FTC rule over charities allowed

Opinion lets agency regulate nonprofits' economic activities

Supreme Court

May 25, 1999|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF

WASHINGTON -- Settling a legal question that had been open for two decades, the Supreme Court ruled unanimously yesterday that the Federal Trade Commission has the power to regulate the economic activities of nonprofit groups and associations.

The fact that a group earns no profit on its own, the court said, does not bar FTC oversight, if the organization engages in activities that affect the profits and economic interests of members.

But, in a separate part of the ruling, the court decided by a 5-4 vote that any FTC inquiry into whether those activities in fact harm competition must be full and thorough. A superficial "quick look" that the FTC sometimes can use in business cases is not enough when a nonprofit is under investigation, the majority said.

The ruling upheld a 1997 decision by the 9th U.S. Circuit Court of Appeals in San Francisco that the FTC could regulate the advertising rules that the California Dental Association imposes on its members.

Those rules generally bar dentists from advertising low fees or ads that make claims about the comparative quality of a dentist's services.

The FTC had ruled in 1996 that these rules illegally interfered with dentists' opportunity to advertise price and other advantages they were offering patients.

In a separate case yesterday, the court, splitting 5-4, ruled that developers are sometimes entitled to jury trials when they sue in federal court with claims that a local government unconstitutionally seized their property by denying permits to build on it.

It did not spell out the specific instances in which the jury trial right exists, leaving that to be developed in future cases.

The ruling was not a complete victory for developers for another reason:

The court, in a second part of the decision, refused unanimously to make it easier for developers to prove that land-use regulations resulted in invalid seizures, or "takings," of private property.

The court said it would adhere to its earlier formula, which declares that a taking does not occur unless government action destroys all of a property's economic value.

The ruling upheld a jury verdict of $1.45 million in favor of California developers who wanted to build homes in a 37-acre dune area along the Pacific coastline in Monterey, only to be thwarted repeatedly by local officials seeking to protect an endangered species, Smith's Blue Butterfly.

In a second California case, the court refused to hear a challenge to a rent-control ordinance in Santa Monica.

Pub Date: 5/25/99

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