Nomination of Christine A. Varney to be a member of the Federal Trade Commission : hearing before the Committee on Commerce, Science, and Transportation, United States Senate, One Hundred Third Congress, second session, October 5, 1994

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>7

S. Hrg. 103-809

NOMINATION OF CHRISTINE A. VARNEY TO BE
A MEMBER OF THE FEDERAL TRADE COMMISSION

Y 4. C 73/7: S. HRG. 103-809

Honination of Christine ft. Uarney t. . .

HEAKING

BEFORE THE

COMMITTEE ON COMMERCE,

SCIENCE, AND TRANSPORTATION

UNITED STATES SENATE

ONE HUNDRED THIRD CONGRESS

SECOND SESSION

OCTOBER 5, 1994

Printed for the use of the Committee on Commerce, Science, and Transportation

MN /7

U.S. GOVERNMENT PRINTING OFFICE
83-458 CC WASHINGTON : 1994

For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-046112-X

U A S. Hrg. 103-809

^ NOMINATION OF CHRISTINE A. VARNEY TO BE
A MEMBER OF IHE FEDERAL TRADE COMMISSION

Y 4.C 73/7; S. HRG. 103-809

Nonination of Christine ft. Marney t. . .

HEARING

BEFORE THE

COMMITTEE ON COMMERCE,

SCIENCE, AND TRANSPORTATION

UNITED STATES SENATE

ONE HUNDRED THIRD CONGRESS

SECOND SESSION

OCTOBER 5, 1994

FVinted for the use of the Committee on Commerce, Science, and Transportation

'^hmt

U.S. GOVERNMENT PRINTING OFFICE
83-458 CC WASHINGTON : 1994

For sale by the U.S. Government Printing Office
Superintendent of Documents. Congressional Sales Office, Washington, DC 20402
ISBN 0-16-046112-X

COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

ERNEST F. HOLLINGS,

DANIEL K. INOUYE. Hawaii

WENDELL H. FORD, Kentucky

J. JAMES EXON, Nebraska

JOHN D. ROCKEFELLER IV, West Virginia

JOHN F. KERRY. Massachusetts

JOHN B. BREAUX, Louisiana

RICHARD H. BRYAN, Nevada

CHARLES S. ROBB, Virginia

BYRON L. DORGAN, North Dakota

HARLAN MATHEWS, Tennessee

Kevin G. Curtin, Chief
Jonathan Chambers,

South Carolina, Chairman

JOHN C. DANFORTH, Missouri
BOB PACKWOOD, Oregon
LARRY PRESSLER, South Dakota
TED STEVENS, Alaska
JOHN MCCAIN, Arizona
CONRAD BURNS, Montana
SLADE GORTON, Washington
TRENT LOTT, Mississippi
KAY BAILEY HUTCHISON, Texas

Counsel and Staff Director
Republican Staff Director

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CONTENTS

Page

Opening statement of Senator Bryan 1

Opening statement of Senator Rollings 1

List of Witnesses

Harman, Hon. Jane, U.S. Representative from California 2

Vamey, Christine A., Esq., Cabinet Secretar>', the White House, nominated

to be a member of the Federal Trade Commission 3

Biographical data 4

Appendix

Questions asked by, and answers thereto by Ms. Vamey:

Senator Bums 11

Senator Hollings 11

(III)

NOMINATION OF CHRISTINE A. VARNEY TO
BE A MEMBER OF THE FEDERAL TRADE
COMMISSION

WEDNESDAY, OCTOBER 5, 1994

U.S. Senate,
Committee on Commerce, Science, and Transportation,

Washington, DC.

The committee met, pursuant to notice, at 2:40 p.m. in room SR-
253, of the Russell Senate Office Building, Hon. Richard H. Bryan,
presiding.

Staff members assigned to this hearing: Claudia A. Simons, staff
counsel, and Rebecca A. Kojm, professional staff member; and
Emily J. Gallop, minority professional staff member.

OPENING STATEMENT OF SENATOR BRYAN

Senator Bryan. I am pleased to convene this nomination hearing
this afternoon and to welcome Christine A. Vamey, nominated to
be a Commissioner of the Federal Trade Commission to this hear-
ing, and the distinguished guests that she brings with her, our col-
league in the House of Representatives, Congressman Jane Har-
man, who we will hear from in just a moment.

