The U.S. Federal Trade Commission issued a policy statement that dramatically expands the scope of what it considers “unfair methods of competition” under Section 5 of the FTC Act, 15 U.S.C. § 45. This represents an aggressive and unprecedented interpretation of the agency’s authority, and indicates that the Commission plans to use rulemaking and enforcement actions to police a broad set of conduct beyond the scope of the antitrust laws (i.e., the Sherman Act and the Clayton Act).
According to the agency’s press release, the policy statement – issued pursuant to a party-line vote of 3-1 – is intended to “restore the agency’s policy of rigorously enforcing the federal ban on unfair methods of competition” with the stated goal of allowing the agency “to exercise its full statutory authority against companies that use unfair tactics to gain an advantage instead of competing on the merits.” And Chair Lina Khan suggested that the agency will enforce Section 5 to “crack down on unfair methods of competition,” as commanded by Congress when it created the FTC.
The policy statement lays out two elements to a Section 5 violation: (1) the conduct must be a method of competition (2) that is unfair. Most of the action will be around the second prong – unfairness – which the policy statement defines as conduct that goes “beyond competition on the merits.” To determine whether the alleged conduct is fair or unfair, the Commission will evaluate two criteria on a sliding scale (i.e., the more evidence of one, the less the Commission believes that there is need for evidence of the other):