[House Report 107-276]
[From the U.S. Government Publishing Office]



107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    107-276

======================================================================



 
                  AMERICAN SPIRIT FRAUD PREVENTION ACT

                                _______
                                

November 9, 2001.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Tauzin, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 2985]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 2985) to amend the Federal Trade Commission Act 
to increase civil penalties for violations involving certain 
proscribed acts or practices that exploit popular reaction to 
an emergency or major disaster declared by the President, and 
to authorize the Federal Trade Commission to seek civil 
penalties for such violations in actions brought under section 
13 of that Act, having considered the same, report favorably 
thereon without amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     2
Committee Consideration..........................................     2
Committee Votes..................................................     2
Committee Oversight Findings.....................................     2
Statement of General Performance Goals and Objectives............     2
New Budget Authority, Entitlement Authority, and Tax Expenditures     3
Committee Cost Estimate..........................................     3
Congressional Budget Office Estimate.............................     3
Federal Mandates Statement.......................................     4
Advisory Committee Statement.....................................     4
Constitutional Authority Statement...............................     4
Applicability to Legislative Branch..............................     4
Section-by-Section Analysis of the Legislation...................     4
Changes in Existing Law Made by the Bill, as Reported............     5

                          Purpose and Summary

    The purpose of H.R. 2985 is to amend the Federal Trade 
Commission Act to increase civil penalties for violations 
involving unfair or deceptive acts or practices that exploit 
popular reaction to a national emergency or natural disaster.

                  Background and Need for Legislation

    During times of national emergency or natural disaster, 
Americans generously give financial assistance to their fellow 
citizens in need. For example, it has been estimated that 
charities have received in excess of $1 billion for those 
affected by the September 11th terrorist acts. Unfortunately, 
such emergencies are often an invitation for unscrupulous 
persons to manipulate the emotions of generous citizens to 
fraudulently line their own pockets. Scam artists will use the 
telephone and Internet to prey on emotions--for example, by 
being rude when asked for specific information or insinuating 
that people who decline to give are unpatriotic. H.R. 2985, the 
American Spirit Fraud Prevention Act, takes measures to prevent 
scam artists from capitalizing on national tragedies and 
takesadditional steps to penalize those practices.

                                Hearings

    The Committee on Energy and Commerce did not hold hearings 
on H.R. 2985.

                        Committee Consideration

    On Wednesday, October 3, 2001, the Subcommittee on 
Commerce, Trade, and Consumer Protection met in open markup 
session and approved H.R. 2985 for Full Committee 
consideration, without amendment, by a voice vote. On Thursday, 
October 11, 2001, the Committee on Energy and Commerce met in 
open markup session and favorably ordered reported H.R. 2985, 
without amendment, by a voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. 
There were no record votes taken in connection with ordering 
H.R. 2985 reported. A motion by Mr. Tauzin to order H.R. 2985 
reported to the House, without amendment, was agreed to by a 
voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has not held 
legislative or oversight hearings on this legislation.

         Statement of General Performance Goals and Objectives

    The goal of H.R. 2985 is to provide the FTC with the 
authority to increase penalties for those who perpetuate frauds 
that capitalize on national emergencies or natural disasters.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
2985, the American Spirit Fraud Prevention Act, would result in 
no new or increased budget authority, entitlement authority, or 
tax expenditures or revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:
                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, November 2, 2001.
Hon. W.J. ``Billy'' Tauzin,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
completed the enclosed cost estimate for H.R. 2985, the 
American Spirit Fraud Prevention Act. The CBO staff contact for 
this estimate is Ken Johnson.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 2985--American Spirit Fraud Prevention Act

    H.R. 2985 would authorize the Federal Trade Commission 
(FTC) to seek higher civil penalties for unfair or deceptive 
business practices if businesses exploit the popular reaction 
to a national emergency. This authority would apply to 
violations committed within a year after the President has 
declared a national emergency.
    Based on information from the FTC, CBO estimates that 
implementing H.R. 2985 would increase the agency's enforcement 
costs and collections of civil penalties by insignificant 
amounts. Because the bill would affect civil penalties, which 
are classified in the budget as governmental receipts 
(revenues), pay-as-you-go procedures would apply.
    H.R. 2985 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contact for this estimate is Ken Johnson. 
This estimate was approved by Peter H. Fontaine, Deputy 
Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    Section 1 establishes the short title of the bill as the 
``American Spirit Fraud Prevention Act.''

