama"
E. Utilize national print media (Warren)
Wall Street Journal
National Observer
Washington Post
Washington Star
New York Times
Weeklies (Time/Newsweek/U.S News)
- 2 -
5. During Month After Message Goes To Congress
A. Do a Presidential Regional Conference on Consumerism and
the Administration's new initiatives.
B. Get principal spokesmen out to major cities for speeches,
interviews and meetings.
C. Have Commerce Field Offices set up a series of briefings across
the country for the public, business and media.
D. Prepare, distribute and have used by Presidential appointees a
number of succinct paragraphs for their speeches.
E. Assist trade associations and other interested groups in preparing
material for their newsletters, journals or general mailings.
F. Testify, brief and meet on the Hill with all interested members
of Congress.
DRAFT
PRESIDENTIAL CONSUMER MESSAGE
Two of the greatest challenges facing America today are the
closely interrelated tasks of restoring our nation's economic health
and rekindling consumer confidence in American governmental,
economic and social institutions.
To attack the nation's primary economic problems I have
submitted comprehensive economic and energy plans to the Congress.
And I believe that together the coequal Legislative and Executive
branches of government will construct programs that will solve these
problems.
When introducing my economic and energy programs I regrettably
had to tell our citizens that I had bad news. Today I am pleased to
tell the U.S. consumer that I have good news.
In this same spirit of cooperation I am outlining to the Congress
a comprehensive consumer program, one which will not only provide
substantial long-term economic benefits to all American consumers,
but which will also help to restore consumer confidence in govern-
mental institutions.
Presidential Consumer Message
Page 2
Since the primary responsibility of government is to serve the
needs of its people- - it is essential that the voice of its people be
heard within the government decision-making process.
Our forefathers believed in the sacredness of that principle--
basing this nation's government on a foundation which provided for
equality between the people's representatives and those who manage
the bureaucracy- - with a judiciary to arbitrate the differences.
Since those early days of our Republic dramatic changes have
occurred in the structure and interrelationship of our public and
private institutions.
Private Sector
Within the private sector business firms have multiplied
significantly in number and many have grown to be national or multi-
national in size. The ratio between manufacturing firms and service
firms has almost been reversed. Although we are still the greatest
industrial nation in the world, our economy has for the first time in
modern civilization become a service oriented economy. Our people,
as consumers of these goods and services, are demanding higher
quality, better guarantees and more efficient service- - all at reasonable
prices. And what with longer and more complicated distribution
channels and larger and more impersonal business firms--it becomes
Presidential Consumer Message
Page 3
more and more difficult for the businessman and his customer to
come together and reach some accord in the marketplace.
I am pleased that a number of innovative steps are being taken
in an effort to remedy this situation. The best mechanism is within
the channel of distribution utilizing responsive and responsible
retailers, wholesalers and manufacturers who are willing:
-- to promote their goods and services in an honest
forthright manner;
-- to provide these goods and services at a fair and reasonable
price; and
-- to stand behind and maintain these goods and services at
least to the extent advertised.
However, when the consumer is frustrated by a seeming lack of
responsiveness, there must be other recourse available. And the
development of Consumer Action Panels within various industries
designed to provide an arbitration vehicle for consumers finding it
essential to go outside the channel of distribution- - is an excellent
step in the right direction. These panels are usually composed of
people from within that industry as well as consumer representatives.
After a review of the facts the panel makes a recommendation, which
Presidential Consumer Message
Page 4
is usually lived up to by both sides. Sometimes the manufacturer is
asked to replace or restore his product. Other times the consumer
is told that the firm has fulfilled its responsibilities and that there
is no real further obligation on the part of the provider.
An indication of how well this system works is in the major
appliance industry. Until recently this industry was one of the leading
sources of complaints received by Mrs. Knauer, my Special Assistant
for Consumer Affairs. However, she reports to me that since the
establishment of MACAP (Major Appliance Consumer Action Panel) a
few years ago there has been a significant reduction in the number of
such complaints received by her office. Such panels have already
been established in the Carpet and Rug Industry (CRICAP), the Furniture
Industry (FICAP) as well a by a few regional auto dealership organiza-
tions (AUTOCAP).
