Goodlatte and Members of Congress to Federal Trade Commission: Section 5 Needs to Be Addressed

Washington, D.C. – House Judiciary Committee Chairman Bob Goodlatte (R-Va.), along with House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law Chairman Spencer Bachus (R-Ala.) and Vice-Chairman Blake Farenthold (R-Texas), Rep. Lamar Smith (R-Texas), Rep. Trent Franks (R-Ariz.), Rep. Raúl Labrador (R-Idaho), Senate Judiciary Committee Ranking Member Charles Grassley (R-Iowa), and Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights Ranking Member Mike Lee (R-Utah), sent a letter today to Federal Trade Commission (FTC) Chairwoman Edith Ramirez urging the FTC to issue guidelines on the FTC’s authority under section 5 of the Federal Trade Commission Act. 

Antitrust laws and their enforcement should be transparent, fair, predictable, and reasonably stable over time.  Providing guidance with respect to the FTC’s Section 5 authority will allow businesses to develop lawful competition policies and encourage critical innovation.

Below is the text of the letter.  To read the signed letter, click here.

“Following the recent statements of Commissioners Wright and Ohlhausen, we are writing to express our concerns with the lack of guidance by the Federal Trade Commission (FTC) regarding its authority under Section 5 of the Federal Trade Commission Act.  As you know, Section 5 provides that “unfair methods of competition in or affecting commerce . . . are hereby declared unlawful.”  The statute does not provide a specified list of proscribed conduct but, rather, Congress originally deferred to the FTC to establish guiding principles for what would constitute unfair methods of competition. Despite calls for the FTC to publish this guidance, the FTC has yet to provide a clear standard to which the public and business community can refer. 

“As you know, antitrust enforcement actions pursued under the Clayton and Sherman Acts are subject to rigorous economic tests to ensure that the subject activity results in actual economic harm.  In contrast, stand-alone Section 5 claims do not receive similar scrutiny.  The absence of clear parameters for the FTC’s Section 5 authority based on empirical and economic justifications engenders uncertainty in the business community.  This uncertainty acts as a deterrent to innovation and creativity, which are critical drivers of the American economy and are vitally important in today’s challenging economic environment.  Accordingly, articulating a standard by which the FTC intends to utilize its Section 5 unfair method of competition authority should be a high priority. 

“Providing guidance is particularly important in light of the FTC’s prosecution of conduct as a standalone violation of the unfair methods of competition provision of Section 5 beyond the confines of traditional antitrust law. While the Clayton and Sherman Acts have the benefit of decades of developed and refined jurisprudence, Section 5 unfair methods of competition enforcement remains a largely unformed area of the law. As former Commissioner Kovacic highlights, since 1968, no federal Court of Appeals has endorsed an FTC competition decision that relied solely on a Section 5 violation. Notwithstanding this record, prior and existing Commissioners remain steadfast in their view that Section 5 can, and should, be used to proscribe behavior beyond conduct prohibited by the Clayton and Sherman Acts.  This provides the opportunity for Section 5 standalone prosecutions to operate untethered to the economic justifications grounded in Clayton and Sherman Act jurisprudence, with boundaries that may be defined only by the existing composition of the FTC.

“In addition to the absence of an economic foundation, the FTC has developed certain Section 5 jurisprudence through entry into private, administrative settlements that lack the benefit of judicial review. This is particularly troublesome when the settlement is reached in the context of a merger review, which creates a significant risk that the settling party acquiesces because of economic pressure rather than substantive agreement.

“While we can agree with your statements before the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights that agencies should provide clear enforcement criteria, we take issue with your views that it is difficult to articulate the outer bounds of Section 5 authority or that existing decisions provide sufficient guidance. In fact, two of your fellow Commissioners have issued separate, but largely consistent, policy statements on the parameters of Section 5. Further, obtaining clear principles from a body of decisions that are largely formed through private settlement agreements and tailored to case-specific facts would be difficult enough, but when coupled with a lack of judicial review by courts who have not upheld a standalone Section 5 case since the 1960s, it is virtually impossible. The FTC has a record of providing the business community with guidance on its enforcement authority, and we urge you to extend its record to include guidance on the “unfair methods of competition” component of Section 5. 

“Antitrust laws and their enforcement should be transparent, fair, predictable, and reasonably stable over time.  When exercised appropriately, the application of antitrust law allows for a functioning market and negates the need for further government regulation.  Providing guidance with respect to the FTC’s Section 5 unfair methods of competition authority will allow businesses to develop lawful competition policies and encourage critical innovation.  We look forward to your response.”