The FTC has broad responsibility to oversee the marketplace,
and the role of the agency is vital to both the consumer and the
business community. Its primary duties are to ensure the operation
of competitive markets, and to protect consumers from unfair and
deceptive acts and practices.

It is particularly gratifying to note that for the first time in more
than a decade, as a result of the good work of the ranking member
of this subcommittee, Senator Slade Cxorton, and others, that the
Federal Trade Commission is operating with a formal legislative
authorization. This was no small accomplishment, but one that was
realized only through some diligence and perseverance by members
of both sides of the aisles who were involved in the conference to
reauthorize the FTC.

As we move to a more global economy, there will be new chal-
lenges for the FTC as it continues to ensure a free, fair, and com-
petitive marketplace, and remains committed to vigorous enforce-
ment of the existing laws. Mr. Chairman, your comments, please.

OPENING STATEMENT OF SENATOR ROLLINGS

The Chairman. I welcome Ms. Varney to the committee. If con-
firmed, she will have an important role in ensuring that the Fed-
eral Trade Commission fulfills its responsibilities with respect to

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promoting fair competition in the marketplace and protecting
American consumers from unscrupulous business practices. While
some have criticized the agency in the past for a failure to enforce
vigorously the antitrust laws, it appears that the FTC's more re-
cent approach has been somewhat more active. Ms. Vamey will be
able to offer her views concerning the proper role, of the agency in
today's global economy.

I would note that Ms. Vamey, if confirmed, will be in the unique
position of being the first Commissioner to be appointed to the FTC
under its new legislative authorization. After over a decade of oper-
ating without a formal authorization — due to disagreements over
the application of the FTC's regulatory authority and the expan-
siveness of the FTC's unfairness authority regarding commercial
advertising — the House and Senate authorizing committees were
able to reach agreement and enact legislation to reauthorize the
FTC formally. . .

I look forward to Ms. Varney's testimony.

Thank you, Mr. Chairman.

Senator Bryan. Thank you, Mr. Chairman. Ms. Vamey, I en-
joyed our opportunity to visit this morning and to get better ac-
quainted with you. We are delighted to have you here before this
committee for this hearing, and we look forward to hearing your
testimony and your discussion of these issues in a moment. But
you have brought a distinguished person .with you, who I would
like to defer to now and to welcome her to our hearing.

We are delighted to have you here, and we obviously welcome
any comments that you would care to make about our distin-
guished nominee.

STATEMENT OF HON. JANE HARMAN, U.S. REPRESENTATIVE

FROM CALIFORNIA

Ms. Harman. Thank you. Senator.

I would like to say just a few words about a dear friend and a
very qualified nominee, Christine Vamey. First of all, in these dog
days at the end of the congressional session, not much is pleasur-
able, and what I am about to do is extremely pleasurable. And that
is to introduce such a good friend.

I think she is an excellent nominee for this post. She brings to
it quality, qualifications, and experience. Obviously this committee
has her resume before it, but I would like to identify several chap-
ters in her life which I have shared with her.

We practiced law together for some years. I am substantially
older, so I was in a mentoring capacity, but there was not much
to mentor. Christine brings great skill, enormous law school cre-
dentials, and wisdom and fairness to this role. Because I have ob-
served it as she practiced corporate law 10 years ago or so.

In addition to that, we worked together in various legal capac-
ities for the Democratic Party over several years. And, again, I saw
Christine exhibit quality, qualifications, and experience.

And I agree with you that a free, fair, and competitive market-
place is essential, and in the Federal Trade Commission we have
a watchdog that we depend on. And filling vacancies with qualified
people is urgent business. And so it is with great pleasure that I
commend to you someone that I think can bring probably as good

credentials as anyone that I can imagine to one of the two pending
vacancies in the FTC, and I urge her prompt confirmation by the
Senate. I would close with this:

This committee has a great legacy, and I am very well aware of
it. In another life I was a chief counsel and staff director of a Sen-
ate Judiciary subcommittee, and I observed with awe the way the
Commerce Committee functioned. And I know from my experience
now in the other body that it continues to function with that kind
of quality.

So, my congratulations to you. And, again, I recommend without
hesitation this wonderful woman next to me.

Senator Bryan. Thank you very much, Congresswoman. It is a
pleasure to have you here. And we appreciate those fine comments
and words of endorsement for our nominee.

I know your schedule may be difficult; you are invited to stay as
long as you can. But if you have to excuse yourself, we understand.
We are all trying to conclude. I suppose the target date is still the
7th; is it not?