Section 2. Increase in penalties for unfair or deceptive acts or 
        practices exploiting reaction to certain emergencies and major 
        disasters

    Subsection (a) makes changes to section 5(m) of the FTC 
Act. If the FTC brings an administrative action under section 5 
for an unfair or deceptive act or practice committed during an 
emergency period or disaster period, and the act or practice 
exploits popular reaction to the emergency or disaster, the 
civil penalties provided under section 5(m) are doubled from 
$11,000 to $22,000 per violation.
    Subsection (b) makes changes to section 13 of the FTC Act. 
If the FTC brings an action in Federal district court under 
section 13 for an unfair or deceptive act or practice committed 
during an emergency period or disaster period, and the act or 
practice exploits popular reaction to the emergency or 
disaster, after awarding any equitable relief, subsection (b) 
requires the court to impose civil penalties in the amount of 
$22,000 per violation. The civil penalties collected under 
section 13 are not intended to preempt any equitable relief the 
court may otherwise deem necessary.
    For actions brought under section 5 or section 13 of the 
FTC Act, an ``emergency period'' is defined as the period of 
time that begins when the President declares an emergency under 
the National Emergencies Act (50 U.S.C. 1601 et seq.) and ends 
one year after the emergency is terminated. A ``disaster 
period'' is defined as the one year period beginning on the 
date the President declares an emergency or major disaster 
under the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act (42 U.S.C. 5121 et seq.).

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic, and existing law in which no change is 
proposed is shown in roman):

FEDERAL TRADE COMMISSION ACT

           *       *       *       *       *       *       *


  Sec. 5. (a) * * *

           *       *       *       *       *       *       *

  (m)(1)(A) * * *

           *       *       *       *       *       *       *

  (D) In the case of a violation involving an unfair or 
deceptive act or practice in an emergency period or disaster 
period, the amount of the civil penalty under this paragraph 
shall be double the amount otherwise provided in this 
paragraph, if the act or practice exploits popular reaction to 
the national emergency, major disaster, or emergency that is 
the basis for such period.
  (E) In this paragraph--
          (i) the term ``emergency period'' means the period 
        that--
                  (I) begins on the date the President declares 
                a national emergency under the National 
                Emergencies Act (50 U.S.C. 1601 et seq.); and
                  (II) ends on the expiration of the 1-year 
                period beginning on the date of the termination 
                of the national emergency; and
          (ii) the term ``disaster period'' means the 1-year 
        period beginning on the date the President declares an 
        emergency or major disaster under the Robert T. 
        Stafford Disaster Relief and Emergency Assistance Act 
        (42 U.S.C. 5121 et seq.).

           *       *       *       *       *       *       *

  Sec. 13. (a) * * *

           *       *       *       *       *       *       *

  (e)(1) If a person, partnership, or corporation is found, in 
an action under subsection (b), to have committed a violation 
involving an unfair or deceptive act or practice in an 
emergency period or a disaster period, and if the act or 
practice exploits popular reaction to the national emergency, 
major disaster, or emergency that is the basis for such period, 
the court, after awarding equitable relief (if any) under any 
other authority of the court, shall hold the person, 
partnership, or corporation liable for a civil penalty of not 
more than $22,000 for each such violation.
  (2) In this subsection--
          (A) the term ``emergency period'' means the period 
        that--
                  (i) begins on the date the President declares 
                a national emergency under the National 
                Emergencies Act (50 U.S.C. 1601 et seq.); and
                  (ii) ends on the expiration of the 1-year 
                period beginning on the date of the termination 
                of the national emergency; and
          (B) the term ``disaster period'' means the 1-year 
        period beginning on the date the President declares an 
        emergency or major disaster under the Robert T. 
        Stafford Disaster Relief and Emergency Assistance Act 
        (42 U.S.C. 5121 et seq.).

                                
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