Section 5 of the FTC Act: Principles of navigation

Abstract

Section 5 of the Federal Trade Commission (FTC) Act prohibits 'unfair methods of competition' (UMC), including conduct that violates either the antitrust laws or Section 5 standing alone. Although it has existed for nearly 100 years, the FTC has never issued any formal guidance on its Section 5 enforcement policy. Relying on commonly used regulatory principles, this article identifies six criteria that the FTC should satisfy in pursuing any standalone Section 5 enforcement. First, the FTC should use its UMC authority only in cases of substantial harm to competition. Second, the FTC should pursue a UMC violation only where there is no procompetitive justification for the challenged conduct or where such conduct results in harm to competition that is disproportionate to its benefits. Third, in using its UMC authority, the FTC should avoid or minimize conflict with other institutions, including most notably the Department of Justice. Fourth, UMC enforcement must be grounded in robust economic evidence regarding the anticompetitive effects of the challenged conduct. Fifth, prior to pursuing a UMC violation, the agency should consider using its many non-enforcement tools to address the perceived competitive problem. Finally, the agency should provide clear guidance and minimize uncertainty in the UMC area.