Newest Commissioner Makes the “Wright” Call for FTC Act’s Section 5

MurinoGuest Commentary

By Andrea Agathoklis Murino, Wilson Sonsini Goodrich & Rosati

In a speech last week, the Federal Trade Commission’s (FTC) newest Commissioner, Joshua D. Wright, provided an unusually candid and public exploration of his would-be agenda as a sitting Commissioner.  Foremost among his to-do list is the issuance of a binding public “Unfair Methods Policy Statement,” that would specify both guiding and limiting principles the FTC would use in the application of Section 5 of the Federal Trade Commission Act.  Section 5, though deceptively straight-forward in language, has a tortured history of enforcement and remains among the more muddled doctrines in United States competition law today.  Commissioner Wright’s bold attempt to eliminate this uncertainty is assuredly the “Wright” call.

All seem to agree that Section 5 was established to reach conduct that could otherwise not be condemned under the Sherman or Clayton Acts.  There is uniform consensus behind the history of the legislation that the FTC was designed to be a tribunal which could assess potential Section 5 violations using its accumulated and competition-specific expertise and knowledge in ways that a generalist adjudicator could not.  Like so much in life, this was easier in theory than in practice.  I certainly agree with Commissioner Wright that Section 5 enforcement has fallen short.  You need look no further than the fact that not since the 1960s – over 50 years ago – is there a case where the FTC prevailed on a Section 5 appeal.  Indeed, for most of the years since, Section 5 was barely used as it was intended at all.

Using deliberate and determined language, Commissioner Wright’s call-to-arms begins with the premise that there is an “unfortunate gap between the theoretical promise of Section 5 as articulated by Congress and its application in practice by the Commission.”  He then moves on to explain that there is little hope for Section 5 application if the FTC cannot properly articulate its enforcement policy, and most importantly, that this Commission can “put an end to the state of affairs” by issuing a “policy statement articulating its views on the appropriate application of its signature statute in unfair methods of competition cases.”  

Over the past decade, a Section 5 cause of action has been a sword hanging over the heads of the business community.  Immediate past Chairman Jon Leibowitz showed extreme interest in Section 5 and spoke extensively on his view that Section 5 could encompass a broad (and sometimes it felt, limitless) range of conduct.  While the FTC held a well-received workshop on the issue in 2008, an FTC statement on the landscape of permissible – and impermissible – conduct under Section 5 remained elusive.  The FTC’s settlement with Intel in 2010 and others have provided some guidance but, for the most part, the omnipresent threat that a vast array of conduct not clearly violative of the Sherman or Clayton Act could still result in liability, left counselors like me with little choice but to explain to clients that there was still one other ambiguous legal theory the FTC might try to pursue in an enforcement action.  This, as you could imagine, provided clients with neither comfort nor certainty.

Commissioner Wright seems determined to end the ambiguity.  His express statement that he will “soon informally and publicly distribute a proposed Section 5 Unfair Methods Policy Statement more fully articulating [his] views and perhaps even providing a useful starting point for a fruitful discussion among enforcement agencies, the antitrust bar, consumer groups, and the business community”, is notable.  While non-Chairman FTC Commissioners routinely speak publicly providing insights into their thinking on a wide-range of topics affecting the agency’s enforcement, I can think of no instance where a non-Chairman Commissioner has essentially indicated he will undertake an effort to move the full Commission’s agenda forward by providing something as tangible as a public document to launch simultaneously the discussion internally and externally.

The time has come to provide the business community with meaningful guidance surrounding the application of Section 5.  While I’m not certain I agree with every substantive Section 5 point Commissioner Wright raised in the speech or that he may ultimately decide, I applaud his boldness and desire for a deliverable.  I look forward to contributing to his effort.

3 thoughts on “Newest Commissioner Makes the “Wright” Call for FTC Act’s Section 5

  1. Pingback: May 2 roundup - Overlawyered

  2. Pingback: Commissioner Wright Moves to Advance Discussion on FTC Act Section 5 | The Legal Pulse

  3. What I’d like to know, as a consumer and businessperson who has suffered and contintues to suffer greatly at the hands of distinct violations of the acts and practices prohibited FTC Section 5, is how exactly one is supposed to even get any attention from the FTC when reporting these violations of law? I have filed a formal complaint with FTC, I have the case #, yet have never even once heard back from anyone at FTC to even follow up and get more information.

    What I was told was that FTC doesn’t even follow-up on reported behavior that violates this law until they’ve gotten multiple reports of the very same behavior by the very same entity or individual. So what that means is that, in the modern age when every company hides behind a complex, multiple-identity veil, seldom will FTC even follow up much less enforce the law.

    In the FTC’s own documents it states:

    The Role of Consumer Complaints in Identifying Unfair or Deceptive Acts or Practices
    Consumer complaints play a key role in the detection of a UDAP. Consumer complaints have often been an essential source of information for possible UDAPs and can also be an indicator of weaknesses in elements of the institution’s compliance management system, such as training, internal controls, or monitoring.
    While the absence of complaints does not ensure that UDAPs are not occurring, the presence of complaints may be a red flag indicating that a more detailed review is warranted. This is especially the case when similar complaints are received from several consumers regarding the same product or service. One of the three tests in evaluating an apparent deceptive practice is: “The act or practice must be considered from the perspective of the reasonable consumer.” Consumer complaints provide a window into the perspective of the reasonable consumer.

    So, while Mr. Wright’s intentions seem to be in the right place, and I agree with his sentiments entirely, perhaps it’s also the internal processes and prcedures that he needs to be proactive about evaluating to ensure that violations of the law are being investigated.

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