FTC's New "Unfair Methods Of Competition" Policy Statement Declares Protection For Competitors, Not Just Competition

• Published date: 16 November 2022
• Subject Matter: Corporate/Commercial Law, Antitrust/Competition Law, Intellectual Property, M&A/Private Equity, Antitrust, EU Competition , Patent
• Law Firm: Baker Botts
• Author: Ms Maureen K. Ohlhausen, Taylor M. Owings, Ben Rossen, Christine M. Ryu-Naya and Sarah Zhang

On November 10, 2022, the FTC by a 3-1 party line vote issued a new "Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act" ("Policy Statement"), formally declaring that the FTC's "unfair methods of competition" ("UMC") authority under Section 5 extends beyond the bounds of the Sherman and Clayton Acts to encompass a vast array of allegedly "unfair" practices that "tend to negatively affect competitive conditions." As described in more detail below, the Policy Statement effectively abandons a rule of reason of analysis, instead giving the FTC broad discretion to determine that conduct is "unfair" without proof of market power or evidence of anticompetitive effects, and without regard to procompetitive justifications or potential efficiencies. The breadth of the Policy Statement strongly suggests that the Commission will double down on aggressive UMC enforcement in areas well outside the traditional scope of the consumer welfare standard, including efforts to advance worker welfare, protect small businesses, and block acquisitions of nascent competitors, among others.

The Policy Statement follows after Chair Khan and the other majority Commissioners voted in July 2021 to rescind the FTC's 2015 bipartisan Statement of Enforcement Principles Regarding "Unfair Methods of Competition" Under the FTC Act ("2015 Statement"). The 2015 Statement had declared that the FTC would only exercise its "standalone" Section 5 authority using "a framework similar to the rule of reason," aligning the FTC's UMC enforcement with the Sherman and Clayton Acts. The vote to withdraw the 2015 Statement was an early indication that the new Commission intended to push the boundaries of the antitrust laws through its Section 5 enforcement, but it provided no guidance to businesses about what types of conduct the FTC might deem "unfair" or how businesses could structure their conduct to comply with the law.

While ostensibly intended to provide such guidance, the new Policy Statement contains few specifics about the particular conduct that the Commission might deem to be unfair, and suggests that the FTC has broad discretion to challenge nearly any conduct with which it disagrees. Citing the legislative history of the 1914 FTC Act, the Policy Statement argues that Congress, by giving the FTC authority to police unfair methods of competition, gave the new agency broad flexibility to stop anticompetitive practices in their...