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FTC sets first-ever enforcement guidelines for unfair methods of competition

FTC chairman Edith Ramirez

In a significant policy move, the Federal Trade Commission adopted guidelines for how it will police companies that try to compete unfairly in the marketplace.

Chairwoman Edith Ramirez announced the details of the policy Wednesday in a speech at the George Washington University Law School.

Voted by the commissioner earlier this week, the policy could change how the agency will use and interpret its consumer protection authority over unfair and deceptive business practices under section 5 of the FTC Act.

The FTC has long been criticized for a lack of guidelines and boundaries for how it polices “unfair business practices,” leaving businesses unsure of what conduct the FTC considers unlawful. Tech companies, particularly have been subject to FTC investigations under the vague authority, most recently Apple music for how it handles competition music services in its app store.

The limiting principles adopted by the agency were proposed by GOP commissioner Joshua Wright, who has been pushing for the agency to adopt clarifying principles even before he joined the FTC in 2013.

For the first time in its 100 year history, the agency provided the following factors it will use to decide whether it should use its standalone authority to challenge unfair methods of competition: First, the commission will be guided by the same principles as the antitrust laws to promote consumer welfare; second, business practices or acts will be evaluated for whether they harm or are likely to harm competition; and third, and most importantly, the commission will be less likely to challenge an act or practice on a standalone basis if the antitrust laws are sufficient to address the act or practice.

In her speech, Ramirez hailed the changes as “an important milestone in the commission’s application of its founding statute.” But she also hedged by stressing the flexibility of the guidelines.

“Our policy statement prescribes no detailed code of regulations for the business community at large. Again, however, no such prescriptive code would be feasible or desirable in our variegated and intensely dynamic economy, which is why antitrust has always relied on a case-by-case approach to doctrinal development,” Ramirez said.

House judiciary leaders, who also called for the FTC to clarify its authority, called the guidelines a “good first step.”

“We will vigilantly monitor the manner in which the FTC applies its guidance and evaluate whether additional action is necessary to ensure that the FTC administers our antitrust laws in a transparent, stable, fair, and predictable manner and that it does not exceed its statutory authority,” said House judiciary chairman Bob Goodlatte (R-Va.) and antitrust subcommittee chairman Tom Marino (R-Pa.).

The commission voted 4-1 to adopt the new guidelines. GOP commissioner Maureen Ohlhausen dissented, arguing that the proposal should have been put out first for public comment. In her dissent, Ohlhausen warned that the FTC can, and has withdrawn or changed a policy, a practice that could be repeated.

“Today’s decision statement is a victory for the rule of law, sound economics, and regulatory humility,” said TechFreedom president Berin Szoka. “In recent years, the FTC has revived UMC [unfair methods of competition] in a disturbing line of cases, mostly involving high-tech companies. Unmoored from sound antitrust principles and economic analysis, the commission strayed into arbitrary, undemocratic and unaccountable policy-making.”