Ms. Harman. Right.

Senator Bryan. We hope you make it and we hope we make it.
So, thank you so much for coming by. We appreciate it very much.

Ms. Harman. Thank you, Senator.

Senator Bryan. And those comments about the committee, those
respond to the leadership that Chairman Rollings provides. And I
will make sure that he is aware of those fine words. We appreciate
them as well.

Well, we are delighted to have you here before us. I was greatly
impressed, as I indicated in my opening comment, with our con-
versation this morning. You are a former law partner and a frater-
nity brother of mine many, many years ago in a previous life, to
use Congresswoman Harman's frame of reference.

Frank Fahrenkopf called to express his full support. So, we have
a bipartisan endorsement here.

You had indicated that your family joins you today, so before
making any formal comments that you care to make, let me give
you the opportunity to introduce your family and to let us see
them.

Ms. Varney. Thank you very much. Senator.

My husband is here, Tom Graham, with my sons, Michael and
John.

Senator Bryan. Two proud sons it looks like this morning.

Ms. Varney. Two very proud sons. And two very proud sisters.
My sister, Molly, and my sister, Jackie.

Senator Bryan. We are delighted to have the family here.

This will be a moment that they will remember, I am sure.

We would be pleased to hear anything that you wanted to say
by way of any formal remarks, and then we will get into a couple
of questions.

STATEMENT OF CHRISTINE A. VARNEY, ESQUIRE, CABINET
SECRETARY, THE WHITE HOUSE, NOMINATED TO BE A MEM-
BER OF THE FEDERAL TRADE COMMISSION

Ms. Varney. First of all, Senator, I want to express my deepest
thanks and appreciation for allowing me to testify today. I know

with the press of business, this was an extraordinary feat, and I
very much appreciate it.

Senator Bryan. You are more than welcome.

Ms. Varney. Given the shortness of time we have had here, I did
not prepare any extended remarks. I just wanted to say that most-
ly I looK forward, if confirmed, to working with you to implement
the laws and regulations that promote the economy and protect the
consumers at the Federal Trade Commission.

I would like to answer any questions you have.

[The biographical data of Ms. Varney follows:!

Biographical Data

Name: Varney, Christine Anne; address: 3515 Macomb St., N.W., Washington, DC
20016; business address: 1600 Pennsylvania Ave., N.W., Washngton, DC 20500.

Position to which nominated: FTC Commissioner; date of nomination: October 3,
1994.

Date of birth: December 17, 1955; place of birth: Washington, DC.

Marital status: Married; full name of spouse: Thomas J. Graham; names and ages
of children: John Walsh Graham, 7; and Michael Graham, 4.

Education: S.U.N.Y. Albany, 1974-77, BA; Syracuse University, 1978, MPA; and
Greorgetown University, 1982-85, J.D..

Employment: 1993-present, Executive Office of the President, Cabinet Secretary;
9/90-1/93, Hogan &. Hartson, Attorney; 1/89-8/90, Democratic National Committee,
Attorney; 1/86-2/89, Person, Semmes, Attorney; and 6/84-12/85, Suny & Morse,
Law Clerk and Attorney.

Government experience: Employed in the White House from January 1993 to
present as Cabinet Secretary; participated in the Federal Executive Graduate Coop
program in 1978 and 1979.

Political affiliations: Chief Counsel to Clinton Primary Campaign, 1991-92; Chief
Counsel to Clinton/Gore Campaign, 1992; and General Counsel, Democratic Na-
tional Committee, 1989-91. $500 to Jane Harman for Congress, 1992; $50 to Clinton
for President, 1992; $100 to Democratic National Committee, 1986-88; $100 to
Democratic Senatorial Campaign Committee, 1986-88; $50 to Jack Evans for City
Council, 1990; and $50 to Single for Senate.

Memberships: American Bar Association, member. Standing Committee on Elec-
tion Law; ana DC Bar Association, member.

Honors and awards: Syracuse University, Outstanding Alumni, 1994.

Published writings: None.

Senator Bryan. Well, thank you. I appreciate that. You are never
penalized here because you do not have a long opening statement.
In fact, that probably weighs in your favor.

Let me ask you a couple of questions to get the benefit of your
thinking. We are all very much aware of the hearing this morning
on GAIT. And virtually everything that you read in every business
section of every newspaper in America reinforces the global nature
of our economic system and the competitive pressures that are
brought to bear, the different economic systems, different legal sys-
tems, and different cultural norms.

