In the US, the majority of cases concerning anti-competitive conduct allege violations of Sections 1 and 2 of the Sherman Act, which regulate anti-competitive agreements and unilateral conduct. Actions under the Sherman Act can be brought by the US Department of Justice or by private claimants. The US Federal Trade Commission (FTC) also has the ability to bring actions against ‘unfair methods of competition… and unfair or deceptive acts’ affecting commerce through an administrative process under Section 5 of the Federal Trade Commission Act (Section 5). The FTC can use Section 5 to challenge actions that otherwise would violate the Sherman Act, but courts have also held that Section 5 is intended to reach a broader range of anti-competitive behaviour than that addressed in the Sherman Act.

The FTC’s use of Section 5 to challenge conduct outside the scope of the Sherman Act or other federal antitrust laws declined over the past 20 years because it lost a number of cases on appeal. However, the current FTC leadership has sought to reinvigorate and expand Section 5 enforcement, and we can expect more of this in 2011.

This is significant for companies acting in the US – particularly those with large market shares. Although recent Supreme Court decisions have restricted the scope of monopolisation claims under Section 2 of the Sherman Act, the FTC may bring cases under Section 5 without the burden of restrictive Section 2 precedent.

The FTC may also consider bringing Section 5 actions in antitrust claims that involve deception – for instance, claims of fraud on a standard-setting organisation. The FTC lost its Sherman Act case against Rambus, but could have a better prospect of success in the future if a similar case were instead brought under Section 5.

In at least three enforcement actions this past year, all of which have been settled, the FTC used its Section 5 authority to bring a stand-alone claim.

  • The settlement with Intel prohibits the computer chip manufacturer from using threats, bundled prices or other offers to restrict competition for the sale of competing central or graphics processing units (CPUs and GPUs). The settlement also contains provisions regulating access to Intel’s CPUs by manufacturers of complementary products for the next six years.
  • In the Transitions Optical case, the FTC alleged that Transitions was using its dominant market position to coerce its customers (eyeglass lens manufacturers, for whose lenses Transitions provides photochromic coating) into signing exclusive dealing arrangements. The FTC also alleged that Transitions entered into exclusive agreements with downstream, indirect customers (the wholesale labs and retailers that purchased the lenses), foreclosing its rivals from 40 per cent or more of this sales channel. Transitions agreed not to enter into any agreement or policy that results in exclusivity with lens casters, retailers or wholesale labs except under certain conditions. Transitions is also prevented from offering certain discounts to its customers, such as bundled product discounts or retroactive volume discounts, and from retaliating against customers that purchase its lenses on a non-exclusive basis.
  • The FTC charged U-Haul International with violating Section 5 by inviting its closest competitor, Avis Budget Group, to collude on prices for truck rentals. (The FTC did not allege that the parties reached any agreement.) The settlement order bars U-Haul from inviting any of its competitors to collude – for example, by dividing markets, allocating customers or fixing prices – and imposes monitoring and compliance provisions.

The FTC has indicated that it may publish a report on the Section 5 hearings held in 2008, which would clarify its approach and objectives when contemplating Section 5 cases.