Enforcement “Plus:” The FTC’s Business Education Efforts

Kelly Signs, Aug 13, 2012

Law enforcement can have obvious consequences for the targets of investigations, but it can also affect the conduct of other businesses. Research shows that the vast majority of businesses want to comply with legal requirements, not just to avoid sanctions but also to maintain a reputation as an ethical business. Informed businesses can anticipate the consequences of a particular course of action, thereby reducing uncertainty about potential legal pitfalls and increasing compliance with prevailing legal standards. Yet to comply, businesses must be aware of a wide variety of laws, rules, and guidelines governing their conduct.

As the only U.S. agency with both consumer protection and competition jurisdiction in broad sectors of the economy, the Federal Trade Commission enforces laws and regulations aimed at protecting consumers from unfair, deceptive, or anticompetitive conduct. Long ago, the FTC recognized thatpreventing law violations is even more important than detecting and punishing violators, and that educating businesses about legal requirements encourages them to avoid policies and practices that might later be found to be unfair, deceptive, or anticompetitive. Preventing conduct that is likely to harm consumers leads to obvious, if difficult to calculate, benefits-for both consumers and the businesses themselves. Moreover, effective and efficient FTC enforcement promotes policies that encourage competition on the merits and truthful, non-deceptive information, which leads to lower prices, better service, and more choices.

Some statutes and regulations enforced by the FTC are very specific in their proscriptions, but the FTC’s primary statute, the Federal Trade Commission Act, is very broadly worded, in keeping with the common law approach to U.S. antitrust and consumer protection law. Although this allows the FTC to adapt its enforcement approach to the changing nature of competition and consumer behavior, it can present a challenge for a business that wants to remain up-to-date on legal requirements. As a result, the need for business education is particularly acute in areas of the law governed by general standards of conduct, areas such as monopolization, advertising substantiation, and consumer privacy. Here, business education can be a cost effective supplement to law enforcement by “filling in the gaps” and explaining sometimes esoteric legal concepts in language easy for a businessperson to understand and act upon. It can also build support for a culture of competitiveness in which every business has the same opportunity to succeed because legal standards are understood and applied uniformly to all competitors.

Businesses-and consumers-deserve assurance that law enforcement is predictable and tied to basic principles of fairness and truthfulness. To that end, the FTC makes public all of its enforcement decisions, and publishes many other types of documents that help to explain its work, as well as providing opportunities for formal and informal feedback on its efforts. By coupling the announcement of enforcement actions with other types of business education, the FTC leverages its limited resources to expand the reach of its law enforcement efforts and encourage compliance. And businesses that are knowledgeable about the work of the FTC and the laws it enforces are more likely to spot potential law violations or support the FTC’s investigative work by providing relevant information when asked.

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