Most U. S. businessmen are honest, hard-working, legitimate
and essential members of our economic system. But like any segment
of our society, there are always a few who are ill-advised, unconcerned
or just plain dishonest. Therefore, I call upon the other businessmen--
the great majority- - to band together and develop mechanisms that will
allow for the full and fair hearing of consumer complaints and provide
vehicles for reasonable solutions.
Presidential Consumer Message
Page 5
One such governmental mechanism exists within our judiciary
system. I refer to our small claims courts. I urge local government
officials to sit down with business leaders and consumer representa-
tives to determine what needs to be done to improve this mechanism.
I urge the utilization of revenue sharing funds as may be needed to see
that these courts are open evenings and on weekends, to see that the
procedural systems are streamlined to reduce the time involved and
eliminate the need for expensive legal counsel, to set the jurisdictional
limits at a reasonable level and to assure that adequate assistance and
information is available to the user.
Public Sector
Within the public sector government departments and agencies,
too, have multiplied significantly in number and increased substantially
in size and involvement in our economy and society. Government
agencies set the price of airplane tickets, routes for trucks, maximum
interest that can be paid on your money, the speed at which you can
drive your car, the standards by which your food and drugs are made,
and many, many other regulatory functions.
All government regulation, however, is not bad. A civilized
society must have order to function. And most government.regulation
came into being out of a need for order or a need to protect the health
or safety or general welfare of our citizens.
Presidential Consumer Message
Page 6
Yet at a meeting last week with Vice President Nelson A.
Rockefeller, consumer leaders from around the country consistently
stressed two points:
1. the need for regulatory reform now, and
2. the need for greater consumer representation within the
governmental regulatory decision-making process.
I agree!
Regulatory Reform
Last Fall I called for the establishment of a Regulatory Reform
Commission. I proposed legislation that would put in place a bipartisan
commission composed of representatives of both the legislative and
executive branches. It would have a clear mandate and a short two-year
life. But nothing happened in Congress.
However, during these last months we have continued to study
the problem of too much governmental regulation, which in some
instances has stifled productivity, almost eliminated competition and
significantly increased consumer costs.
The time to act is now!
We must take specific steps to reduce government regulation
and excess involvement in our economy--when and where it is no
longer serving the best interests of our citizens.
Presidential Consumer Message
Page 7
Reform
Consumers and businesses have an interest in promoting
competition in the marketplace. Competition is the stimulus for
producing safer, more efficient, higher quality merchandise and
competition gives consumers a diversity of buying choice. But while
competition is the key to productivity and innovation in the free enter-
prise system, its effects are often hampered by inefficient or outdated
government regulation. According to a recent report by the Council
of Economic Advisors, the cost to the economy of ineffective regula-
tion may be as high as $66 per person a year, or $122 billion a year.
This is too great a burden for the U.S. economy and consumer.
It is also too great a burden for those businesses who want to compete
without government strangulation.
Of course, there are important reasons for government
regulation- - to deal with the problems of monopoly, to insure public
safety, and to allocate certain national resources, such as our
airwaves. But unfortunately, once established, regulation has the
tendency to become rigid with age and bureaucratic red tape.
Regulatory agencies can become sacred cows, defended by the very
businesses they regulate.
Presidential Consumer Message
Page 8
This consumer message I am sending to the Congress today
contains a number of legislative proposals to eliminate some of these
abuses while maintaining regulatory safeguards where they are needed.
Within the next few weeks I will send to Congress an Air
Transportation Regulatory Reform Act and a Surface Transportation
Regulatory Reform Act which together will foster greater competition
in transportation by allowing for new market entries, by allowing for
greater price competition without hindrance from government, and by
narrowing the agencies' power to grant anti-trust immunity.
In no other industry are consumers more at the mercy of
outdated regulation than in our various modes of transportation. While
the Interstate Commerce Commission was created originally to protect
the public from monopoly power of the railroads, today, the hundreds of
rules and regulations established by this agency to regulate competition
cost the consumer an estimated $4-10 billion annually.
The impact of economic regulation of the airlines by the CAB is
even more evident to the consumer in terms of cost than is surface
transportation regulation. At present, any increase or decrease in
airline fares must be approved by the CAB; all route changes must be
approved; leaving competition among the airlines limited to differences
in services offered and flight frequency. Concrete evidence of the
Presidential Consumer Message
Page 9
added cost of regulation may be easily seen in California and Texas
where regulated carriers compete with intra-state carriers which
are not CAB regulated in the same markets. In these cases, fares
of the non-regulated carriers are as much as 40% lower.
