This paper examines the Federal Trade Commission’s (FTC’s) authority under Section 5 of the FTC Act, which prohibits "unfair methods of competition" (UMC). It critiques the FTC’s evolving guidance on UMC enforcement, particularly the 2015 and 2022 policy statements, and proposes a new approach to provide clarity and predictability for consumers, courts, and businesses. Overall, Section 5’s ambiguous enforcement criteria raise compliance costs and litigation risks while chilling legitimate competition.
This paper recommends a targeted, practical approach to UMC enforcement, guided by three principles:
- Specificity in Enforcement: The FTC should identify specific practices it intends to challenge as UMC, explain its legal and economic rationale, and outline the market conditions relevant to enforcement.
- Advance Notice: The FTC should give prior notice of enforcement priorities to consumers and businesses to encourage advance compliance.
- Consensus and Public Input: The FTC should seek public and stakeholder feedback on proposed enforcement policies to ensure clarity and alignment with legal and economic principles.
Such a focused, bipartisan approach would reduce uncertainty and compliance costs, align UMC enforcement with established antitrust principles, encourage procompetitive behavior, and deter harmful practices, regardless of the party in power. At the same time, this approach would avoid the pitfalls of vague policy statements and overly broad rulemaking.
