Antitrust Law Daily Wrap Up, TOP STORY: FTC identifies principles for stand-alone unfair methods of competition authority, (Aug 13, 2015)

By Jeffrey May, J.D.

The FTC today released a one-page document identifying general principles that guide the agency when deciding whether to bring an action against “unfair methods of competition” that do not amount to traditional antitrust violations. The Statement of Enforcement Principles comes in response to calls from practitioners and even some commissioners for guidance on when the FTC will invoke its stand-alone unfair methods of competition or UMC authority.

The brief announcement did not provide as much detail about the boundaries of the FTC's authority in this area as some had hoped. The U.S. Chamber of Commerce was among the critics, calling the guidance disappointing.

Not unlike the broad language in the Sherman Act, Section 5 of the FTC Act broadly prohibits all “unfair methods of competition.” Over the last decade, the FTC has brought a handful of stand-alone UMC claims to address conduct that was outside the Sherman Act but was perceived to violate the spirit of the antitrust laws. The challenged practices included invitations to collude and deception in the standard-setting process.

The Commission's statement did not identify the types of conduct that the agency would pursue under its stand-alone Section 5 authority. Instead, the agency said that it would continue to decide on a case-by-case basis whether to challenge “acts or practices that are anticompetitive but may not fall within the scope of the Sherman or Clayton Act.”

The agency’s statement instead offered a framework for the exercise its standalone Section 5 authority. It identified three principles on which, according to FTC Chairwoman Edith Ramirez, there is “broad consensus.”

First, these actions will be pursued to promote consumer welfare, as the term is understood in antitrust precedent. In addition, the practices will be evaluated under a framework similar to rule-of-reason analysis. The challenged conduct must cause, or be likely to cause, harm to competition or the competitive process. The Commission will recognize cognizable efficiencies and business justifications. Lastly, the Commission said that it would be less likely to challenge an act or practice as an unfair method of competition on a standalone basis if enforcement of the Sherman or Clayton Act is sufficient to address the competitive harm.

The statement simply “makes time-honored principles explicit; it does not signal any change of course in our enforcement practices and priorities,” Ramirez advised in remarks, announcing the statement at George Washington University Law School. Ramirez also responded to critics who suggested that the principles are too general to provide sufficient guidance to the business community.

“To be sure, our policy statement prescribes no detailed code of regulations for the business community at large,” Ramirez said. “Again, however, 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.”

The statement won the support of Commissioner Joshua Wright, a Republican commissioner who has called for guidance in the area and has dissented on some high-profile cases asserting stand-along UMC authority. Wright had sought a statement that would limit UMC cases outside the Sherman Act to those targeting plainly anticompetitive conduct and permitting plausible efficiency claims. Wright’s vote suggests that he was satisfied that the statement met those requirements.

Dissent. Commissioner Maureen K. Ohlhausen—the Commission's other Republican member—was the lone dissenter.

“[I]f the Commission is going to issue a policy statement in this controversial area, it should provide meaningful guidance to those subject to our jurisdiction,” said Ohlhausen. “This statement, however, provides no such guidance.”

“Arming the FTC staff with this sweeping new policy statement is likely to embolden them to explore the limits of UMC in conduct and merger investigations,” she also warned.

Ohlhausen provided the following wish list for any future Section 5 policy statement. Among the requirements for her UMC statement would be:

1. a substantial harm requirement;

2. a disproportionate harm test;

3. a stricter standard for pursuing conduct already addressed by the antitrust laws;

4. a commitment to minimize FTC-Department of Justice conflict;

5. reliance on robust economic evidence on the practice at issue and exploration of available non-enforcement tools prior to taking any enforcement action; and

6. a commitment generally to avoid pursuing the same conduct as both an unfair method of competition and an unfair or deceptive act or practice.

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