WASHINGTON D.C. — Today, the Federal Trade Commission released a policy statement defining the FTC’s Unfair Methods of Competition (UMC) authority, paralleling the policy statements issued by the Commission regarding its consumer protection authority over unfair (1980) and deceptive (1983) acts and practices (UDAP).

The 1-page document reportedly promises that the FTC will only use its UMC authority regarding conduct not covered by the antitrust laws This would end the FTC’s recent trend of making vague claims of unfairness on top of the antitrust laws, which are well-defined by case law and guidelines issued by the FTC and the Department of Justice. The new policy statement also apparently clarifies that, when the FTC does make UMC claims, it will weigh harm to consumers against other benefits — as required by the 1980 Unfairness Policy Statement in consumer protection cases. These are the key limits Commissioner Joshua Wright proposed over two years ago.

“Today’s decision statement is a victory for the rule of law, sound economics, and regulatory humility,” said TechFreedom President Berin Szoka. “In the 1970s, the FTC so abused the amorphous concept of unfairness in consumer protection matters that Congress briefly closed the agency and forced it to issue limiting principles. The Commission avoided addressing the meaning of its UMC authority simply by focusing on pure antitrust enforcement. But in recent years, the FTC has revived UMC in a disturbing line of cases, mostly involving high-tech companies. Unmoored from sound antitrust principles and economic analysis, the Commission strayed into arbitrary, undemocratic and unaccountable policy-making. Today’s policy statement should mean an end to this knight-errancy.”

“Commissioner Wright was right: the only way to limit the FTC’s abuse of UMC is to draw a clear, bright line between UMC and the antitrust laws,” continued Szoka. “So long as the Commission continues to apply its UMC authority over conduct covered by the antitrust laws, UMC will remain a source of regulatory mischief. Commissioner Ohlhausen’s six proposed limiting principles are laudable in theory but the FTC has already shown its willingness to ignore the very sensible limiting principles in its UDAP policy statements — despite Congress codifying the Unfairness statement. The more discretion the Commission has, the more its decisions will be essentially political — especially if companies prove unwilling to litigate even legally shaky UMC cases in court, just as they have proven all too willing to settle UDAP actions. So the key question is just how clearly the new statement limits the FTC to using UMC for conduct beyond what the antitrust laws cover.”

“But Commissioner Ohlhausen is certainly right about process: the Commission should have sought public comment on a draft proposal before voting on it,” concluded Szoka. “In 2012, the Commission summarily revoked its 2003 policy statement on disgorgement of ill-gotten gains in competition cases — reminding everyone that it can withdraw or change a policy statement overnight, as Ohlhausen warned in a scathing dissent. Issuing today’s statement with no public comment process only reinforces this precedent, thus undermining the value of all the FTC’s policy statements as reliable predictors of future enforcement.”

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We are available for comment at media@techfreedom.org. See our other work on FTC reform, especially:

  • Comments objecting to the FTC’s settlement of charges brought against Nomi Technologies regarding tracking of customers’ movements in-store
  • FTC Reform Report, “Consumer Protection & Competition Regulation in a High-Tech World: Discussing the Future of the Federal Trade Commission”
  • TF and ICLE Event on FTC Reform and the agency’s use of economics in digital consumer protection cases
  • “The Second Century of the Federal Trade Commission,” Berin Szoka and Geoffrey Manney in Techdirt
  • “The FTC Should Help Unshackle the Sharing Economy,” a statement summarizing TechFreedom and ICLE’s comments on the agency’s workshop on the sharing economy
  • TF’s comments on the Office of Science and Technology Policy’s “Big Data” inquiry

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