Recalibrating Section 5: A Response to the CPI Symposium

Joshua Wright, Dec 30, 2013

I want to thank the participants in Competition Policy International’s Symposium on the Federal Trade Commission’s unfair methods of competition  authority under Section 5 of the FTC Act and, in particular, discussing my Proposed Policy Statement suggesting one approach to defining what constitutes an UMC. The Symposium elicited many thoughtful contributions and identified some misunderstandings about the rationale for my proposal. I will take this opportunity to share my view of the current state of play with respect to FTC guidance for Section 5, suggest the intellectual distance between the various UMC definitions offered for public scrutiny is relatively small, address a few criticisms of my Proposed Policy Statement, and demonstrate why I believe there is significant reason to be optimistic that this Commission can finally produce much needed guidance in this important area.

As the FTC enters its second century, it is an especially appropriate time to reflect upon whether the agency’s various enforcement and policy tools are being put to the best possible use to help the agency fulfill its competition mission. Now is the time to sharpen tools that have long been deployed effectively and to evaluate whether tools that have not proven up to the task should be salvaged or scrapped. One of these tools-the Commission’s UMC authority under Section 5 of the FTC Act-is a particularly suitable candidate for evaluation.

I have made no secret of the fact that I think the Commission’s record with respect to Section 5 is bleak. The historical record reveals a remarkable and unfortunate gap between the theoretical promise of Section 5 as articulated by Congress and its application in practice by the Commission. This gap has grown in large part due to the absence of any guidance articulating what constitutes a UMC. Both the existence and cause of the Section 5 performance gap are well understood. Indeed, for at least the past twenty years, commissioners from both parties have acknowledged that a principled standard for application of Section 5 would be a welcome improvement and have called for formal UMC guidance.

In the absence of guidelines, the Commission’s UMC authority cannot possibly contribute effectively to the agency’s competition mission. At best, without UMC guidelines, the gap will remain. At worst, the absence of UMC guidelines can be counterproductive to the FTC’s competition mission, raising issues of fundamental fairness and potentially deterring consumer welfare-enhancing conduct.

Links to Full Content