I guess my question really is how do you see the FTC fitting in,
in terms of any international antitrust issues? Is the present struc-
ture, in your view, adequate? Do you see it needing some changes,
either in terms of policy or legislative initiative? Why do not you
bite off whatever piece of that you would like to, and share with
me your thoughts?

Ms. Varney. Well, if I can preface it, Senator, with, "if con-
firmed," do I get the right to come back and discuss these with you
as I get more experience and more expertise?

Senator Bryan. "If confirmed," yes. You will have that oppor-
tunity, I can assure you of that. Yes.

Ms. Varney. As I shared with your staff earlier, I just came back
from a week in Japan, and was experiencing quite a bit of con-
sternation from our Japanese friends on the way some of our laws
work and some of our expectations. But it seems to me that in the
first instance, one of the things that the FTC has to do is to assess
its role in promoting and providing the atmosphere for growth for
American business in America. I think that is not inconsistent with
protecting the consumers.

And from the bit that I know of the FTC, I think we need to be
careful that we do not unnecessarily burden business when the
goals and objectives of what the FTC is trving to do are not imme-
diately clear. It is a very competitive global economy, and American
business is strong. It is strong in America, but it also needs to be
strong intemationallv.

I think first and foremost what the FTC needs to do is look at
the opportunities that it has to make sure that the playing field is
level in the United States for both American business and foreign
business.

Senator Bryan. I am not going to ask you whether you believe
that there are some antitrust violations in which American law
would have jurisdiction over with respect to the conduct of our
international trading partners. I think that is unfair.

But let me ask you: Is there at least an issue that we need to
look into? That is, as you know, American businesses frequently
complain. They say, Look, we have one set of rules in America —
you know, the antitrust laws that are vigorously enforced. Our
competitors, many of whom have established, in effect, a beachhead
in terms of their extended domestic operation here in the United
States, operate under a different system. Because our competitors
operate in a different environment, they may engage in practices
which might violate U.S. law — and I am speaking in the abstract,
without respect to any particular case or matter or country — but
they are able to do things that clearly we cannot do.

And I guess, in the broad context, my question is: Is that an area
that is appropriate, in your iudgment, for the FTC to examine? And
might there be some possible — I am not asking you to conclude
that there is a violation — but is there a possibility that the FTC
might conclude that a practice does, under American law, violate
the provisions of our law?

Ms. Varney. I think that is absolutely a possibility. Senator, put-
ting aside for a moment the other issues that come to bear on
that — like questions of sovereignty when certain corporations are
also arms of the government. But, clearly, without addressing spe-
cific cases or practices — if you look at the biotechnology industry or
the semiconductor industry, I think those were both opportunities
for the FTC to review practices by foreign companies and whether
or not they should have been considered unfair or anticompetitive
under our laws.

Senator Bryan. As you know, we have had instances where those
cases have actually been litigated.

Ms. Varney. Right.

Senator Bryan. And in some instances it was the position of an
American administration to join in, in support of the foreign com-
petitor.

Ms. Varney. Right.

Senator Bryan. Or at least on the face of it — and I am not an
antitrust lawyer and I have never been involved with the Federal
Trade Commission — those decisions seemed somewhat questionable
in light of the impact that they had on America consumers. And
I think your answer is that you are prepared to examine those is-
sues with a fresh and open mind, but recognizing that there may
be some violations there that need to be examined.

This may be a little bit unfair; you have not been confirmed yet,
although we hope you will be immediately. And that is the question
of your assessment of the current operation of the FTC, its proce-
dures, its practices. Any comment in terms of that?
.;Ms. Varney. Yes, Senator, without— I think that the FTC has a
tremendous amount of expertise and does a terrific job on a lot of
the difficult issues they undertake. And I am not familiar inti-
mately with their operating procedures. But it does seem to me
that the current chairman has begun reviewing some of the prac-
tices and procedures, and that is something I would look forward
to participating in.

For example, I know that in certain instances — and I am not
sure how recent they are — the FTC continued investigations when
parties had abandoned a transaction. On its face it is not imme-
diately obvious of the need to do that.

