FTC's New Section 5 Competition Policy Statement Draws Raves, Jeers

The FTC’s Thursday policy statement boldly reasserting the agency’s FTC Act Section 5 authority to rigorously enforce the federal ban on unfair methods of competition is grounded in the Supreme Court’s interpretation of the statute in at least 12 decisions, said the agency. The statement “makes clear that Section 5 reaches beyond the Sherman and Clayton Acts to encompass various types of unfair conduct that tend to negatively affect competitive conditions,” it said.

The FTC’s previous competition policy, enacted in 2015 and rescinded in July 2021, “restricted its oversight to a narrower set of circumstances, making it harder for the agency to challenge the full array of anticompetitive behavior in the market,” said the commission. Thursday’s statement “removes this restriction and declares the agency’s intent to exercise its full statutory authority against companies that use unfair tactics to gain an advantage instead of competing on the merits,” it said.

The commission’s vote was 3-1 to approve the policy statement, with Republican Commissioner Christine Wilson voting no. The FTC’s newly energized deployment of Section 5 “will be firmly rooted in statutory text, history, purpose, and judicial precedent,” said Chair Lina Khan in a statement joined by Democratic Commissioners Rebecca Kelly Slaughter and Alvaro Bedoya. “Reactivating Section 5 in a way that is fully faithful to the authority that Congress gave us is critical for promoting the rule of law and for ensuring the democratic legitimacy of our work,” said Khan.

But the new policy statement, instead of providing meaningful guidance to businesses, declares that the FTC “has the authority summarily to condemn essentially any business conduct it finds distasteful,” said Wilson in a 20-page dissent. The new policy statement “abandons the rule of reason, which provides a structured analysis of both the harms and benefits of challenged conduct,” she said. It also “repudiates the consumer welfare standard” and ignores the Supreme Court’s “admonition” that antitrust protects competition, not competitors, said Wilson. The policy statement also “rejects a vast body of relevant precedent that requires the agency to demonstrate a likelihood of anticompetitive effects, consider business justifications, and assess the potential for procompetitive effects before condemning conduct,” she said.

Public Knowledge hailed the policy statement, with Competition Policy Director Charlotte Slaiman calling it “the roadmap to a brighter future for consumers, small businesses, entrepreneurs, workers, and all of us.” The policy statement “will reinvigorate antitrust enforcement at a critical juncture,” she said. But Neil Bradley, U.S. Chamber of Commerce chief policy officer, blasted it as “a pure political power grab designed to give Chair Khan carte blanche control over when, where, and how companies compete.” The FTC’s decision “to reject decades of bipartisan consensus and declare itself the nation’s economic czar will discourage healthy competition and damage America’s competitiveness,” said Bradley.

Congress struck an “intentional balance” when it enacted the FTC Act, said the policy statement. “It allowed the Commission to proceed against a broader range of anticompetitive conduct than can be reached under the Clayton and Sherman Acts, but it did not establish a private right of action under Section 5, and it limited the preclusive effects of the FTC’s enforcement actions in private antitrust cases under the Sherman and Clayton Acts.” The Supreme Court has affirmed that “same broad view of the scope of Section 5 on numerous occasions,” said the statement. SCOTUS has condemned “coercive and otherwise facially unfair practices that have a tendency to stifle or impair competition," it said. The federal circuit courts “have likewise consistently held” that the FTC’s authority extends not only to the letter, but also to the spirit of the antitrust laws, it said.

Where conduct prima facie constitutes an unfair method of competition, “liability normally ensues under Section 5 absent additional evidence,” said the policy statement. There is limited case law “on what, if any, justifications may be cognizable in a standalone Section 5 unfair methods of competition case, and some courts have declined to consider justifications altogether,” it said. Where a party chooses to assert justifications as an affirmative defense, the FTC can draw on its “long experience evaluating asserted justifications when enforcing Section 5, as well as its review of decided cases and past enforcement actions,” it said.

Congress intended for the FTC “to be entitled to deference from the courts as an independent, expert agency,” said the policy statement. Courts over the years “have consistently held that FTC determinations as to what practices constitute an unfair method of competition deserve ‘great weight,’ recognizing that the Commission is an expert agency,” rather than a carbon copy of DOJ, it said. “Even when courts have rejected the Commission’s factual conclusions, they have consistently reaffirmed the scope of its Section 5 authority.”