Federal Trade Commission Issues New Policy Statement Regarding The Scope Of "Unfair Methods Of Competition" Under Section 5 Of The FTC Act

• Published date: 01 December 2022
• Subject Matter: ntitrust/Competition Law, Antitrust, EU Competition
• Law Firm: Hughes Hubbard & Reed LLP
• Author: Mr William Kolasky, Philip A. Giordano, Robert Bell and Daniel Chan

November 29, 2022 - On November 10, 2022, the U.S. Federal Trade Commission ("FTC") issued its long-awaited "Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act" ("New Policy Statement"). The FTC says that by releasing this statement it is seeking to "restore the agency's policy of rigorously enforcing the federal ban on unfair methods of competition." The New Policy Statement takes an expansive view of the FTC's authority to prevent unfair methods of competition under Section 5. While it enunciates general principles of enforcement that are broadly consistent with past Commission practice, it articulates new criteria for determining whether a business practice is an unfair method of competition, thereby creating greater uncertainty as to what conduct the FTC may find to violate Section 5.

The New Policy Statement is part of an ongoing effort by the Biden administration to reinvigorate antitrust enforcement after what President Biden and his senior antitrust advisors view as four decades of under-enforcement that began in the late 1970s with the adoption of the consumer welfare standard by the Supreme Court and its greater reliance on the rule of reason to decide antitrust cases. They blame weaker antitrust enforcement for having contributed to higher concentration in many industries, depressed wages for American workers, and higher prices for American consumers. (See Statement of the Commission on the Withdrawal of the Statement of Enforcement Principles Regarding "Unfair Methods of Competition" Under Section 5 of the FTC Act).

FTC Chair Lina Khan, who President Biden nominated to chair the FTC shortly after he became president, had for several years been one of the most prominent advocates for more aggressive antitrust enforcement and one of the most outspoken critics of both the consumer welfare standard and the rule of reason. It was not surprising, therefore, that one of her first acts as Chair was to rescind by a 3-to-2 vote a Statement of Enforcement Principles Regarding Enforcement of FTC Act that the FTC had issued in August 2015, during the Obama Administration. ("2015 Statement of Principles").

That statement set forth three principles for the Commission to use in exercising its authority to prohibit unfair methods of competition under Section 5 of the FTC Act, principles that at the time seemed non-controversial: First, the Commission would be "guided by the public policy underlying the antitrust laws, namely, the promotion of consumer welfare." Second, any act or practice being reviewed would be "evaluated under a framework similar to the rule of reason," meaning that "an act or practice challenged by the Commission must cause, or be likely to cause, harm to competition or the competitive process, taking into account any associated cognizable efficiencies and business justifications." Third, the Commission would "be less likely to challenge an act or practice as an unfair method of competition on a standalone basis" under Section 5 "if enforcement under the Sherman or Clayton Act is sufficient to address the competitive harm arising from the act or practice."

An accompanying statement that Chair Khan and the other two Democratic commissioners released along with the New Policy Statement emphasized that the reason they had rescinded the 2015 Statement of Principles a year-and-a-half earlier was because, in their view, that statement had "departed from the plain text, purpose, structure, and history of the FTC Act," and had "effectively amounted to an abdication of the Commission's statutory mandate." (See Statement of Chair Lina M. Khan Joined by Commissioner Rebecca Kelly Slaughter and Commissioner Alvaro M. Bedoya On the Adoption of the Statement of Enforcement Policy Regarding Unfair Methods of Competition Under Section 5 of the FTC Act).

At the time they rescinded the 2015 Statement of Principles, Chair Khan and her colleagues promised that they would issue a New Policy Statement outlining how they intended to evaluate business conduct under Section 5. The release of this New Policy Statement fulfills that promise. Here are what we view as the four key takeaways from this New Policy Statement.

1. The New Policy...