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FTC publishes statement on antitrust law enforcement principles: agency is flexing it muscles when it comes to anti-consumer activities.

Just in time for IDEA 2016, the U.S. Federal Trade Commission (FTC) has published a Statement of Enforcement Principles Regarding "Unfair Methods of Competition applicable under Section 5 of the Federal Trade Commission Act." The statement describes the underlying antitrust principles that guide FTC's application of its statutory authority over unfair methods of competition --even if these methods are not necessarily prohibited under the Sherman Antitrust Act of 1890 or the Clayton Antitrust Act of 1914.

Both of these bedrock laws in U.S. commerce seek to prevent competitors from colluding to fix prices or markets and offering false or deceptive adverting to consumers. FTC, along with the U.S. Department of Justice, has jurisdiction over U.S. antitrust law and is known to frequent trade gatherings in its efforts to ensure consumer welfare protection.

Readers will remember sanctions placed on certain wipes by FTC last year (see Capitol Comments, July 2015) as an example of the Commission's reach.

Indeed, when Congress enacted this legislation more than 100 years ago, they recognized that application of the statute would need to evolve with changing markets and business practices. So Congress chose not to define specific acts and practices that constitute unfair methods of competition. Instead, it left policy development to FTC as an expert administrative body able to apply the statute on a flexible, case-by-case basis, subject to judicial review.

As part of its responsibilities for keeping up with evolving markets, FTC staff has been known to attend trade gatherings in search of anti-competitive behaviors (receiving similar quotes for a similar good from multiple industry members for example), as well as deceptive, fraudulent, or misleading claims made with regard to consumer products.

Authority Expansion

With this enforcement statement, one FTC Commissioner warns that it stakes claim to a level of authority well beyond that claimed in the past. Specifically, the statement claims ability to challenge an act or practice as an unfair method of competition on a "standalone" basis even if enforcement provisions contained in Sherman or Clayton are "insufficient to address the competitive harm arising from the act or practice."

For the nonwovens industry, like any other industry in the U.S. economy, this FTC statement indicates that the Commission is flexing its muscle with regard to activities that it deems to be anti-consumer, even if these activities are not explicitly outlined under Sherman or Clayton.

Specifically, the statement notes that FTC adheres to the following principles:

* The Commission will be guided by the public policy underlying the antitrust laws, namely, the promotion of consumer welfare;

* Acts and or practices will be evaluated under a framework similar to the rule of reason, that is, an act or practice challenged by the Commission must cause, or be likely to cause, harm to competition or the competitive process, taking into account any associated recognizable efficiencies and business justifications; and

* FTC is 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 arising from the act or practice.

In describing the principles and overarching analytical framework that guided FTC's statement, it notes that the statement aligns with antitrust laws that have "evolved over time and are guided by the goal of promoting consumer welfare and informed by economic analysis."

The statement also makes clear that FTC will" rely on the accumulated knowledge and experience embedded within the 'rule of reason' framework developed under the antitrust laws over the past 125 years--a framework well understood by courts, competition agencies, the business community, and practitioners."The Commission goes on to note that these principles" also retain for the Commission the flexibility to apply its authority in a manner similar to the case-by-case development of the other antitrust laws."

In justifying the need for this enforcement policy statement, FTC says there has been "much thoughtful dialogue inside and outside of the agency over the course of the last century about the precise contours of [FTC authority over] ... unfair methods of competition. We have benefited greatly from this ongoing dialogue and from judicial insights through the process of judicial review, and we believe that the principles we have set forth ... are ones on which there is broad consensus."

Moreover, in remarks during a speech made shortly after publication of the Enforcement Principles, as posted on arnoldporter.com, FTC chair Edith Ramirez noted that the contours of U.S. antitrust law have developed over 125 years via common law, and explained that the Commission believes the contours of FTC enforcement policies are best developed in a similar manner--"flexibly, and on a case-by-case basis, to deal with constant flux in the American economy."

Chairwoman Ramirez indicated that this authority is and should be exercised only with regard to "conduct that threatens competition or the competitive process," and stated the Commission will "invoke the same kind of careful economic analysis that we use in all of our enforcement matters to ensure that we exercise our authority wisely."

Chairwoman Ramirez also expressed her view that the "standalone" authority noted in the statement is now "exercised more narrowly than it was throughout most of the twentieth century."

But not so fast counters FTC Commissioner Maureen K. Ohlhausen, in a blistering dissent to her fellow Commissioners: "The approach of my colleagues to this important issue of competition policy is too abbreviated in substance and process for me to support. Moreover, what substance the statement does offer ultimately provides more questions than answers, undermining its value as guidance. In addition, the Commission's failure to seek public input has deprived us of guidance from key stakeholders on this particular interpretation of Section 5. Finally, the Commission's official embrace of such an unbounded interpretation ... is almost certain to encourage more frequent exploration of this authority in conduct and merger investigations and standalone Section 5 enforcement by the Commission."

Commissioner Ohlhausen also warns that the statement may not hold up to court review, and chides her colleagues over the Commission's track record on court decisions where FTC has claimed the ability to expand its enforcement capabilities: " [This statement] does not mention, much less grapple with, the existing case law. While the majority might like to sweep that unfortunate history under the rug.. .FTC was repeatedly rebuffed by the courts when it last tried to reach well beyond settled principles of antitrust law in asserting its Section 5 authority. Instead, the Commission acts as if it is writing on a clean slate."

In defending this portion of her dissent, Commissioner Ohlhausen cites the Commission's 1980 defeat in the "Official Airline Guides" case, as well as the "Ethyl" and "Boise Cascade" cases, and questions how courts would come to different conclusions with what she terms, "this new rubric." As an alternative, Commissioner Ohlhausen called on her fellow Commissioners to draft a revised Section 5 policy--and put it out for public comment prior to adoption--which includes the following elements: 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-DOJ 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.

More information: FTC Secretary Donald S. Clark by telephone at 202-326-2514; U.S. Federal Trade Commission, 600 Pennsylvania Avenue NW., Washington, DC 20580.

Peter G. Mayberry, Contributing Editor
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Title Annotation:Capitol Comments
Author:Mayberry, Peter G.
Publication:Nonwovens Industry
Date:Apr 1, 2016
Words:1271
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