Wednesday, May 23, 2012
Posted by D. Daniel Sokol
Marc Winerman, Federal Trade Commission and William E. Kovacic, George Washington University - Law School discuss Outpost Years for a Start-Up Agency: The FTC from 1921-1925.
ABSTRACT: The challenges and questions surrounding the design of a competition system are part of an identifiable life cycle that characterizes the development of a competition agency. The core challenges are to set priorities and execute them, but there are various potential obstacles. This article looks at the FTC’s experiences in its first decade, a period bringing extraordinary technological dynamism that reshaped the U.S. economy and transitions in political leadership, to shed light on how a new or reformed agency might go about facing predictable problems in its first years and to suggest how these agencies can improve their effectiveness.
New institutions like the FTC are shaped by the socio-political context that leads to their formation. Interested parties had multiple conceptions about the FTC’s purpose and differing expectations as to its use when the FTC was formed. Law enabling competition systems generally embodies a mix of objectives and policy aims that the new agency must reconcile. Some of the most daunting tasks for the leadership of these institutions is to identify the multiple policy impulses that brought the agency to life; to assess the relative intensity and importance of individual ideas; and to formulate a program that is coherent, faithful to its original aims, and adaptable to political and intellectual changes. External stakeholders who impose demands on new agencies and political transitions complicate these tasks.
The FTC was in some ways poorly organized to meet the challenges of its first decade due to its lack of centralized leadership and small staff. However, it still addressed tough issues in the emerging economies of the 1920s, in part by establishing many of its critical elements. First, the development of an administrative adjudication process helped make the FTC an influential competition policy tribunal. Also, the completion of studies examining competitive conditions in one or more industries was part of the FTC’s broad program to address competitive problems and led to FTC litigation, referrals to the Department of Justice, and legislative proposals. A final element was outreach through the introduction of “trade practice submittal,” which permitted the FTC to meet representatives of industries and formulate rules that formally expressed judgment on the industry.
In part because it was stretched too thin by its inability to set priorities and it faced a hostile judiciary, the FTC often failed to implement its plans for a successful enforcement program. Its problems were compounded by inadequate articulation of the rationales for its early orders and for its decision not to prosecute. The FTC’s challenges in setting priorities and executing its goals in the face of early challenges may serve as a cautionary lesson for other new agencies.