Having participated on behalf of corporate clients in a previous
life in Hart-Scott-Rodino premerger notifications and certifications,
it seems that the process there, while statutorily directed, could
probably be quickened in many instances. What I am always inter-
ested in, I think, is decisiveness. When parties come before the
FTC, they deserve an answer within a reasonable period of time,
and they deserve a clear answer as quickly as reasonably possible.

Senator Bryan. I think if there is a thread of criticism that you
hear throughout the Federal bureaucracy is the length of time it
takes. Obviously, in a contested matter, not everybody is going to
be happy with the decision. That is the nature of the beast. But
the protracted delays serve no one's best interest, least of all the
public.

And to the extent that, if you are confirmed, you can be part of
at least a dynamic within the agency that, whatever our decision
is, we need to make it. The parties have a right to a decision, and
obviously the American people, most importantly, have a right to
have that decision announced and enforced to protect the consumer
interests in America.

In the context of the health care debate, among others — I am not
going to get you into that — but the question was raised about anti-
trust laws and physicians. It was raised in the context that the
marketplace is changing dynamically, irrespective of what we do at
the Federal level, irrespective of whatever policies are occurring.

And what is occurring is clearly an amalgamation of large hos-
pital interests who are acquiring hospitals all over the country. The
size and the dimension of those is increasing geometrically monthly
and the role that physicians may play under the existing law with
respect to their ability to form them, for purposes of offering com-
petitive alternatives, many have said.

In fact, as you know, a piece of legislation was introduced that
would have relaxed the antitrust laws with respect to that physi-
cian participation. Any thoughts on any of those two issues?

Ms. Varney. Yes. I think that at this point, as we are looking
more toward market reforms in the health care industry to correct
some of the imbalances, it is probably appropriate for the FTC to
examine within its existing jurisdiction what issues they could
rightly undertake to ensure more a competitive marketplace to pro-
tect and promote consumer choice.

Obviously, as this committee knows, the Clinton administration
proposal for health care would have eliminated the antitrust ex-
emption for insurance. And that exemption remains on the books.
And I think as long as that is on the books that is not an area the
FTC would likely venture into. But it is certainly something that
I would think this body will be looking at as we go forward.

Senator Bryan. Do you have any thoughts on McCarran-Fer-
guson yourself?

Ms. Varney. The regulation of the insurance industry is ex-
tremely complex, and I am not terribly familiar with McCarran-
Ferguson, other than I think my own belief that industrywide ex-
emptions are probably something we need to be very careful about
and evaluate very critically, and reevaluate over time.

I have recently learned that in the 1920's, we decided baseball
was a pastime not an industry, and that is why it was exempt. So,
I think that there is some value in occasionally revisiting.

Senator Bryan. Senator Gorton, the ranking member of the sub-
committee, and I had occasion to serve as attorneys general of our
respective States. I think one of the things that the current chair-
man has done — and done a very good job — is to restore that rela-
tionship between the State attorneys general and the FTC. And
that working relationship, I think, has improved dramatically, and
she deserves credit, as well as other members of the Commission
and staff.

What are your views on the relationship of the FTC with State
attorneys general for purposes of enforcement of these various pro-
visions of the law?

Ms. Varney. I think it is an extremely important relationship.
The Federal Government operates under limited resources, and we
need to rely on our State and local partners. Also, the issues are
different from State to State. What is a problem for consumers or
businesses in some States is not always a problem that as heavily
impacts consumers in other States.

I think it needs to be an active partnership with the attorneys
general. And it can be very useful for the FTC in helping decide
its allocation of resources, what is best done at the Federal level,
what is best done at the State level, and also finding out what is
really a problem.

As you know, when you are closer to the people, you get a better
sense of what the issues are in their everyday life that are making
a difference.

Senator Bryan. As we discussed, an issue that consumed a good
bit of time of a number of us was the enactment of the new
telemarketing fraud legislation. And that does contemplate this
partnership relationship with the FTC and the additional enforce-

8

merit powers of State attorneys general. I think most of us who
worked on that would agree that that is a framework that provides
for this working, cooperative relationship.

We will be watching very carefully to see how that evolves in
terms of the relationships with the States and the Federal Grovern-
ment. Obviously, we hope to hear from you and others if there
needs to be any fine tuning to that legislation. Because that is a
serious problem. That is a multibillion dollar problem in America
that we do need to get a handle on.

I think the new legislation gives us some additional enforcement
tools. It provides additional individual rights. It provides additional
power for the FTC, and it provides for additional authority for
State attorneys general to act. And we will obviously want you to
follow that one carefully as well.

