Republicans Press FTC to Establish a Clear Standard for Section 5

By on October 29, 2013

In a letter to the Federal Trade Commission (FTC) on Wednesday, October 23, eight GOP lawmakers from both the House and the Senate called on the FTC to publish clear guidance on Section 5 of the FTC Act.

Section 5 grants the Commission broad authority to regulate “unfair methods of competition” beyond the scope of the Sherman Act and Clayton Act.  In FTC v. Sperry & Hutchinson Co., 405 U.S. 233 (1972), the Supreme Court opined that the FTC was authorized to consider public values beyond the letter or spirit of the antitrust laws when enforcing Section 5.  Then, during the 1980s, courts began rejecting the FTC’s attempts to bring Section 5 actions, out of concern that the agency had failed to put forth adequate standards.  More recently, the FTC has used Section 5 in various agency actions to target invitations to collude and breaches of standard-setting commitments, but no cases have been affirmed by the courts.

In their letter, the legislators warned that “the absence of clear parameters . . . based on empirical and economic justifications, engenders uncertainty in the business community,” which in turn deters innovation and stifles economic growth.  Over the summer, Commissioner Brill questioned the need for a formal statement, citing the fact that no business executive had ever addressed the lack of guidance with her.  The letter also contended that defendants in administrative cases often settle due to “economic pressures rather than substantive agreement,” and these settlements leave no room for judicial review – pushing back on Chairwoman Ramirez’s belief that a policy could be developed through agency enforcement actions.

Both Commissioners Wright and Ohlhausen announced policy proposals earlier this year, which the lawmakers pointed to as evidence to refute Chairwoman Ramirez’s statement from a congressional oversight hearing that it is difficult to articulate the outer bounds of Section 5 authority and that the existing informal guidance is sufficient.

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