Primer on The FTCs New Section 5 Guidance
December 12, 2022
In a new policy statement, the Federal Trade Commission declared that it may deem many types of routine business conduct as “unfair methods of competition,” without any showing of harm to consumers or anticompetitive intent.
In particular, the FTC announced that it may be illegal for companies to compete in ways that harm competitors (rather than just consumers), disadvantage workers, use intellectual property, or rely on economies of scale. According to the FTC, for example, loyalty rebates, bundling, exclusive contracts, and small acquisitions all may constitute illegal “unfair” activity.
This memo analyzes the FTC’s new policy statement. In short, the FTC has unilaterally decided that it has almost complete discretion to declare illegal any competitive behavior that it disfavors. The FTC is likely to use this authority to target companies and business practices that do not conform to its progressive policy agenda, irrespective of the impact on consumers.
Still, the FTC faces a myriad of constraints. The FTC simply lacks the resources to reshape every contract and practice across the economy; it will have to pick its targets.
Moreover, the courts are very unlikely to endorse the FTC’s sweeping claims of authority, which selectively ignore decades of court precedent and contain numerous internal inconsistencies.
Ultimately, companies should understand the breathtaking scope of the FTC’s policy statement, appreciate that the FTC may try to bully them into accepting its view of “fair” competition, yet recognize that the FTC’s claimed authority rests on a very thin reed.