FTC sets limits on its competition authority

The Federal Trade Commission (FTC) on Thursday issued a policy statement defining the limits of its ability to go after companies for unfair methods of competition — authority it invoked against some tech companies in years past.  

The one-page policy statement is meant to restrain the FTC’s authority when it pursues antitrust cases that fall outside the scope of two major laws — the Sherman Act and the Clayton Act. 

{mosads}The policy principles released Thursday require that enforcement action promotes consumer welfare and that it be aimed at conduct that is likely to harm competition. The third principle says the commission will be less likely to use the stand-alone authority if the issue can be resolved by enforcing one of the two main antitrust laws. 

“Congress chose not to define the specific acts and practices that constitute unfair methods of competition in violation of Section 5, recognizing that application of the statute would need to evolve with changing markets and business practices,” according to the policy statement. 

“Instead, it left the development of Section 5 to the Federal Trade Commission as an expert administrative body, which would apply the statute on a flexible case-by-case basis, subject to judicial review,” the statement continued. 

The FTC has historically given itself the ability to crack down on unfair competition that violates only the spirit of antitrust law or that could violate the law in the future if allowed to go forward. The Sherman Act outlaws unreasonable attempts to monopolize or retrain trade. The Clayton Act deals with mergers that could substantially lessen competition, and also addresses some discriminatory prices. 

Thursday’s policy statement is meant to define when that stand-alone action can be taken.

The stand-alone authority addressed Thursday was used in 2013 to get Google to change the way it licensed some patents essential for smartphones and other devices. At the time, the FTC said the authority was a “sensible and practical way for the commission to bring problematic conduct to a halt.”

The commission adopted similar policy statements governing its unfair and deceptive acts authority in the 1980s. Sen. Richard Blumenthal (D-Conn.) called Thursday’s move a “historic step in the commission’s 100 year history.”

House Judiciary Chairman Bob Goodlatte (R-Va.) and Rep. Tom Marino (R-Pa.) also called it a “historic action” but said they will continue to determine if additional action is necessary and how the new guidance is applied. 

The commission approved the policy statement in a 4-1 vote. Only GOP Commissioner Maureen Ohlhausen dissented. 

Calling the policy statement “exceedingly brief, and highly general,” Ohlhausen predicted it would spur the agency to use the authority more often. She also criticized the commission for voting without seeking public comment on the issue. 

Finally, she echoed a concern from other critics who have said the limits of the policy statements would not have an opportunity to be tested in court because so few cases make it that far. Many cases, like the one involving Google, reach a settlement before that point. 

“I disagree with the view that having an expansive [unfair methods of competition] policy statement is better than having no statement at all,” she said in her dissent.