The time has come to reform transportation
regulation
now!
In another area of our economy I am sending to the Congress a
legislative proposal to amend the Robinson Patman Act. Certain
provisions in the act discourage legitimate price competition. My
proposals will preserve a special remedy against anti-competitive
price discriminations while eliminating language and interpretations
which discourage legitimate price competition.
The Financial Institution Act (or the Expansionary Credit and
Small Investors Act of 1975), which I will send to Congress next week,
also aimed at stimulating
is/competition by removing outdated constraints on the services and
rates which banks and savings institutions offer to the consumer.
Presently, these regulations favor the large depositor over the smaller
depositer. Banks should be allowed to compete for the small investor's
dollar. I urge that the Congress pass this Act because it will open up
new sources of deposits and increase lending power of these institutions.
This will result in additional credit to finance industrial growth and
housing construction. It will also give the average consumer a better
opportunity to earn an honest return on his or her savings investment.
Presidential Consumer Message
Page 10
In these days of high inflation, food manufacturers must be
given the flexibility to introduce new, nutritious food products into
the marketplace without the limitation of outdated standards. My
proposal amending the Federal Food, Drug and Cosmetic Act will
give manufacturers the flexibility they need to bring these new
products into the marketplace, but at the same time they protect the
consumer from being mislead or confused about the product he or
she is buying. This legislative proposal will closely follow a report
of the White House Conference on Food, Nutrition, and Health.
Another important area of regulatory reform is the need to
expedite regulatory decisions. Therefore, I propose to streamline
the hearing procedures under the Federal Food, Drug and Cosmetic
Act so as to accelerate this process in those areas covered by the
Food and Drug Administration without injuring the necessary due pro-
cess protection of affected parties.
While taking these immediate and specific steps I again call
on the Congress to create a National Commission on Regulatory Reform
to thoroughly examine all government regulation. If the goal of this
commission is to be realized, consumers and businesses must join
government in identifying issues that need to be solved and in developing
alternative solutions to regulation.
Presidential Consumer Message
Page 11
The issue of regulatory reform is not limited to the Federal
government. We need to work with the states to examine regulations
covering energy and utilities, insurance, financial institutions,
occupational licenses, and prohibitions against competition. There-
fore I am establishing today an Intergovernmental Task Force on
State and Local Regulatory Reform to work with the states to develop
recommendations for reform. These proposals will be considered
at a future White House Conference.
Consumer Representation
In spite of the need for regulatory reform and an overall
effort at deregulation, certain government regulation is and will
continue to be essential. But is is also equally essential that the public
believe and be assured that the consumer point of view is adequately
represented within the governmental regulatory decision-making process.
Some believe that this consumer voice should be placed in a
new, independent Agency for Consumer Advocacy. I do not agree! We
do not need a new agency when we are trying to deregulate and cut back
on the role, size and cost of the Federal government. We do not need
a new agency that will take years to organize, staff and develop the
procedures,
expertise necessary to deal with highly complex and technical licensing/
standards-setting and rate-making cases.
Presidential Consumer Message
Page 12
Others, including certain of the consumer leaders, believe
that a strong and expert consumer voice should exist in almost each
and every executive department and independent agency. I agree!
We need a number of Offices of Consumer Representation with
adequate staff, access, expertise and the power to be heard--all
operating within the existing structure and supported and coordinated
by an enlarged and enhanced Office of Consumer Affairs within the
Executive Office of the President.
A few will say that this method of organizing will not work
because the Consumer Representative will be controlled by or become
the captive of his agency. Again, I do not agree. We have already
witnessed the effectiveness of the ICC Office of Public Counsel, which
overturned completely original proposals and helped rewrite them so
as to best serve the public's interest. Moreover I am directing my
Special Assistant for Consumer Affairs to take a central coordinating,
stimulating and advising role and to assist reluctant regulators to
adjust to operating in and for the public interest. And lastly, Congress
through its budgetary and general oversight process can assure
consumers that their voices are being heard through these numerous
Offices of Consumer Representation.
