Risk & Compliance

FTC Tackles Meaning of ‘Unfair Competition’

For the first time, the agency outlines how it will use its unfairness powers under antitrust law but a GOP commissioner dissents.
Matthew HellerAugust 14, 2015

The U.S. Federal Trade Commission has issued unprecedented guidance on the section of antitrust law that bans unfair competition, but a dissenting commissioner said the policy statement may only add to “burdens for the business community.”

Section 5 of 1914 Federal Trade Commission Act authorizes the FTC to combat “unfair methods of competition.” In its first attempt to clarify what that phrase actually means, the commission outlined the basic principles it will use in applying the law.

Those principles include promoting consumer welfare, considering whether a business act or practice “must cause, or be likely to cause, harm to competition or the competitive process,” and giving deference to the Sherman or Clayton Act antitrust laws when they are sufficient to address competitive harm.

“Our aim in adopting this policy statement is to reaffirm the principles that guide our enforcement decisions, leaving for future generations the flexibility to do the same,” FTC Chairwoman Edith Ramirez said in remarks at George Washington University Law School.

The FTC voted 4-1 to adopt the policy, with three Democrats and a Republican in the majority.

GOP Commissioner Maureen Ohlhausen dissented, saying that “the possibilities for expansive use of Section 5 under this policy statement appear vast”and FTC staff will be emboldened to “explore the limits” of the law in their investigations.

“I fear that this will ultimately lead to more, not less, uncertainty and burdens for the business community,” she wrote.

As The Wall Street Journal reports, the FTC has used its unfairness powers sparingly in recent years, but the interpretation of Section 5 “has continued to stir debate in the legal and business communities because the FTC over 100 years has never formally defined what it means to compete unfairly.”

Critics say that what counts as unfair can be in the eye of the beholder, creating the risk of government overreach and arbitrary enforcement.

“This is a good first step and we are pleased that the FTC has finally heeded the committee’s calls for guidance,” said Rep. Bob Goodlatte (R-Va.), chairman of the House Judiciary Committee, and Tom Marino (R-Pa.), head of a key subcommittee overseeing the FTC.