I guess the last question is for any other suggestions or com-
ments that you might care to make in terms of the operation of the
FTC or any priorities that you would have as a new member, if you
are confirmed? What do you see as your top priority? What would
you like to spend most of your time doing?

Ms. Varney. Well, I think it is a split. I am extremely interested
in the Hart-Scott-Rodino certification process. I think that the
length of that process is very detrimental to business. And my ex-
perience has been that business will live with an answer, one way
or the other. They just need to know it and they need to know it
as soon as possible. So, I would like to take a look at that on the
process side.

I am also extremely interested in the telemarketing and the new
responsibility of the FTC. Again, I think that is something that af-
fects people every day in their life. And that is an issue that I look
forward to working on.

Finally, I am very interested in looking at the issues in defense
consolidation. Without referencing any cases, as we move forward
with trying to right-size defense and do the conversions that are
important to us all, I think there can be attention in the antitrust
framework with defense consolidations. But I think there is the
flexibility in the laws and regulations to do certain consolidations
when they make sense. So, that is an area I also look forward to
working in.

Senator Bryan. Yes, the nineties are a lot different than the
1980's, and defense consolidation is an example of that and what
I discussed earlier in a question to you in terms of the organiza-
tional structure of the health care industry. And I would simply
urge you to examine and to be mindful of that.

There are big changes. I am not suggesting all of those changes
are necessarily adverse to consumer interests, but there is a con-
solidation that is occurring and an amalgamation of interests
which is increasingly centralized, rather than decentralized.

I think we need to know what the impact is on the American
consumer. The result may be that it is a very positive one. But in
my own view, using an old legal metaphor, I think the jury is prob-
ably still out on that.

Ms. Varney. On that one. Senator, I would look forward to work-
ing closely with the Congress, because I suspect that the Congress
will be revisiting that issue next year, as well.

Senator Bryan. I suspect the last word has not been heard on
that in the halls of Congress either.

I have no further questions. We are going to keep the hearing
open for possible questions from other members of the committee.

Thank you very much for your appearance here today. We wish
you and your family the very best. Hopefully we will be able to get
this nomination confirmed quickly so you can assume your new re-
sponsibilities and we can enjoy a relationship with you as a con-
firmed member of the FTC.

Congratulations and the very best.

Ms. Varney. Thank you verv much, Senator. And thank you to
your staff also, who has worked very hard with me.

Senator Bryan. I will pass that along as well.

This hearing will stand adjourned.

[Whereupon, at 3 p.m., the hearing was adjourned.]

BOSTON PUBLIC LIBRAR;^

3 9999 05982 266 6

APPENDIX

Questions Asked by the Senator Rollings and Answers Thereto by Ms.

Varney

Question. Is it appropriate for the Federal Trade Commission to retain authority
over food advertising while the Food and Drug Administration regulates food labels?
Should the FTC rules allow manufacturers to make claims in their advertising that
they cannot make under FDA rules that apply to labels?

Answer. I believe that the FDA's implementation of the Nutrition Labeling and
Education Act has greatly assisted consumers in ensuring that nutritional value and
health benefit claims on food labels are truthful. I understand that the Commission
has recently issued its own Enforcement Policy on Food Advertising.^ Although I
have not had a chance yet to consider fully all of the ramifications of this policy
statement, I pledge to work to ensure that the FTC and the FDA cooperate effec-
tively in the future.

Question. The FTC has the authority to declare acts and practices unfair. What
standards would you apply in exercising this authority?

Answer. In a statute that became effective in August of this year, Congress
amended section 5 of the FTC Act to provide that an act or practice is unfair if the
injury to consumers it causes or is likely to cause (1) is substantial; (2) is not out-
weighed by countervailing benefits to consumers or to competition; and (3) is not
reasonably avoidable by consumers themselves.^ I understand that the Commission
in the past has relied on similar factors to define the scop)e of its unfairness author-
ity .3 I believe that these statutory factors permit the Commission to exercise its un-
fairness authority in a fair and judicious fashion.

Question. What role can or should the FTC play in making Government more re-
sponsible to the communities, consumers, and businesses afiected by its decisions?