Presidential Consumer Message
Page 13
Therefore, I will support legislation that will create Offices
of Consumer Representation in most executive departments and
independent agencies as well as statutorily establish an Office of
Consumer Affairs in the Executive Office of the President. This
system of organizing will mean that the U.S. Consumer is better
served thr ough a number of mini-consumer agencies, each having
adequate authority, access and legal, economic and other profes-
sional expertise- - than one, monolithic, floundering new agency that
will never be able to adequately staff with the necessary professional
expertise or fit all of the varying problems into its set of priorities.
The U. S. Consumer wants adequate representation in each of
the affected departments and agencies now! Most of you in Congress
agree with this need. Now I call upon you to act in a manner that will
provide the best possible consumer representation in each affected
department and agency in the shortest possible time and at the least
additional cost to the U.S. Consumer as a taxpayer. To achieve this
extraordinary result I ask you to support my Consumer Representation
Act of 1975.
In the interim I am taking certain actions immediately. Today
I am requesting the heads of executive departments and independent
Presidential Consumer Message
Page 14
agencies to voluntarily begin setting up these Offices of Consumer
Representation utilizing existing resources. Also I am taking steps
to enlarge the Office of Consumer Affairs and by Executive Order I
am directing Mrs. Knauer, my Special Assistant for Consumer
Affairs, to begin stimulating and coordinating an orderly development
of these Offices of Consumer Representation. And I stand ready to
work with Congress for the swift enactment of my Consumer
Representation Act of 1975.
Page 15
OTHER CONSUMER INITIATIVES
Regulatory reform and consumer representation are extremely
important consumer initiatives that we must deal with in this First
Session of the 94th Congress. But there are other consumer matters
and concerns that must be dealt with now.
These are hard times for consumers and it is time for the
Federal government to look at ways it can cut costs for consumers
by making the marketplace more efficient. Competition is essential
in holding prices down. There are many impediments to competition
built into our system and we must eliminate them.
These impediments come in many forms. Some are Federal
laws on the books that permit price setting in one way or another
by providing specific exemptions from our antitrust laws.
Other impediments are created by the lack of information that
consumers need to compare competing products. One of the most
basic of consumer rights is the right to information on which to base
intelligent choices between products. Much of the information
consumers need is invisible. Looking, asking, or reading a
brochure won't tell the consumer how much energy an appliance
FORD
Page 16
uses. Nor, often, can the consumer tell how a product will perform,
compared to its competitors, just by looking at it. We must make
visible the invisible information consumers need. When consumers
have the facts, industry competes on the essentials such as price,
product quality, service and energy conservation.
There are a few areas, however, where competition does not
answer the consumer's needs. Protection against unsafe products and
against fraud require the continued vigilance of government. In
recent years the Federal government has made tremendous strides
in safety legislation but we must continue to build on and refine
these laws.
Antitrust
The so-called Fair Trade laws are not fair to the consumer.
A number of states have laws that permit manufacturers to dictate
the price at which their merchandise will be sold. Under these laws
no retailer in the state can sell at a lower price. In essence, these
laws tie the hands of anyone who wants to compete on the basis of price.
The effect of these laws, according to Justice Department estimates,
is to increase prices on fair traded goods by as much as 18 to 27
percent because manufacturers can. set these prices artificially
high. Consumers would save between $1. 5 and $3 billion a year if
the fair trade laws are repealed.
Page 17
The Federal government must take the lead in eliminating
fair trade laws. State fair trade laws have been made possible by
two Federal laws, passed by Congress years ago, which in effect
exempted fair trade practices from the antitrust laws. I want to
reiterate my support for the legislation now before Congress to
repeal the Miller-Tydings Act and the McGuire Act which, in turn,
will lead to the repeal of state fair trade laws.
The fair trade laws are just one example of the manyexceptions
that have been made to our antitrust laws over the years. Earlier,
I mentioned my plans to eliminate some of the antitrust exemptions
in our transportation system. Each of these proposals attacks
an important part of the problem.
But that is not enough. Now is the time to take a hard look at the
whole spectrum of antitrust exemptions and to look at them through
the consumer's eyes. When these exemptions hinder competiton and
reduce the efficiency of the marketplace, the consumer is the loser.
I am therefore setting up a Task Force under the lead of the
Justice Department to review antitrust exemptions. Some of these
exemptions were enacted years ago when our market structure was
very different. Our needs have changed. For example, agricultural
producer cooperatives are permitted by the Capper-Volsted Act to set
prices collectively on such foods as milk. When that exemption was
Page 18
enacted, the producer cooperatives were small and struggling. Now
some of them control agricultural markets over an area of many
states. What does that mean for food prices? That is one of the
questions I am asking the Task Force to look into.
