1. Business

The FTC is finally telling businesses what 'competition' should mean

Published Aug. 15, 2015

For the first time in its 100-year history, the Federal Trade Commission on Thursday laid out the guidelines it follows when deciding to go after a company for attempting to stifle competition.

The new policy, approved by the commission in a closed-door meeting, was detailed by Chairwoman Edith Ramirez at a George Washington University speech.

The agency will use its authority to protect consumers and evaluate "commercial practices by focusing on harm to competition or the competitive process," Ramirez said. The FTC is less likely to use its authority if enforcement of traditional antitrust laws, such as the Sherman or Clayton acts, is "sufficient to address the competitive concern," she said.

Investigating anticompetitive behavior is one of the agency's chief mandates. It has used its powers in the past to crack down on tech giants such as Google and Intel. And it is currently investigating Apple's behavior in the music-streaming market.

The Department of Justice also investigates anticompetitive behavior. But the FTC's powers are broader and it can bring cases that don't "necessarily rise to the antitrust level, but threaten competition," said Richard Feinstein, who was head of the FTC's Bureau of Competition from 2009 through 2013 and is now a partner at the law firm Boies, Schiller & Flexner.

But the business community has complained that the agency is not transparent about what kinds of activities could get them in trouble. Those complaints have been echoed by Republican Commissioner Joshua Wright.

"Such uncertainty inevitably results in the chilling of some legitimate business conduct that would otherwise have enhanced consumer welfare but for the firm's fear that the commission might intervene," Wright said in a speech this year.

When it identifies anticompetitive behavior, the FTC has been more likely to reach a settlement with the company rather than take it to court. That is what happened in 2013, when it argued that Google has abused its smartphone patents, for example.

In fact, "the last time the FTC litigated and prevailed on a case with this competition authority was in the late 1960s," said former FTC Chairman William Kovacic, who was appointed to lead the FTC by President George W. Bush in 2008 and is now a professor at GW's law school.

Settlements "perpetuate the uncertainty" about what the FTC considers anticompetitive behavior, Wright said.

The FTC did not feel compelled to deliver guidelines before because it does not use its powers in this arena often, said Feinstein, the former head of the FTC's Bureau of Competition. "The commission hasn't used this authority that frequently over the years and continued to develop it on a case-by-case basis."

The new enforcement principle attempts to provide some clarity, but it's also very brief — less than a page long — and appears primarily to codify how the agency already uses its unfair-competition power.

Some observers were skeptical of that approach, including Kovacic. "The broad and undefined nature of this mandate has been a disabling condition," Kovacic said. "When people litigate and fight, they win."