Friday, November 14, 2008
The Past, Present, & Future of Stand-Alone Section 5 Competition Enforcement at the FTC: Is N-Data a New Direction or a Mere Diversion?
Posted by D. Daniel Sokol
Section 5 of the Federal Trade Commission Act empowers the Federal Trade Commission (“FTC” or “Commission”) to prohibit “unfair methods of competition.” Congress left these terms largely undefined in order to provide the new agency with broad and flexible authority to address threats to competition. Not surprisingly, the Commission has grappled with how to apply its mandate throughout its history.
On the one hand, the Supreme Court has suggested that the FTC has great discretion to condemn behavior it deems “unfair.” The Court in Sperry & Hutchinson held that Section 5 empowered the FTC to “define and proscribe an unfair competitive practice, even though the practice does not infringe either the letter or the spirit of the antitrust laws” and to “proscribe practices as unfair or deceptive in their effect on competition.” It has acknowledged the breadth of Section 5 elsewhere, finding that the unfairness standard encompasses “not only practices that violate the Sherman Act and other antitrust laws, but also practices that the Commission determines are against public policy for other reasons.”
On the other hand, the FTC has struggled in the modern era to apply its authority beyond the four corners of the antitrust laws. The Commission’s action in N-Data has revived the debate over the Commission’s authority under Section 5.