There are antitrust exemptions for competing ocean carriers,
and for private rate-making bureaus that establish non-competitive
prices for insurance services at the state level under the McCarran-
Ferguson Act. The Task Force will be looking into these exemptions
and others too. I have directed the Task Force to consider the costs
to the consumer as well as the needs of the affected industries in
reviewing these exemptions. Following upon the Task Force's review,
I may have additional legislative proposals at a later date.
New legislation will get the same scrutiny that we are giving.
to laws already on the books. When a bill comes to my desk for
signing, I shall look at the impact it will have on the prices consumers
pay and I shall not hesitate to veto laws which unnecessarily raise
prices to the consumer or restrict production.
For example, farm price support legislation now before
Congress could lead to high Federal subsidies of farm prices or
restrictions on agricultural production. It would signal a return to
regulation of the agricultural sector. We estimate that this legislation,
Page 19
as it now stands, could cost the taxpayer as much as $25 billion in
subsidies alone. In addition, the consumer would have to pay in
higher food costs if the government gets back into the business of
regulating and limiting agricultural production as this legislation
proposes. I oppose such legislation.
Auto No-Fault
I will also seek legislation that can help cut consumer costs.
One increasingly expensive item in most family budgets is automobile
insurance. The present automobile insurance laws in most states
give rise to needlessly expensive suits to determine liability and
damages. We estimate that consumers could save as much as $2 to
$3 billion if every state adopted the no-fault concept of automobile
insurance. Under the no-fault system, most of the automobile owner's
accident costs are covered by his own insurance company, regardless
of fault and thus expensive law suits are avoided. Automobile owners
in the few states that have adopted effective no-fault insurance plans
are already reaping the benefits in reduced (or not increased?)
automobile insurance premiums. To bring the benefits of no-fault
insurance to every automobile owner, I am therefore endorsing
legislation that sets Federal minimum standards for state no-fault
insurance laws.
Page 20
At the same time that we work to sweep away the cobwebs of
old laws that unnecessarily increase costs to the consumer, we must
recognize that some new legislation is needed to protect consumers'
rights in the marketplace, the right to information, the right to
protection from unsafe products and from fraud.
The Right to Know
The consumer's right to know is fundamental to making our
economy work. Consumers need to get full value out of every dollar
they spend. And to get full value they need a way to compare the
key characteristics of competing products. For some products,
consumers need information that they cannot get today.
With soaring utility bills and expensive gasoline, one of the
key questions consumers have about major appliances and motor
vehicles is how much energy they use. In most cases, the consumer's
question goes unanswered because there are no standards for comparing
the energy consumption characteristics of competing products. And
yet, every consumer, and the nation as a whole, have a stake in
conserving energy by using more efficient appliances. To help con-
sumers get the information they need, I have proposed a "Truth-in-Energy
Bill. " It would authorize the President to develop energy conservation
specifications for a broad range of motor vehicles and appliances in
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order to provide consumers with information about energy consumption.
Motor vehicles, applicances, and many of the other products
on the market today are SO complex that it is difficult, if not
impossible, for the consumer to compare them objectively just by
looking at them. Although the Federal government does not belong
in the business of running comparative tests on products, the government
can use its expertise to develop tests and standards that industry can
use to compare products. I am therefore proposing a Consumer
Product Test Methods Act which would authorize the National Bureau
of Standards to develop tests and standards for comparing product
qualities and performance. These standards would be available to
manufacturers to use, on a voluntary basis, when they wanted to make
comparative claims in advertising or at point of sale. Consumers
would have the assurance that claims were based on valid tests.
The Federal government has established voluntary quality
grading systems for some products, particularly food. However; the
grade labeling based on these systems is confusing for consumers.
because there are so many different grading systems. The best
quality for one food may be U.S. Grade AA but for another food the
top grade may be U.S. No. 1. Consumers can't possibly keep in mind
all the different voluntary grade labeling systems for vegetables, ,
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jams, canned fruits and so on and therefore they do not benefit from these
programs. I am directing the Special Assistant for Consumer Affairs
to set up a Task Force with the Department of Agriculture, the Food
and Drug Administration and the Department of Commerce to recommend
ways to harmonize the various grade labeling systems. Only in this way
will consumers be able to use the grades to compare products.