Answer. I strongly support the President's Executive Order 12862 requiring that
Federal agencies lilce the FTC make themselves more responsive to the communities
they serve. I believe that full implementation of this order is vital to ensuring that
the Federal Government serves all of the American people. The FTC has broad ju-
risdiction over antitrust and consumer protection issues and, consequently, its deci-
sions impact many businesses and consumers, making it even more important that
the FTC act responsively. In particular, I believe that the FTC should act quickly
and effectively to address pressing antitrust and consumer protection concerns as
they arise. In its deliberative processes as well, the FTC should strive to move in
a timely and fair way.

Questions Asked by Senator Burns and Answers Thereto by Ms. Varney

Question. As you may know, in the past, the FTC has been accused of abusing
its "unfairness" authority with request to commercial advertising. Specifically, in
the late 1970's, the FTC attempted to ban all television advertising allegedly aimed
at children. Congress recently reauthorized the FTC, after a 14-year impasse, the
new authorization statute contains a strict three-part definition of "unfairness"
which focuses on "consumer injury." What are your views on how the FTC should
use this power, as recently constrained by Congress?

Answer. I am aware that in the past the FTC was accused of abusing its "unfair-
ness" authority with respect to commercial advertising. It is my understanding that

1 Federal Trade Commission Enforcement Policy Statement of Food Advertising, 59 Fed. Reg.
28,388 (June 1, 1994).

2 See section 5(n) of the FTC Act, 15 U.S.C. §45(n), added by the Federal Trade Commission
ACt Amendments of 1994, Pub. L. No. 103-312.

3 See, e.g., Orkin Exterminating Company, Inc., 108 F.T.C. 263, 362 (1986); International Har-
vester Co 104 F.T.C. 949, 1061 (1984); see generally Federal Trade Commission Policy State-
ment on Unfairness, appended to International Harvester Co., 104 F.T.C. at 1070-76.

(11)

12

Congress has addressed the unfairness issue, as you referenced, with specific focus
on consumer injury. My own view is that the FTC's activity in this area must be
governed by the three-part test established by Congress: Is there substantial injury;
not reasonably avoidable; and not outweighed by countervailing benefits. For exam-
ple, many television advertisements directed toward children, while they may not
make us happy as parents, clearly do not meet the strict three-part definition now
contained in the FTC authorization statute. In summary, my view is that the FTC
should strictly follow the congressional requirements as reflected in the FTC reau-
thorization.

Question. Do you believe, as an FTC Commissioner, the FTC should demand sig-
nificant proof that an ad is deceptive or unfair before initiating an action, or do you
believe tnat visceral, personal reactions should principally govern in deciding the
propriety of an ad?

Answer. Your second question goes to the appropriate level of proof required to
initiate an action in unfair advertising. I believe when reviewing whether or not an
ad is deceptive of fair, the relevant evidence must be reviewed from the reasonable
person "reason to believe" standard. Again, Congress has established the relevant
criteria for unfair advertising.

Question. In your view, what role should "public" policy play in determining
whether an ad is "unfair"? Do you believe there is a principled way to determine
what "public policy" is with respect to a challenged aa in a potential "unfairness"
proceeding? How much unanimity or consensus should there be before an FTC Com-
missioner can determine what "public policy" is in the unfairness context?

Answer. Your third question raises the issue of "public policy" and unfairness cri-
teria. Public policy is a very slippery slope upon which to determine the fairness,
under the Federal Trade Commission Act, ot a particular advertisement, and, of
course, public policy means different things to different people. I believe that the
FTC and the courts have interpreted unfairness over the years and it is best to stay
within the statutory, regulatory, and judicial framework when evaluating the fair-
ness of an ad. If there were such an extraordinary case where public policy could
be a factor in determining the fairness of an ad (for example, public policy as re-
flected in a statute), I believe that we should strive for consensus among the Com-
missioners on that point.

Question. Do you believe that TV ads showing cars being driven in an allegedly
reckless manner are problematic? Do you believe generally such ads contribute to
or influence individuals to engage in such behavior?

Answer. Finally, you raised questions regarding TV ads showing cars being driv-
en in "an allegedly reckless manner." While it would be inappropriate for me to com-
ment on how I would evaluate a specific ad, I believe that consumers do not nec-
essarily determine appropriate driving behavior from the high-performance dem-
onstrations they see in television advertising. Again, I think the Commission should
evaluate any potentially unfair or misleading advertising on a case-by-case basis in
light of the relevant evidence. I have no opinion as to whether or not such ads con-
tribute to particular individuals' bad driving, but I would look to evaluate any such
assertions on the basis of the available evidence.

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