Federal Trade Commission's Historic Attempt To Drive A Mack Truck Through The Sherman Act

• Published date: 23 November 2022
• Subject Matter: ntitrust/Competition Law, Antitrust, EU Competition
• Law Firm: BakerHostetler
• Author: Mr Jeffry Duffy, Tyson Herrold, Carl Hittinger and Justin M. Kadoura

Key Takeaways

• The Federal Trade Commission (FTC) issued a historic statement setting out a new framework for assessing "standalone" claims of "unfair methods of competition" that can be brought by the FTC alone under Section 5 of the FTC Act and that do not independently violate the Sherman, Clayton or Robinson-Patman acts.
• Although the FTC's new interpretation of Section 5 is far broader and more aggressive than it has been in the past, it is unclear what conduct the FTC will deem "unfair" going forward and what criteria it will use to make that determination.
• One commissioner dissented from the FTC's statement fearing that its unclear framework will create uncertainty for businesses, undermine consumer welfare and competition, and delegitimize the FTC's enforcement efforts.

Introduction

Following its repudiation of its prior enforcement regime in July 2021, the FTC on Nov. 10 issued a Statement Regarding the Scope of "Unfair Methods of Competition" Under Section 5 of the Federal Trade Commission Act (Statement). The Statement, however, creates significant uncertainty for businesses seeking to predict (1) what conduct will be deemed by the FTC to run afoul of Section 5 and (2) what analytical structure the FTC will use to make that determination. We have considerable experience analyzing¹ and successfully litigating² the FTC's authority under Section 5. We will continue to monitor this significant development as it unfolds and provide additional client alerts along with our analysis.

Background

Congress passed the FTC Act in 1914 to supplement the Sherman and Clayton acts. Section 5 allows the FTC to investigate and prosecute, among other things, "unfair methods of competition," which includes a broader range of conduct than the conduct prohibited by the Sherman and Clayton acts, such as "incipient violations of those statutes" and "conduct which . is a close violation or is contrary to their spirit."³ Unlike criminal prosecutions and private civil actions for treble damages under the Sherman, Clayton and Robinson-Patman acts, however, claims under Section 5 of the FTC Act can be brought only by the FTC in an administrative proceeding and can seek only injunctive relief (if awarded by a federal court in a subsequent action).⁴

In August 2015, the FTC explained that in Section 5 actions alleging conduct "that fall[s] outside the scope of the Sherman and Clayton [a]cts," the FTC is "guided by the public policy underlying the [other] antitrust laws...