The one comparison we all take for granted is price comparison.
But, in the case of prescription drugs, it can't be taken for granted.
A number of states restrict or prohibit drug price advertising or
posting of prices within a Pharmacy. I am proposing Federal
legislation to remove impediments to posting the price of prescription
drugs so that consumers will be able to comparison shop for drugs.
This measure could mean big savings for those consumers, many
of whom are elderly, who buy prescription drugs on a regular basis.
Safety
There are serious gaps in the Federal government's authority
to protect consumers from hazardous medical devices. Although
new drugs cannot be put on the market until they are proved both safe
and effective, there is no such requirement for devices. We must close
this loophole.
I reaffirm my support for legislation that would give the Food
and Drug Administration authority to review the safety and efficacy of
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potentially life-threatening medical devices before they go on the market.
FDA should also have the authority to prescribe safety standards for
medical devices when needed. In addition, the legislation I propose
would provide the following: mandatory registration for establishments
manufacturing medical devices; specific authority to assure the use of
good manufacturing practices; increased Federal inspection authority; a
requirement that device manufacturers maintain records and reports
on clinical experience with devices; and procedures for repair,
replacement or refund on devices that violate Federal standards.
Another vital piece of safety legislation would establish a code
system for labeling prescription drugs. We need a drug identification
law so that in cases of medical emergencies such as over-dosage or
accidental ingestion, precious time is not lost in attempting to identify
a drug before medical treatment can be given. A uniform coding system
would have the additional benefit of facilitating federal and state adminis-
tration of drug purchase and reimbursement programs.
A number of Federal safety laws require public notice or
recalls of hazardous products with health or safety defects. However,
in many cases, only a fraction of the hazardous products are located
because consumers are unaware of the recall, or do not realize it
applies to an item in their possession. I am asking my Special-Assistant
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for Consumer Affairs to chair a committee that will study the
options for developing more effective recall techniques and report
back to me any steps that might be taken.
Fraud and Deception
In the area of fraud and deception I am asking Congress for
legislation to prohibit what are known as pyramid sales transactions.
Pyramid sales works on a principle similar to the chain letter. Like
the chain letter, the first people in are likely to reap big returns and
the latecomers are the losers. In these schemes, people put down
several thousand dollars to buy a distributorship and the right to sell
other distributorships. Distributors hope to make their money not by
selling the product, but by selling additional distributorships. My
proposal would prohibit pyramid sales in interstate or foreign commerce
or by use of the mails and would give the Securities and Exchange
Commission regulatory authority to carry out the act.
Consumer Involvement
The best way to strengthen the Federal government's response
to consumer needs is to involve consumers more actively in government
decisions. The Federal government needs to know more about consumer
needs when it carries out its regulatory responsibilities. I plan to
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encourage Federal regulatory agencies to obtain better survey and
marketing data before acting on regulatory proposals by requiring the
development of a Consumer Benefit Analysis by each Office of Consumer
Representation as part of each agency's Inflationary Impact Statement.
In addition, I shall create a public advisory board to the Director of
the Federal Register to work with him on making the Federal Register
a more effective instrument in notifying, and thus involving, consumers
in Federal regulation.
CONCLUSION
Now is the time to reform many of the archaic, unproductive,
expensive and rigid regulations which are shackling the U.S. economy
and directly affecting the American consumer. It is also time to reform
the way in which the Executive branch and independent agencies consider
direct consumer interests.
Ultimately the Office of the President must serve as the people's
final consumer advocate.
It is my unique responsibility, as President, to weigh conflicting
citizen interests and to finally make recommendations which are in the
public interest. When I entered this office I said to the American people
that I had not made special promises to any one sector or group. I
pledge then to devote myself to the public good. Today it is clear that
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this means more carefully considering the interests of the consumer.
I regret to say that in many instances government regulation has
become either counter-productive, protective of special interest
groups, or has lost sight of consumer needs and interests.
As we prepare for our Bicentennial we must pledge that good
government means enhancing the power of the consumer in the market-
place and in the halls of government. Therefore, I have today outlined
my program for reforming government SO that the consumer interest
will prevail. I will shortly submit legislation, or in some cases
Executive Orders, to enact this program.
I ask your support in this most important effort of, by and
for the U.S. consumer.