FTC Plans to Clamp Down on Unfair Competition by Companies (1)

The US Federal Trade Commission plans to make wider use of its 1914 founding statute to police anticompetitive behavior by companies in the internet age.

The Democratic-led commission on Thursday issued a new policy statement that empowers the agency to prevent “unfair methods of competition.”

FTC Chair Lina Khan said the policy, which re-affirms Section 5 of the FTC Act, will effectively reactivate the FTC’s authority to police conduct, especially in online markets.

“In the digital economy, we’ve seen time and time again, there’s a real premium for businesses to capture the market as quickly as they can,” Khan told reporters in a briefing Wednesday. That “can lead businesses to play fast and loose with the rules.”

The move comes under an aggressive push by the Biden administration to rein in corporate dominance and reinvigorate dormant antitrust powers.

The guidance will allow the agency to tackle behavior that traditional antitrust laws have had trouble addressing, for example when a series of acquisitions, each of which would appear fine on its own, represent an anticompetitive consolidation when combined. The agency has also used the statute to sue companies under its mandate to protect consumers from fraud, scams and misleading business practices.

The new policy, which was approved 3-1, says the commission doesn’t need to demonstrate harm solely from unfair activities, but can focus on “negative consequences” such as reduced choice.

The agency’s only Republican Commissioner Christine Wilson dissented on the new policy statement.

The new statement “resembles the work of an academic or a think tank fellow who dreams of banning unpopular conduct and remaking the economy,” Wilson wrote in a dissent. It “abandons bedrock principles of antitrust that long have been accepted by the Commission, the courts, the business community, and enforcers.”

The commission said that, unlike other competition laws, Section 5 doesn’t require showing a company’s power in a given market. Enforcers simply need to show a negative impact on competitive conditions.

When drafting the FTC Act, Congress intentionally used language that allowed the commission’s authority to evolve with changing market realities, Khan has said. That was a recognition that the agency has the authority to promote competition beyond traditional antitrust statues, although with more limited remedies, according to the FTC policy statement.

Khan said the FTC reviewed 180 legal decisions to “give teeth” to the new guidance and protect it from legal challenges. That’s unlikely to sway the agency’s conservative critics, who have lambasted the FTC for arguing its authority is open-ended.

After facing scrutiny in Congress in the 1970s over its interpretation of Section 5, the FTC adopted bipartisan policy statements outlining its views on deception and unfairness. But for years, the FTC declined to spell out how it viewed unfair methods of competition.

That ended in 2015, when the agency under former president Barack Obama voted 4-1 to adopt a policy that limited how it would use Section 5 to bring antitrust cases. Antitrust advocates criticized the 2015 statement, saying it curbed the FTC’s authority.

Last year under Khan, the FTC revoked the 2015 statement in a 3-2 vote, with both the agency’s Republican commissioners voting against its withdrawal.

The new policy serves as a framework for how the FTC sees violations and future enforcement, Khan said, sending a signal to businesses before the commission moves in court or issues rules on specific practices.

Business groups like the US Chamber of Congress and tech advocates condemned the statement as a power grab by the FTC.

Replacing the bipartisan 2015 statement “with a partisan one without limiting principles may have symbolic value to Chair Khan and her supporters but will hurt more than help the FTC in court,” said Joshua Wright, a former FTC commissioner who authored the earlier statement and now heads George Mason University’s Global Antitrust Institute. “I predict it will generate much more bark than it will bite.”

(Updates to add dissent, reaction starting in graph ninth graph)

To contact the reporters on this story:
Leah Nylen in Washington at lnylen2@bloomberg.net;
Daniel Papscun in Arlington at dpapscun4@bloomberg.net

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net;
Roger Yu at ryu128@bloomberg.net

Jon Morgan

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