Key Take-Aways From The FTC's New Section 5 Statement

The Federal Trade Commission's New Section 5 Statement Preserves the Agency's "Doctrinal Flexibility" but Fails to Provide Meaningful Concrete Guidance

On August 13, 2015, the Federal Trade Commission (FTC) released its long-awaited "Statement of Enforcement Principles Regarding 'Unfair Methods of Competition' Under Section 5 of the FTC Act" (the "Statement," available here). The key take-aways are these:

As Chairwoman Ramirez explained in her speech announcing the Statement, it "does not signal any change of course in [the FTC's] enforcement practices and priorities." Edith Ramirez, FTC Chairwoman, Address to the Competition Law Center at George Washington University Law School, at 6 (Aug. 13, 2015) [hereinafter Ramirez Address]. The Statement is not a detailed set of guidelines and contains no safe harbors or other concrete prescriptions for agency action or inaction. It is instead a very high-level set of principles - articulated in one page via a total of three bullet points - designed to signal that the FTC will continue to evolve its Section 5 jurisprudence using a "common law approach." Id. The two key "common law" principles guiding the FTC's use of Section 5 will be (a) "the promotion of consumer welfare" rather than the pursuit of other policy objectives and (b) an analysis, consistent with rule-of-reason analysis under the antitrust laws, of conduct's potential for "harm to competition or the competitive process, taking into account any associated cognizable efficiencies and business justifications." The FTC's "rule-of-reason-like" analysis will not necessarily involve a full-blown weighing of the harms and benefits to competition, but may instead involve "quick-look" condemnation of conduct that lacks meaningful efficiencies or other justifications. Ramirez Address at 7-8. The Statement's third principle confirms that the FTC intends its "unfair competition" authority to reach farther than the antitrust laws. It states that standalone Section 5 challenges are more likely when the Sherman and Clayton Acts are not "sufficient to address [a practice's] competitive harm." The FTC thereby signals that Section 5 may be used to address perceived threats of competitive harm despite the absence of any "agreement" of the sort required by Section 1 or any proof of existing or threatened "monopoly power" of the sort required by Section 2 in actions challenging unilateral conduct. Ramirez Address at 5. BACKGROUND

Section 5 of the FTC Act prohibits two broad categories of "unfair" practices: "[u]nfair methods of competition in or affecting commerce" and "unfair or deceptive acts or practices."1 Although the FTC typically enforces the "unfair methods of competition" clause of Section 5 (or "unfair competition" for short) against conduct that would violate the Sherman and Clayton Acts, it has long taken the view (supported by courts) that Section 5 can also be used against conduct that would not violate those statutes. The FTC calls this its "standalone" unfair competition enforcement authority, and it has successfully asserted it to obtain - usually via settlement - injunctive and other equitable relief.2 Unlike the other antitrust statutes, however, the FTC Act creates no private right of action to enforce Section 5, and thus violations of the provision are not subject to private damages actions.3

The potential reach of the FTC's standalone unfair competition authority has generated much controversy over the years. In the 1970s and early...