On 13 August, the Federal Trade Commission (FTC or Commission) issued its first set of principles governing enforcement of “unfair methods of competition” under Section 5 of the FTC Act. The FTC Commissioners voted 4-1 in favor of the statement, with Commissioner Maureen K. Ohlhausen the lone dissenting vote.
Three principles guide whether the FTC will challenge an act as an unfair method of competition:
- the Commission will be guided by the public policy underlying the antitrust laws, namely, the promotion of consumer welfare;
- the act or practice will be evaluated under a framework similar to the rule of reason, that is, an act or practice challenged by the Commission must cause, or be likely to cause, harm to competition or the competitive process, taking into account any associated cognizable efficiencies and business justifications; and
- the Commission is less likely to challenge an act or practice as an unfair method of competition on a standalone basis if enforcement of the Sherman or Clayton Act is sufficient to address the competitive harm arising from the act or practice.
There is general consensus within the antitrust bar that Section 5 is broader than the Sherman Act’s prohibitions. It therefore enables the FTC to bring cases that fill the gaps between clearly anticompetitive conduct and the language of the Sherman Act, but the precise boundaries of the statute are unclear.
The quintessential example is an “invitation to collude,” which raises the possibility of anticompetitive price-fixing but does not meet the literal prohibition against an “agreement in restraint of trade” under the Sherman Act. The FTC has cited Section 5 in some settlements of competition-based investigations, notably its investigation of Intel that resulted in a settlement in 2010, but the federal courts have not decided a case involving an “unfair method of competition” claim under Section 5 in over 50 years.
In 2013, Commissioner Joshua Wright proposed a policy statement that would have enabled the FTC to bring Section 5 claims against practices that (1) harm or are likely to significantly harm competition and (2) lack "cognizable efficiencies." This proposal, which ultimately was not adopted, kicked off a broad dialogue on the proper scope of Section 5 that has culminated in the Commission’s statement.
The statement—which is only 324 words long—gives a terse summary of the principles that have long guided the FTC’s enforcement decisions in this area, but it does not provide much concrete guidance to the business community or to the antitrust bar advising them. As Commissioner Ohlhausen noted in her dissenting statement that "[t]he approach of my colleagues to this important issue of competition policy is too abbreviated in substance and process for me to support. … Moreover, what substance the statement does offer ultimately provides more questions than answers, undermining its value as guidance." It remains to be seen how the Commission—and future Commissioners—choose to interpret the vague principles described in the statement.