The Federal Trade Commission would get new powers to oversee and punish companies that run afoul of its rules as part of a financial-services oversight bill currently before Congress, a further step in the Obama administration’s beefing up of the U.S. regulatory machinery.

The provision, which has reached this point virtually unnoticed by all but a few lobbyists and interest groups, is scheduled to be debated in the House Energy and Commerce Committee Thursday.

The legislation, if approved, would strengthen the FTC by allowing the agency to craft regulations more quickly and enhance its ability to impose civil penalties on companies. It would also allow the agency to take action against companies “aiding and abetting” unfair or deceptive business practices, not just the original perpetrator, according to people familiar with the legislation.

“All of us want to ensure that federal law enforcement agencies have effective tools to help them stop unfair and deceptive abusive business practices,” FTC Chairman Jon Leibowitz wrote to lawmakers Monday in support of the proposal. “New tools for the FTC are critical for the FTC to provide the strongest possible protection for consumers and President Obama has expressed his support.”

In a telephone interview, Mr. Leibowitz called the proposals “very modest changes that would make us more effective.”

The FTC is charged with protecting consumers from unfair or deceptive trade practices, having begun as an antitrust enforcer. Its authority covers a wide range of companies and industries, from Internet marketers to consumer-products manufacturers.

The House Energy and Commerce Committee, which oversees the FTC, is scheduled to vote on the legislation Thursday. Democrats hold a large majority on the committee and are expected to approve it. It then must pass the full House and Senate.

“It’s the most significant expansion of the FTC since its inception, so it’s a pretty big deal,” said Timothy Muris, who served as chairman of the agency from 2001 to 2004.

Jim Miller, an agency chairman from 1981 to 1985, said the legislation “is like putting the FTC on steroids.”

In his letter to Congress, Mr. Leibowitz also asked lawmakers to give the agency additional powers not currently in the legislation, including the power to litigate cases involving civil penalties. The agency now must refer civil-penalty cases to the Justice Department. Mr. Leibowitz said the FTC could better protect consumers if it had the same authority as other federal agencies such as the Securities and Exchange Commission.

Most businesses oppose the new powers. Ryan McKee, a senior official at the U.S. Chamber of Commerce, said industry is “concerned that the legislation removes an important check on new regulations and could lead to a serious rush to judgment given their very broad authority over a vast segment of industry.”

Even some supporters of the agency’s mission approve of keeping some constraints on its powers, given controversy dating to the 1970s as to whether the agency was overstepping its authority in areas including breakfast cereal and advertising aimed at children. Congress at the time passed laws making it harder for the FTC to craft new rules.

In practice, much of the impact could fall on the financial-services industry and Internet advertisers, according to consumer groups that support the changes.

The legislation has caught most industry lobbyists flat-footed as they focus their attention on a high-profile fight over legislation to create a new federal regulatory agency to oversee consumer-oriented financial products. Industry lobbyists have held dozens of meetings in the past few months to plot strategy for defeating the proposed Consumer Financial Protection Agency. The U.S. Chamber of Commerce has spent more than $2 million on advertisements opposing the agency.

Daniel Jaffe, the executive vice president for the Association of National Advertisers, the advertising industry’s oldest trade association, said “one if the problems when you create a mega-agency like the [new financial-services agency] is that people don’t notice the impact on the FTC.”

The two biggest changes pushed by the Obama administration and House leaders would simplify the FTC’s complex rule-making procedures and toughen its enforcement powers over companies.

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By Brody Mullins and John D. McKinnon
October 29th, 2009