Section 5 Guidelines: Fixing a Problem that Doesn’t Exist?

Posted by D. Daniel Sokol

Sharis Pozen (Skadden) and Anne Six ask Section 5 Guidelines: Fixing a Problem that Doesn’t Exist?

ABSTRACT: When Congress enacted the Federal Trade Commission Act in 1914, almost 25 years after enacting the Sherman Act, it purposely created a different statute with different goals and different parameters. As many have pointed out in the ongoing Section 5 debate, the use of the “elusive” term “unfair methods of competition” was a considered choice. Not only did Congress not define the Commission’s powers in terms of the traditional antitrust laws, it also refused to delineate what would constitute an “unfair method of competition.” As the legislative history of the Federal Trade Commission Act shows, Congress recognized the futility of attempting to frame a definition that would embrace all unfair methods of competition and, instead, provided “broad and flexible authority” to the Commission with the aim to “protect society against oppressive anti-competitive conduct.”

As Commissioner Joshua D. Wright explained in his June 19, 2013 proposed Section 5 policy statement, the malleable language used by Congress in the Federal Trade Commission Act assigned the task of identifying unfair methods of competition to the Commission. Congress did not, however, require that the Commission prescribe any official, conclusive definition of unfair methods of competition, or even issue formal guidelines. Indeed, it was noted in a House Conference Report on the bill that would eventually be enacted as the Federal Trade Commission Act that the task of defining unfair methods of competition was considered “impossible” and that there was “no limit to human inventiveness in this field.” Accordingly, for nearly a hundred years now since the Federal Trade Commission Act’s enactment, the Commission and the business community have functioned without an official definition or formal guidelines. Even after the Commission’s 2008 workshop exploring the scope of Section 5 and repeated calls for additional guidance, the Federal Trade Commission’s current Chairwoman, Edith Ramirez, has somewhat resisted issuing a definition of unfair methods of competition or formal guidelines, preferring instead to allow existing case law and the Commission’s consent decrees impart guidance and preserve the flexibility Congress intended. Ramirez’ reliance on existing guidance is certainly defensible in that a significant, albeit small, group of court decisions already provide appropriate contours for Section 5’s interpretation.