(Story updated at 4:30 p.m. Eastern Time.)
The Federal Trade Commission issued its long-awaited principles Thursday on policing unfair competition. FTC Chairwoman Edith Ramirez said the guidance doesn't change how the FTC views business practices, but one commissioner said it could mean more enforcement.
“The policy statement marks no change in course; it merely makes explicit what has been evident to close observers of FTC enforcement actions over the past few decades,” Ramirez said in a statement.
FTC Commissioner Maureen Ohlhausen cast the lone vote against the principles.
“Arming the FTC staff with this sweeping new policy statement is likely to embolden them to explore the limits of [unfair competition] in conduct and merger investigations,” Ohlhausen wrote in her dissent. “The majority is also likely to pursue new [unfair competition] enforcement, else why bother to put out a statement with so little internal deliberation and no provision for public input? I fear that this will ultimately lead to more, not less, uncertainty and burdens for the business community.”
Federal antitrust law states that “unfair methods of competition in or affecting commerce” are illegal, but the FTC has never formally issued principles describing what kinds of conduct violate that provision.
The new principles say that when deciding whether to go after businesses for unfair competition:
- The commission will be guided by public policy behind antitrust law, namely, consumer welfare.
- An act or practice challenged by the FTC must cause or be likely to cause harm to competition or the competitive process, while taking into account related efficiencies and business justifications.
- The commission is less likely to challenge acts or practices on the sole basis that they constitute unfair competition if the Sherman or Clayton Acts would be enough to address them.
The release of the new principles seems to have tempered some of that political pressure, at least for now.
Senate Judiciary Chairman Chuck Grassley (R-Iowa) called the release of the principles a “welcome development” in a statement Thursday.
House Judiciary Committee Chairman Bob Goodlatte (R-Va.) and House Subcommittee on Regulatory Reform, Commercial and Antitrust Law Chairman Tom Marino (R-Pa.) also issued a statement Thursday calling the principles a “good first step.”
“However, we will vigilantly monitor the manner in which the FTC applies its guidance and evaluate whether additional action is necessary to ensure that the FTC administers our antitrust laws in a transparent, stable, fair, and predictable manner and that it does not exceed its statutory authority,” the congressmen said.
Sen. Richard Blumenthal (D-Conn.), ranking member of the Senate Commerce Committee's Subcommittee on Consumer Protection, said in a statement Thursday he hopes the principles lead to “more frequent and effective enforcement actions.”
The section of the law at issue is now used in situations that don't specifically violate antitrust laws but are nevertheless deemed out of bounds. The law has most frequently been applied in situations involving invitations to collude, such as when one party proposes to a competitor that they both raise prices, but the competitor doesn't agree. Because there's no agreement, there's no price-fixing violation, said Richard Feinstein, a former director of the FTC's Bureau of Competition and now a partner at Boies, Schiller & Flexner in Washington, D.C.
The unfair competition provision of antitrust law is seldom invoked on its own, experts say.
In her dissent, Ohlhausen wrote that the new principles don't provide meaningful guidance to businesses.
“Although no policy statement can anticipate all issues or questions that are likely to arise in the enforcement of a statute, this statement raises many more questions than it answers,” Ohlhausen wrote.
Ramirez acknowledged in her statement that the principles prescribe “no detailed code of regulations for the business community at large,” but she said that decision is by design.
“No such prescriptive code would be feasible or desirable in our variegated and intensely dynamic economy, which is why antitrust has always relied on a case-by-case approach to doctrinal development,” Ramirez wrote.
Robert Davis, a former FTC antitrust attorney, called the new principles “pretty general,” and said he thinks it's unlikely they'll lead to an increase in enforcement.
“If the staff knows a particular kind of case is likely to be supported by the commission, they'll start looking for that kind of case,” Davis said. “You really don't have that kind of guidance to staff where they could start looking for specific cases.”
He did say, however, the principles seem to “eliminate some types of cases from the commission's agenda.” For example, there were some cases more than 30 years ago where the commission went after conduct that seemed likely to increase prices but wasn't actually misconduct. Those types of cases won't likely be pursued again under the principle that says efficiencies and business justifications will be taken into account, Davis said.
Also, a past FTC chairman indicated decades ago that the unfair competition section of the law might be used to enforce other laws, but Davis believes the principle about being guided by consumer welfare would seem to now preclude that strategy.
Lisl Dunlop, a partner at Manatt, Phelps & Phillips in New York City, said the new principles don't really change what she might tell healthcare clients about following antitrust law.
She said the principles seem to be the result of an internal compromise at the FTC on the provision, known as Section 5.
“I think they have been using Section 5, and they're going to continue to use Section 5, and they'll look at it on a case-by-case basis,” said Dunlop, who is chairwoman of the firm's antitrust practice. “I don't really see it moving the ball forward very much.”
