FTC announces return to rigorous enforcement of ban on unfair competition

Background

In 2015, the FTC issued a policy statement narrowing its enforcement under Section 5 of the FTC Act. Enforcement under this policy followed the “rule of reason” framework seen in claims pursuant to the Sherman and Clayton Acts. As a result, in the past five years, the FTC charged only one standalone Section 5 violation.¹

The FTC withdrew the 2015 policy statement in 2021 and issued a new policy statement on November 10, 2022. The new statement returns the agency to a broader enforcement policy under Section 5 similar to the pre-2015 landscape. This action suggests an intent to pursue actions against allegedly anticompetitive conduct more aggressively.

Overview of the Legal Standard

Section 5 of the FTC Act prohibits “unfair methods of competition in or affecting commerce.”² The FTC’s new policy statement articulates the general principles that govern whether conduct violates this prohibition. These principles provide as follows:

Conduct must be a method of competition

“A method of competition” refers to “conduct undertaken by an actor in the marketplace.” This sort of conduct implicates competition either directly or indirectly.³

Method of competition is unfair

Unfair methods of competition go “beyond competition on the merits.” This is characterized by conduct that is coercive, exploitative, abusive, deceptive, or predatory and leads to a negative impact on competition.⁴

There is no cognizable justification for the conduct

Seemingly unfair conduct may be justified if the party can assert it was “legally cognizable, non-pretextual, and…narrowly tailored to limit any adverse impact.” The FTC will evaluate these justifications by considering both quantifiable and unquantifiable consequences.⁵

Next Steps

In response to the new policy statement, companies and trade associations should review their current antitrust policies and ensure compliance with this broader prohibition. Please do not hesitate to reach out to us with any questions regarding the FTC’s enforcement policy or for assistance in developing, reviewing or updating antitrust compliance programs.

Authored by Gary Jay Kushner.

References

1 FTC, Statement of the Commission on the Withdrawal of the Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act (July 9, 2021), https://www.ftc.gov/system/files/documents/public_statements/1591706/p210100commnstmtwithdrawalsec5enforcement.pdf.

2 15 U.S.C.A. § 45

3 FTC, Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act Commission, File No. P221202, 8 (Nov. 10, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/P221202Section5PolicyStatement.pdf.

4  Id at 8-10.

5  Id at 10-12.