- The Little Old Lady Has Teeth: The U.S. Federal Trade Commission and the Advertising Industry, 1970–1973
In 1914, President Woodrow Wilson signed the Federal Trade Commission Act into law, establishing the U.S. Federal Trade Commission (FTC) as a permanent government agency responsible for regulating anti-competitive business practices. Amendments to the FTC Act during the 1930s strengthened the FTC’s role in consumer protection by providing the agency with additional jurisdiction over deceptive and unfair advertising. With the exception of a few industries specifically regulated by other federal agencies, the FTC has broad authority to regulate the entire American economy. Despite these extensive powers, the FTC has been frequently regarded as an ineffective and inept agency throughout most of its existence.1 But in 1970, after its long period of hibernation, the FTC began to awaken. From the perspective of major businesses, the FTC during the early 1970s was by far the most formidable regulatory agency in Washington. The FTC addressed fundamental questions about advertising, and the confrontations that followed would help determine the role of government in regulating the ad industry and the American economy in general. Despite the eventual demise of broad-based regulations, a detailed exploration of the FTC’s transformation and the initial response by advertisers has relevance to contemporary debates because it provides a sense of the historical forces that bear on the shape of political reform.
This paper relies on hundreds of industry trade publications and a variety of other historical documents to explore the following developments: the FTC’s regulatory renaissance from 1970–3; the initial response by advertisers and related industries; and the ways in which business interests came together to marshal resources and talent to defeat the FTC’s aggressive policy agenda by 1980. Although many of the FTC’s proposals were eventually watered down or abandoned entirely, the FTC’s regulations during these three years were unprecedented in both number and scope. If made more permanent, the FTC’s policies would have offered two significant changes for major industries. First, the FTC greatly expanded the number of deception complaints for common advertising strategies and instituted corrective advertising for consumer redress.2 Second, the FTC attempted to redefine existing anti-trust regulations by considering advertising as a tool used by firms to create barriers to entry. The advertising industry was surprisingly acquiescent and uncertain about how to respond to the wave of FTC regulations in the early 1970s, leaving open a distinct opportunity for far-reaching changes to advertising as we know it today.
Despite its historical significance, existing scholarship has largely minimized the potency of the FTC by commenting only on particular aspects of consumer activism and media policy from this period’s many political and cultural developments. This, in turn, has provided considerable breathing room for ideological justifications of the status quo. Media histories of this period tend to concentrate on the Federal Communications Commission (FCC) and the creation of the Public Broadcasting Act of 1967.3 Although the FCC has been an important player in media policy making, the Federal Trade Commission—by targeting advertising—was essentially calling into question the lifeblood of the commercial media system. Similarly, histories of this period’s consumer activism have focused on the consumer movement’s effort to create a Consumer Protection Agency (CPA) in Washington.4 This emphasis tends to overlook the ways in which the FTC embodied many of the goals of the CPA and consumer activists in general. Cultural histories of U.S. advertising and consumer culture do mention the FTC’s period of regulatory strength during the 1970s,5 but often refer to the FTC’s unsuccessful attempt to ban advertising to children in 1978 as the quintessence of advertising reform efforts during this period.6 Although this drive was undoubtedly important, developments within the FTC from 1970–3 laid the groundwork for these later proposals, and if continued, would have initiated even more dramatic changes to the entire ad industry and the U.S. political economy as a whole.
Advertising and Oligopoly Markets
Advertising’s economic function in oligopoly markets helps explain why FTC regulations posed such dramatic changes. In 1966...