New FTC chief may bring sea change

Timothy Muris, the new chairman of the Federal Trade Commission, watched with his newly assembled staff from the back of the crowded room last week as his predecessor, Robert Pitofsky, delivered his valedictory address after six years leading the agency.

"What is it about this small agency that attracts superstars from law schools, Supreme Court clerks, partners at great law firms?" Pitofsky asked hundreds of officials and friends gathered for the occasion. "There is at this agency a willingness to challenge the most powerful companies in the world, when those companies have done wrong, in the name of the less powerful."

Pitofsky, after a tenure widely viewed as aggressively enforcing the nation's antitrust and consumer laws, appeared to be delivering a subtle message to Muris.

Many Democrats and Republicans, consumer groups and corporate chieftains see the change in leadership at the Federal Trade Commission as a case study in the differences between the Clinton and Bush administrations on fundamental areas of regulation.

Muris, a senior trade commission official for five years during the Reagan administration, criticized the agency during the Pitofsky era for not being sympathetic enough to the economic benefits of large corporate mergers and for bringing monopoly cases such as the ones the agency filed against Intel Corp. and Visx, a maker of laser vision-correction equipment.

Since assuming the leadership this month of the 1,000-member agency charged with enforcing antitrust and consumer protection laws, Muris, 51, has maintained that he intends to follow in Pitofsky's footsteps.

Moreover, officials at the agency say Muris has told them he is looking for some big proposed mergers and other cases to demonstrate that he will be a tough antitrust cop.

"It's important that I establish I'm a prosecutor, and I'm comfortable being a prosecutor," he said in a recent interview. "People may read things and see a shift and bring dumb mergers. And if they do that, we'll stop them."

But in his first days in office, Muris has been criticized for giving top positions to two former economists who worked for the tobacco industry as it came under legal attack during the Clinton administration. In addition, Muris has appointed as general counsel a law professor who once said that three of the current commissioners were a "national embarrassment."

He has changed the agency's direction on online privacy. Under Pitofsky, the commission asked Congress for a law giving the agency more authority to police violations of privacy. Muris says he needs more time to study the issue.

And shortly before joining the agency, he argued on behalf of a credit rating agency that the Fair Credit Reporting Act, which has been used by the trade commission to challenge agencies for selling confidential information for marketing purposes, is unconstitutional, a view rejected two months ago by the U.S. Court of Appeals in Washington.

Muris' initial decisions have raised concerns inside the agency and among consumer and other groups that he will return the ideological direction of the agency to an earlier era.

The fears among consumer advocates and some longtime staff members have been stoked in part by the senior staff assembled by Muris. The new head of the Consumer Protection Bureau, for instance, is J. Howard Beales III, an economist who has asserted in academic papers that there is no link between cigarette advertisements and smoking among teenagers.

Officials said they thought that Beales would be the first non-lawyer to head the consumer protection bureau and that his background would bring a more market-oriented approach to the job.

David Scheffman, a second economist who has worked for the tobacco industry, has been appointed to head the agency's Bureau of Economics. Scheffman has testified on behalf of the tobacco industry that cigarettemakers never conspired to suppress the development of healthier products.

Internal turmoil over the changing of the guard surfaced in a memorandum circulating two weeks ago that was written by the agency's two Democratic commissioners, Sheila Anthony and Mozelle Thompson.

Muris had planned to have the five-member commission vote on the new appointments. But he put it off after becoming concerned that the vote would be 3-2, an inauspicious beginning since staff appointments typically are approved without dissent. A close vote, officials said, might have been viewed suspiciously by Sen. Ernest Hollings of South Carolina, the new Democratic chairman of the Senate Commerce Committee.

Officials said Anthony and Thompson, the two Democrats, ultimately agreed not to vote against the appointments, after extracting commitments from the new staff members to cast aside their previously held views on certain sensitive issues, which the commissioners described in the memo as "inconsistent with the consumer protection mission" of the agency.

The Democratic commissioners also were described by officials as being troubled that Muris had selected William Kovacic as general counsel.

Kovacic, a law professor from George Washington University, said in an interview in 1998 with Bloomberg News Service that he viewed three commissioners appointed by President Clinton _ Anthony, Thompson and Orson Swindle III, who fills one of the Republican positions on the panel _ as a "national embarrassment" for not knowing enough about antitrust law and for being "three smart people who are learning on the job."

Defending his appointments, Muris insists that he will continue most of the policies put in place by Pitofsky and that there are few issues at the agency that are truly partisan.

"Ralph Nader used this agency to make his case that the difference between Bush and Gore was like the difference between Tweedledum and Tweedledee," said Muris, who during the campaign and in the first few months of the new administration had been an economic adviser to President Bush.

But he also has acknowledged that he will be more sympathetic to the economic efficiencies used to justify large corporate mergers, and he is less inclined to bring some of the monopolization cases brought by the Clinton administration.

Muris has said, for example, that he would not have challenged the proposed merger that reduced the number of baby-foodmakers from three to two, because it also presented significant consumer benefits. His view of that case, which was shaped by his antitrust views and his experience as a lawyer working for one of the companies, was rejected two months ago by a unanimous three-judge panel of the District of Columbia U.S. Court of Appeals.

"There will be differences at the margins," Muris said. "These margins are important."

To some consumer groups, the differences cut to the core of the agency's mandate.

Matthew Myers, president of the Campaign for Tobacco-Free Kids, said the difference between Pitofsky's tenure and the views reflected by Muris' staff "is the difference between consumer protection and non-consumer protection."

"While serving as a consultant to R.J. Reynolds, Howard Beales expressed the views that tobacco advertising, no matter how egregious, doesn't impact children and therefore shouldn't be subject to regulation," Myers said. "A person with that kind of longstanding affiliation with the tobacco industry and views so far outside of the mainstream about the impact of tobacco marketing on children is unlikely to be an aggressive protector of our nation's kids."

The agency's new spokeswoman, Cathy MacFarlane, said Beales would not comment on the issues surrounding his appointment.

Conservatives and some business executives say that Muris, bringing a far more limited vision of the agency and greater reliance on the marketplace, will play a more constructive role than Pitofsky in helping companies attract capital.

"Muris is less quick to jump to the conclusion that markets have failed," said Randolph May, a senior fellow at the Progress and Freedom Foundation, a conservative research organization. "He would sooner sit back and wait and see whether regulation is really needed more as a last resort rather than a first resort."

But others say this vision could be detrimental to consumers.

Gene Kimmelman, co-director of the Washington office of Consumers Union, said the appointments "send a signal that large corporate entities don't have to worry too much about tough enforcement by the Federal Trade Commission, and that's a significant concern."

"It appears to be a green light," Kimmelman said, "to the business community that the cop is not actively policing the beat."

Muris said Beales would not be involved in cigarette advertising cases. He also said his views on advertising were not significantly different from those of Pitofsky. He produced a 1977 article by Pitofsky that said advertising-fraud cases require reliable data, not some "theoretical effort to achieve truth."

After the commission, under Pitofsky, filed a complaint asserting that R.J. Reynolds was engaged in deceptive advertising, the company agreed to permanently retire Joe Camel and his brother cartoon characters, which include Buster, Max and Floyd.

But Muris said the agency now spent very few resources on tobacco issues and that therefore the issue, while important, was a relatively minor part of the agency's portfolio.

But Myers of the Campaign for Tobacco-Free Kids said the agency had a complaint before it challenged claims by Reynolds Tobacco that the company's new Eclipse cigarettes might pose less of a health risk.

"This is precisely the kind of issue," he said, "that the FTC should be weighing in on."