Continuing my run of posts inspired by the Spring Meeting, let’s touch on the other bit of news that came out at the time.  I wasn’t present when he said it, but it was reported to me that Commissioner Wright intends to put out guidance on Section 5 enforcement relatively soon (which has subsequently been reported in more detail elsewhere with the text of his comments available here).  To my ears, Chairperson Ramirez said something similar about the need for guidance, although without the explicit promise, during the Enforcer’s Round Table.

This is unabashedly good news.  As regular readers should know, I’ve been rather wary of Section 5 enforcement.  To the extent that there is any doctrine around it, it’s not well defined and such a fuzzy concept as “unfair methods of competition” seems ripe for abuse and uncertainty.  It’s not clear to me that there are classes of conduct that cry out for antitrust enforcement but that are not covered, or potentially covered, by the current body of antitrust law.

Nonetheless, recent enforcement actions seem to suggest that the FTC plans to continue its efforts to breathe new life into Section 5.  If it’s going to, it is far preferable to have the FTC (or even one Commissioner) state its view on what conduct may be covered so that antitrust practitioners have some basis on which to guide their clients.  Piecemeal, case-by-case announcements of new “rules” as individual cases come along miss out on the opportunity for significant antitrust enforcement on the front lines and risks “gotcha” treatment for conduct that was previously thought to be acceptable.  Or, in other words, how do I advise a client to avoid conduct that only the FTC knows might violate Section 5?

But let’s not get too happy.  I still think the preferable course would be for the FTC to abandon its revival of Section 5.  I just see far more potential for harm than for good coming from expanding the realm of competition enforcement.

To understand why, let’s take one example where the FTC has sought to apply Section 5: information sharing.  I can’t tell you how many times I’ve told someone that, technically, sharing competitively sensitive information is not, standing alone, illegal under U.S. antitrust law (although it probably is in Europe).  It has always been decidedly risky, however, because if you are sharing competitively sensitive information (e.g., prices, volumes, customer lists, etc.), it gets hard to convince anyone who finds out about it that you were not also coordinating your competitive conduct (i.e., fixing prices).  After all, what was the point of sharing if you weren’t?  Do you really expect us to believe that you knew all this stuff but you didn’t coordinate?

But the FTC seems to view Section 5 as giving it a third option.  Using Section 5 arguably relieves it of the burden of showing that a particular instance of information sharing resulted in harm to competition.  Enforcement may therefore be possible even where there is no evidence that the parties actually coordinated.

In my view, this is unhelpful.  Either the information sharing hindered competition and thus should violate Section 1 of the Sherman Act, or it did not and thus should not be illegal.  There is no real room for grey area between the two.

The good news is that Commissioner Wright seems to agree saying, “a necessary but not sufficient condition for such a theory would be that unfair methods claims, like other antitrust claims, must result in harm to the competitive process and, in turn, reduce economic welfare.”  But if that’s going to be the case, what is Section 5 going to add?

That’s not the only question.  As I’ve said before, I don’t think the FTC is being nearly as clever as some from that agency seem to think.  In theory, one of the merits of using Section 5 instead of Section 1 of the Sherman Act is that only the FTC can enforce the FTC Act.  Finding a violation of the FTC Act therefore does not automatically doom the subject of enforcement to losing private treble damages actions in the way that enforcement under the Sherman Act necessarily does.

It won’t take the plaintiffs’ bar long, however, to add allegations of actual harm to competition to the facts in any FTC Section 5 settlement, thus giving them a significant leg up in pleading a case that gets past a motion to dismiss.  After all, the FTC already concluded that the conduct happened, so they will argue that they should get the chance to convince a jury that it also unreasonably restrained competition.

Commissioner Wright notes that the theory behind Section 5 was to empower an expert agency to be more adaptive than the judicial decisions interpreting the Clayton and Sherman Acts.  I don’t know how one can look back over the last half century or so of revolution (and attempted counter-revolutions) in antitrust enforcement and think that more flexibility would “generate sound competition rules and reliable guidance for the business community” rather than generate uncertainty.  One need only consider the unilateral conduct guidelines promulgated by the Bush DOJ that were immediately withdrawn by the Obama DOJ.

Nonetheless, Commissioner Wright is certainly correct that the only hope for reliable guidance for the business community from a reinvigorated Section 5 lies in a clear articulation of enforcement policy from the FTC.